osmie: (Default)
Yes, I'm a heretic.

Many of my friends have been actively fighting the HST since it was first announced. And I've tacitly encouraged them, because on any issue I'd rather see political action and involvement than passivity.

But — much as it pains me to agree with the BC Liberals on anything — I think those particular friends are wrong.

The problem is, I don't agree with most of the pro-HST propaganda either. The commercials I've seen are full of terrible arguments, which alternately misrepresent basic economics or sidestep the question … or both. Very little upsets me more than a bad argument in favour of a good position. It makes my opinions look stupid.

So let me break things down. And let me start with a few opinions that have nothing to do with our current referendum. I won't defend them here; they're not the centre of my current argument. I will state them partly to situate myself politically, but mostly because they have nothing to do with our current referendum.

You see, almost every argument that's been advanced on either side has nothing much to do with our current referendum.

⇒ I believe the BC Liberals have done far more harm than good to this province. I have never voted for Gordon Campbell, either in person during his years as Mayor of Vancouver, or by proxy when he became leader of the provincial Opposition and later Premier. Nor can I support Christy Clark after her education cuts during the last decade — they were the profoundest and most damaging since those of a previous education minister-turned-premier, Bill Vander Zalm.

But this has nothing to do with tax structure. Gordon Campbell is not an idiot, and even if he were, idiots are allowed to have good ideas once in a while. Voting for the return of the PST because one doesn't like the BC Liberals? Bad reason. Voting to keep the HST because one does? Bad reason.

⇒ I'm not terribly fond of Bill Vander Zalm either. He's a fine gardener and a very good auctioneer — the one time we met in person, he auctioned off a performance by my recorder ensemble — but I don't appreciate his politics.

But this has nothing to do with tax structure. Bill Vander Zalm is not evil, and even if he were, evildoers are also allowed to have good ideas once in a while. Voting to keep the HST because one still harbours resentment against the Socreds? Bad reason. Voting for the return of the PST because one remembers them well? Bad reason.

⇒ I have seldom seen a political move so clumsy as last year's introduction of the HST. The BC Liberals campaigned on a platform which rejected a harmonized tax, and then promptly rammed through its legislation without debate or consultation. Their actions were contemptuous and antidemocratic.

But this has nothing to do with tax structure. As a parent, I've often legislated good ideas (e.g. "eat your vegetables") without adequate consultation among my constituents. As a manager, I'm also aware of how easy it is to screw up client communications. Lowering one's opinion of the BC Liberals because they act antidemocratically may be reasonable, just as I'd expect anyone to lower their opinion of me, at least a little, when I fail to announce a server upgrade. But my communication failures don't mean we should return to our old server — and voting for the return of the PST because the HST was terribly introduced? Bad reason. Voting to keep the HST, not that I've heard anyone venture this opinion, because one approves of its manner of introduction? Bad reason.




Those are all knee-jerk bad reasons. By now most British Columbians have thought the matter through a little better than that — but I believe it's important to articulate the knee-jerk reasons first. Otherwise they creep in and contaminate one's decision. As a lefty, I find that voting for the PST is tempting just so I can stick it to the BC Liberals, and that makes it harder to think rationally about my vote. Revenge is fun, but it's almost never wise.

Onward, then.

⇒ The most common argument I've heard in favour of the HST is that it saves businesses money. Well, this is true as far as it goes. Since the HST came along, I've had to program just one tax (HST) instead of three (GST/PST/PVRT) into all my applications at work. My job is easier; I am happier and get more done; this saves my business money and improves our service level. Nor am I the only employee whose job is made simpler; nor is mine the only small business which saved money.

Some of you, reading this, are about to pounce: "But, Karen, you work in the only industry whose taxes went down when the HST came in! Many businesses have way less revenue, because their taxes went up. They sure haven't saved money." You're right, but you're actually addressing my next point. Please have patience. Even the worst-hit businesses have a lower administration cost under the HST, and right now I'm only discussing the administration cost.

This argument is, however, fairly weak. What happens when businesses save money? Well, the TV commercials would have you believe that they pass their savings along to their customers. This is standard neoconservative dogma, the same stuff they've been peddling since the 1970s. It's hogwash and it's always been hogwash. Businesses almost never pass savings along to their clients through lowered prices. They're perfectly aware that prices will increase over time; at best they might defer their next price increase. Certainly a few of them do so, but more often a business will stash away the money against its next lean year. Often it will improve its service level, which could mean expanding, but more often means letting its current employees catch up on their backlog. Maybe it'll issue a dividend to its shareholders, or pay a bonus to its executive.

If we lower costs for businesses, dividends will go up. Employment might go up. But prices certainly won't come down.

Voting for the HST because you want lower prices? Bad reason. Voting for the PST because … um … I'm having trouble here … because you don't believe that businesses ought to have an easier time filing taxes? Bad (not to mention mean) reason.

⇒ The most common argument I've heard for the PST is that it's effectively a lower tax rate for the poor. Well, this also is true as far as it goes. Since the HST was introduced one year, low-income families have paid noticeably more in taxes.

But the problem with this argument — and I'm afraid that for me, it completely demolishes the argument — is that there's nothing integral to the PST which makes it a lower tax rate than the HST.

All sales taxes have exemptions. Before our sales tax was harmonized, the PST came with a great many exemptions, including restaurant meals, books, and medical treatment, which were taxed under the GST. When we harmonized our sales tax, these industries all saw their taxes increase.

But that didn't happen because of the HST. That happened because the BC government decided to tax those industries. Children's clothing was exempt from the PST, and it's still taxed at 5%. The BC government didn't lift its exemption on children's clothing; it could have chosen to keep its other exemptions too.

Effectively the HST legislation came in two parts. One part extended the reach of the PST, removing most (but not all) of its exemptions. The second part eliminated the PST processing department, delegated all collections to the federal government, and renamed our sales tax.

The provincial government could just as easily have stopped after removing those exemptions. We'd have exactly the same consumer tax rate that we have now, but divided into two taxes instead of one. Without an HST structure to distract us, we'd be left with two things: the tax rate (5% federal GST + 7% provincial PST), and the set of tax exemptions.

Personally I believe both of these are worth protesting.

Taxes may be charged on income (income tax, estate tax), on assets (property tax, head tax), on debt (credit card interest), or on transactions (sales tax, service charges). Every tax out there is a combination of these four categories. Some jurisdictions have managed to eliminate one or more categories, but most people will pay all four in various proportions. What those proportions should be, in an ideal society, is a substantial political question. I'm socialist enough to believe that progressive income and asset taxes should make up the bulk of taxation, while debt and transaction taxes should be held as close to zero as possible. There are other opinions.

But this debate has nothing to do with how many sales taxes we have! Repealing the HST won't restore those exemptions, if the government decides to lift them again. This referendum isn't about what industries get taxed, nor at what rate. It's about whether we ought to remit some of our tax federally and some of it provincially.

Yeah, it's actually a pretty wonky referendum. That's what happens when referenda proceed from a petition. I don't think most people signing it actually understood what they were demanding. I wish the referendum had demanded a lower HST rate, or more HST exemptions, instead of just demanding the status quo — that I could have gotten behind.

Voting for the PST because you want fewer industries taxed? Bad reason, unless you trust the current provincial government not to raise taxes. Which personally I don't, seeing as how they already did it once.

Voting for the HST because you want more industries taxed? Bad (and very mean) reason.

⇒ Since the referendum process started, Christy Clark's government has announced a long-term plan to reduce the HST. She says they'll start by issuing refund cheques this fall to all families with kids, then kick taxes down to 11% in 2012, and 10% in 2013.

The PST forces have quite rightly heard this as a bribe. Among other things, it assumes that she'll still be in power by 2013, which is by no means certain. And a lot can change in the economy in two years: if we enter another recession, her government has lots of time to renege on its current promise. I'd believe her a lot more if she reduced the HST to 11% right away as an act of goodwill, even if that meant we couldn't afford 10% until 2014.

(In fact I thought that was Mr. Campbell's plan all along: wait for the protests, then knock down the HST to 11% at the last minute. It's precisely the sort of manœuvre that he gloried in. I was genuinely surprised when it actually came in at 12%.)

Furthermore, Stephen Harper's federal government has threatened to cut off a huge amount of federal funding from BC if we reject the HST. This is almost definitely a threat, and only questionably legal … indeed, exactly the sort of manœuvre that Mr. Harper glories in.

Even thinking about caving to bribes and threats makes me angry. I don't want to vote for the HST if it means supporting Mr. Campbell, Ms. Clark and Mr. Harper! Not if it means cowing to federal threats and accepting provincial bribes!

But these are bad reasons. If somebody makes a credible threat to steal your money or slit your throat, for goodness' sake give them your money — and then memorize their face and gait, so that you can come after them later with the full force of law. Similarly, if somebody offers a credible bribe, accept the money and then turn it over as evidence. Going vigilante is the wrong answer.

And … well … let's consider for just a moment the chance that I'm misinterpreting both leaders' words because I already dislike their governments. Is it possible that they're simply articulating economic facts, in a way that sounds like a threat or a bribe? "Stay out of that SkyTrain track or you'll die," is not the same threat as, "Give me all your money or you'll die." And it's much more innocuous to hear, "Redeem that lottery ticket and you'll get $10," than, "Eat your vegetables and you'll get $10." Is it possible that I'm mishearing economic facts?

Well, yes. Whatever our disagreements on policy, Ms. Clark knows a lot more about BC's long-term budget forecasts than I do. And even that federal funding might be entailed, by laws I haven't researched for even a minute, so that Mr. Harper can't give it to us under the PST. I may not trust either of them, but I can't be sure they're being dishonest in this particular case.

If Mr. Harper is threatening us, if Ms. Clark is bribing us, then by all means let's unseat them in the next election. But if they're just poor communicators, they deserve no such umbrage. And in either case, we're better off taking the money.




Supposing we want sales taxes to come down — and that's precisely my goal — we end up with a decision matrix.

Under the HST, taxes will come down…

* …to 10% across the board, if we trust Ms. Clark's word, and if her government lasts until 2013;

* …maybe, if Adrian Dix forms the next government, plans to lower sales taxes, and can afford to do so;

Under the PST, taxes will come down…

* …to 5% on selected industries, if Ms. Clark's government lasts, and if we believe that she won't simply raise them again — either to 6%/13% across the board, or back to 12% on those very same selected industries;

* …to 5% on selected industries, if Adrian Dix forms the next government, and if we believe that he also won't raise them again.

I believe that under the PST, we're unlikely to see any tax reduction for years to come, and with a decrease in federal funding and increase in provincial tax-processing costs, we may — especially under Ms. Clark — even see a few tax increases. Meanwhile, under the HST, I don't trust that sales taxes will come down, but I believe it's possible. And — especially under Mr. Dix — I believe that we can negotiate many of the same exemptions we used to enjoy under the PST. Or maybe even better ones.

(I'm leaving aside any possibility of propitiating Mr. Harper toward adding cultural exemptions to the HST at a federal level. It's theoretically possible, I suppose. There were protests of this nature against Brian Mulroney when he first introduced the GST in 1988; I do wonder why there weren't similar ones against Jean Chrétien or Paul Martin, who unlike Mulroney were running a surplus, and who you'd think would have been more favourably inclined. —But such exemptions would be helpful no matter how this referendum goes.)




In short: I like the HST because it's a lower administration cost for the provincial government, and it's less work for employees of BC small businesses.

And that's about it. Because all of this talk about raising or lowering the tax rate is a diversion from what this referendum is actually about. And any talk of businesses passing on lower prices is just hogwash.

What do we believe should be taxed? What rate should it be taxed at? These are important political questions which the current referendum won't affect at all. At least not directly. If we vote for the PST, some taxes will come down right away, and then probably go up again later. If we vote for the HST, no taxes will come down right away, but most of them will probably come down later. Over the long term there's not a lot of difference. Our provincial government may be richer under the HST, but my point about businesses passing on lower prices still applies: whether any surplus gets transmitted into lower sales taxes on cultural events or lower income taxes on millionaires is a matter of political will; it will be decided in an election, not this referendum.

This referendum is not about punishing or rewarding our politicians; it's not about raising or lowering taxes. It's about whether we should continue to remit all our sales tax to the federal government, or whether we should remit about half of it to the provincial government, and half to the federal government.

Adding a level of complexity would be crazy.

Am I in favour of extinguishing the HST (Harmonized Sales Tax) and reinstating the PST (Provincial Sales Tax) in conjunction with the GST (Goods and Services Tax)?

No, I am not. Sorry.
osmie: (Default)
I've sounded off about US politics once or twice in other people's comment threads, but it's really only fair that if I'm going to say anything about the subject, I say it here.

Some basic thoughts, then:

...in which I situate myself... )

And now, some specific thoughts on the current election:

...in which I ultimately support Obama... )

Finally, an edit: )

There. I'm done. You can flame me now.
osmie: (Default)
I've sounded off about US politics once or twice in other people's comment threads, but it's really only fair that if I'm going to say anything about the subject, I say it here.

Some basic thoughts, then:

...in which I situate myself... )

And now, some specific thoughts on the current election:

...in which I ultimately support Obama... )

Finally, an edit: )

There. I'm done. You can flame me now.

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