While collecting taxes to fund society’s services is considered a group responsibility, for the most part we pay based on ability.
With income taxes we pay progressively more as our earnings increase, thus the wealthier can afford to pay more.
This works reasonably well since it means that those who can least afford to pay for collective services are still entitled to the same standard of living.
With consumption taxes, however, we have a more flat tax system, whereby income doesn’t matter; you pay the same amount on products and services as everybody else.
Nobody seemed to have a problem with this concept in B.C. until the provincial government decided to unilaterally harmonize the federal and provincial sales taxes into one value-added tax.
Suddenly, it’s become an attack on the poor and those families who can least afford it, or so you’ve been told by HST dissidents.
They call the HST a “regressive” tax, a $2 billion tax shift onto the poor and a jobs killer for the services industry.
Well, the HST is a regressive tax, as was the PST and GST. Consumption taxes are inherently regressive, as they don’t discriminate on the basis of those who can afford to pay for an item.
What this means is that the new car that was taxed at 12 per cent under the PST/GST and is still taxed at 12 per cent under the HST is the same regressive tax system, since it doesn’t charge a lower tax rate based on the relative affordability for the consumer.
That’s simple enough.
But what has people angry is the fact that some services that were PST-exempt under the old system are now taxed seven per cent higher under the HST.
This has been a difficult adjustment as consumption taxes went from a narrow-based system taxing mainly goods and not services, to a broad-based system where taxes are applied equally.
That’s naturally going to take some adjustment for an economy like British Columbia where four out of every five workers are employed in a service. But that isn’t a coincidence.
A tax system that artificially favoured services was caused by government, and so the market adapted to that unnatural imbalance in services.
And though the change to the HST has been difficult, the benefits are showing.
Broad-based consumption taxes curtail inflation, stabilize consumer prices and allow free market forces to work.
The input HST tax credits have allowed B.C. businesses to expand, hire more people and recover from the economic downturn.
It’s unfortunate that the HST has become a political debate, when it has very little to do with politics beyond the way it was introduced.
But don’t take my word for it. Ask any economist, accountant or tax expert.
They’ll tell you the HST is a more fair, simple and equitable means of collecting taxes for the high quality services British Columbians demand from their government.
Adrian MacNair is a reporter with The Mission Record.