Economist says HST is a tax increase

The Canadian Centre For Policy Studies ( http://www.policystudies.ca ), a research and advocacy group dedicated to freedom and prosperity at home and abroad through the development and promotion of good public policy, has released a 31-page report which indicates that households in Ontario and British Columbia are paying more since the HST came into effect on July 1, 2010.

The study and report were done by Dr. Robert Murrell, PhD, a senior fellow at the centre and a professor of Economics at the University of New Brunswick in Fredricton. He focused his report on the five income quintiles (classifications) outlined by Statistics Canada’s Family Expenditure survey of 2008 housing investment data in the 2006 census, and published information from BC and Ontario studies and budgets, to measure personal income tax reductions –- to calculate net tax changes.

The results of the study are revealing. It is a long report and we can only point our readers to a very few points, however the entire report can be seen at http://media.shuswapnews.com/docs/2010/08/hst-impact-report.pdf

Just a few highlights:

• For both provinces, the switch to HST and the accompanying personal income tax relief measures represent, on average over the long run, a net tax increase for households. In BC, the net tax represents about $320 per year. For Ontario, the change is about $290 (all dollar amounts are based on 2008 figures).

• The first year, before the Ontario transitions payments expire and before larger savings from input-cost reductions kick in, the net tax disparity between the two provinces is quite large. Ontario families see a gain of about $145 in tax relief, while in BC, the average family will pay an extra $480 in taxes.

• The reason for the wide disparity is that the BC government has granted much less in the way of personal tax relief. This is true, even though the pure tax increase is considerably lower than for Ontario.

• For both provinces, the pure tax increase is regressive. It impacts low-income households far greater than high-income households. However, the personal income tax cuts are very progressive, so that, in the balance, the net impact is modestly progressive from the poor to the upper-middle class but there is no further progressivity from the upper-middle class to the rich households.

• The change towards an HST tax on consumer goods is highly regressive but the imposition of the HST to new construction (new homes over a certain price limit, renovations and additions) is moderately progressive.

• Personal Income tax cuts in Ontario are larger than in British Columbia (slightly under $500 for Ontario families compared with $270 for families in BC). However, personal income tax cuts in BC are more progressive.

• Since the two provinces did not lower their respective sales tax rates and they broadened their respective sales tax base (more goods are now taxed), one sees a regressive tax increase stemming from the conversion to the HST tax system.

The plain and simple conclusion made by Dr. Murrell is that the average household in both Ontario and British Columbia faces a net tax hike.

And after perusing the entire report, this author cannot help but come to the conclusion that, in spite of all the rhetoric being spewed about by our politicians, this new tax is costing the individual residents of both provinces money -– a lot of money!