Tuesday, June 01, 2010

HST Hits and Myths - BC Liberal promises and other prevarications explained

Stew Murray and Merv Evans staff the Fight HST petition table outside Nanaimo General Regional Hospital on May 15

HST Hits and Myths

As BC Liberals panic, denying they made an anti-HST election promise, various false claims need correction. Here goes.

Bill Tieleman's 24 hours/The Tyee column

June 1, 2010

By
Bill Tieleman

"I'm not a big fan of direct democracy."

- B.C. Liberal MLA
Terry Lake

As the B.C. Liberal government panics in the face of overwhelming opposition to the 12 per cent Harmonized Sales Tax due to be imposed July 1, it's time to separate the HST hits from the myths.

Start with Terry Lake, the Kamloops-North Thompson B.C. Liberal MLA who chairs a legislative committee that will deal with the Fight HST citizens initiative petition that has achieved the signatures of 10 per cent of all voters in each of the province's 85 ridings.

Lake should be removed as chair after first saying that: "The committee could look at that initiative and say that it's invalid. I'm not a lawyer, but I don't know about the constitutionality of the wording of the petition, for example."

Premier Gordon Campbell had to quickly correct Lake's bone-headed misreading of Elections B.C. rules and admit the committee can't dismiss the petition. But Lake has already demonstrated his unfitness for the job.

Lake claimed that the initiative process "Gives people a voice and an opportunity to speak to government directly" before throwing under the train the Fight HST initiative led by former B.C. premier Bill Vander Zalm.

In case anyone thought Lake liked the fact that more than 600,000 British Columbia voters have signed a petition disagreeing with the HST, he clarified, "I'm not a big fan of direct democracy. What we have is a representative democracy, and I think we should work within that tradition."

Hansen’s claim of 'no promise made'

Unfortunately, Lake is far from alone in myth-representing the facts about the HST, which will add an additional seven per cent tax onto the GST of five per cent on a wide range of goods and services currently not subject to the existing Provincial Sales Tax.

B.C. Liberal Finance Minister Colin Hansen leads the pack. When asked by CKNW radio host Jill Bennett why his government had broken a promise made before the 2009 election not to impose the HST, Hansen denied it.

"There was no such promise made," Hansen
claimed. "When people say that, they're not being accurate."

Hansen should talk to restaurant owners and their association, which will suffer under the extra seven per cent tax on food.

"The province broke a promise to our industry when they introduced the HST, and today they have broken another one by offering nothing in the budget to lessen the impact on our industry," said Mark von Schellwitz, vice president Western Canada for the Canadian Restaurant and Foodservices Association on March 2.

The CRFA's
news release goes on to say: "During the last election the B.C. government promised the CRFA in writing that they would not introduce the HST or change taxation on food without consultation. Then, September's budget speech included a promise to work with the restaurant industry to mitigate the negative impact of the HST. So far the government has refused to act on any of the industry's recommendations."

In a May 18
letter to The Province newspaper, Hansen explained the party position this way: "What did happen? During elections, political parties receive dozens of surveys from organizations. These surveys are answered on behalf of candidates by individuals working out of the party headquarters.

"In response to two surveys asking about the HST, the answer was sent out, quite correctly, that the HST 'is not something that is contemplated in the B.C. Liberal platform.'"

Oh, I see. How could anyone think that was a promise?

Home Builders heard a promise

Hansen should also talk to the Greater Vancouver Home Builders' Association. It also asked the BC Liberal Party specific questions on the HST: "Does your party wish to promote HST? If so, how does your party plan to preserve housing affordability?"

Association CEO Peter Simpson
wrote in a Vancouver Sun column that Ontario's announcement to impose an HST on new homes there had prompted concerns in his members.

"In its response, the Liberals defended the current provincial tax system and found fault with tax harmonization," Simpson wrote.

"The response included: 'A harmonized GST would reduce the provincial government's ability to unilaterally adjust sales tax rates. The harmonized GST would make it harder for future provincial governments to lower or raise sales tax rates, which reduces flexibility. In short, a harmonized GST is not something that is contemplated in the B.C. Liberal platform...'

"Because the Liberals indicated they did not support harmonization, it is reasonable to assume that was the reason the second question regarding preserving housing affordability under HST went unanswered," Simpson concluded.

'Harmonization has not been on our agenda'

And why would restaurant and home builders' associations or anyone else think the B.C. Liberals would bring in an HST, after past B.C. Liberal policy on the HST was clear from statements from like then -- Small Business and Revenue Minister Rick Thorpe in the B.C. Legislature on
March 11, 2008, in response to a question from NDP MLA Jagrup Brar about creating a Harmonized Sales Tax:

J. Brar: "I will move on to another question. There has been a recommendation on the table of the minister about PST and GST harmonizing. I would like to ask the minister where the minister is. Is that on the table, or is there any action on that?"

Hon. R. Thorpe: "First of all, that is tax policy, which would fall under the minister of finance. But I have commented on that in the past, and I will comment on that here today, because on this particular issue, the minister of finance and I have worked extremely closely and have both said exactly the same thing to the public.

"It sounds very attractive to talk about harmonization, but one of the things that people have to realize is... I can't remember if it was the competition board or the Progress Board that estimated that flow-throughs through harmonization to taxpayers could amount to $2 billion a year.

"I think that careful consideration has to take place when you contemplate those kinds of things.

"In British Columbia we have an extensive exemption list. Under GST, there aren't exemptions.

"Let me just give you a couple of examples. One is that restaurant meals in British Columbia are PST-exempt. They are not GST-exempt.

"That is a serious question. One that I think all members in this House would have concern about is that children's clothing is PST-exempt, but it's not GST-exempt.

"Those types of decisions have far-reaching ramifications, and I can say that harmonization has not been on our agenda."

Hmmmm. So if the HST has "not been on our agenda" and could cost taxpayers $2 billion and later, in response to both restaurant and development industry questions before the election, the answer is that the HST is "not something that is contemplated" then -- hell, no -- that's not a promise!

But don't think Hansen and Campbell are the only ones who confuse a promise with a straight answer. There are others who can't even figure out what the HST will do.

Mistakes in Victoria's opinion pages

Long-time political columnist Jim Hume of the Victoria Times-Colonist is retired but still contributes to the paper. Regrettably his HST
analysis misses the mark.

"We can't have all we wish for. We tailor our demands or raise taxes to fund them," Hume recently concluded after writing with tongue in cheek that B.C. would be an even greater place if the government spent far more money on public services, but without raising taxes.

The problem with Hume's conclusion that the HST will raise extra money to buy public services is simple. It's wrong. The additional income coming from applying the HST extra seven per cent will not contribute one thin dime to health care, education or social services -- because it is revenue neutral.

The same mistake has been made by other commentators who presume that all new taxes simply go to government coffers -- not true with the HST.

As
Hansen, Campbell, the B.C. Business Council and other HST supporters have made clear, the HST raises $1.9 billion a year from consumers and transfers all of it to businesses.

The HST is designed to be revenue neutral to government. It is a tax shift from businesses to consumers, not a new source of income to pay for additional services.

Savings for citizens? No sure thing

The big business community loves the HST, and no wonder. Large companies will no longer pay the current seven per cent PST on the purchase of goods and services needed to produce their products and instead get "input tax credits."

And yet some claim in another HST myth that these businesses will all reduce their prices by the same seven per cent savings.

"If the tax credits are passed through completely to consumers, then the HST will be a wash for consumers as a whole -- $2 billion up and $2 billion down,"
wrote Kevin Milligan, an associate professor of economics at the University of British Columbia, in a recent Vancouver Sun commentary.



Milligan admits that if businesses do not pass on the savings that "consumers will face a steeper tax burden." No kidding!

But he figures, based on "textbook lessons" and "real-world evidence" that we have nothing to worry about.

I beg to differ.

After the federal Goods and Services Tax was imposed did we see huge savings passed on to anything we buy? No, just higher costs.

But the main problem is even simpler. Most big B.C. businesses don't produce the goods and services that B.C. consumers purchase, so they can't pass on "savings" to the people who are paying the extra HST costs.

Big breaks for foreign corporations

I'm no economics professor but I do know that businesses like Rio Tinto Alcan, Canfor, Timber West, Teck Resources, and others don't sell products that most of us purchase in any significant quantity.

That means that even if the price of aluminum, copper or wood products drops by seven per cent, it won't matter to individual consumers compared to paying an extra seven per cent on restaurant food, haircuts, basic cablevision, domestic airline tickets, sports and concert tickets, gym memberships, massage therapy and a huge number of
other goods and services that currently are not subject to the seven per cent PST but will be taxed under the HST.

In other words, you and I will each be paying hundreds to thousands of dollars in extra HST costs -- for a total of $1.9 billion every year -- simply to subsidize Alcan selling aluminum to China!

And the only possible price reduction for most of us will be, maybe, seven per cent less on a roll of aluminum foil worth under $5!

And Campbell and Hansen still wonder why over 82 per cent of British Columbians oppose the HST?

You could ask if they're nuts. But you know they aren't.

Campbell and Hansen also think it's a myth that British Columbians will remember the HST after it's been imposed. In three years they think the B.C. Liberals can be re-elected, likely under a new leader.

I'm betting they're wrong, and that if they don't drop the HST, a recall campaign starting in November will end their re-election opportunities a lot sooner.

Elegy

My biggest fan, best political advisor and toughest editor -- my mom Pat Tieleman -- passed away last week after a courageous battle with lung cancer. You can read my tribute to her
here.


.

23 comments:

Ron said...

Thank you Bill. A very helpful article.

Gary E said...

One of the statements I keep hearing from the people "in Favor " of this rip off is "how do you think we will pay for schooling and health care if there are no taxes"
I think this must be a spin delivered by the PAB because these people obviously have not been paying attention to what is happening to these programs over the last 10 years. This government has been systematically shutting the system down by taking monies away from the programs. Where they are putting that money we won't know until a new party is in government. And it all started with the giveaway of BC Rail.

Anonymous said...

If Campbell decides to say his own ass I expect he will sacrifice Hansen.

One could see the "fiscal pretty boy" announce he failed to effectively communicate the government's position on a variety of budget policies and will resign for "HIS" failures.

Certainly Hansen is guilty of many sins and should commit political suicide but everyone knows who the supreme commander on this file is and it ain't Colin.

I suspect Colin does not even have the balls to even lift the lid without the approval of the Greatest Political Leader Of All Time.

So as the BC Grit ship goes down by the bow Gordo will expect many a dumb grit to take a hit for his failures and political insanity.

The GREAT SATAN

kootcoot said...

Bill, I just got to this page and at the top it says:

"Your comment was published."

Is this about my comment last week or what? - I haven't commented yet today!

Anyway for today:

"Lake should be removed as chair after first saying that: "The committee could look at that initiative and say that it's invalid. I'm not a lawyer, but I don't know about the constitutionality of the wording of the petition, for example."

Premier Gordon Campbell had to quickly correct Lake's bone-headed misreading of Elections B.C. rules and admit the committee can't dismiss the petition. But Lake has already demonstrated his unfitness for the job.
"

In a normal world Lake would be unsuitable for this position, but in Campbell's Godfather like version of reality, his stupid statements merely verify his suitability for the job.

In a recent post at the House, I point out that the Kamloops ridings most definitely aren't where the BC liaRs store their brain trust. I must admit though that apparently Kevie Krueger CAN actually drive and take orders over his cell phone simultaneously, legality aside, as obeying traffic laws (well, any laws or sense of decency) isn't a huge priority with the LIEberal caucus.

Anonymous said...

Interesting. So since when are promises chipped in granite? The NDP wasn't exactly truthful in their time in power, and to be very fair, neither was VanderZalm.

Think Bill might be spinning the wheels here. What he should do is start the steps to have the NDP get rid of the HST, to set that as a major policy for the next election, and run with it now.

The BC Liberals won't get rid of the HST, the NDP will have the opportunity to do so.

Norman Farrell said...

That would be the same Kevin Milligan who tried without success to debate with readers of The Tyee a while back while defending HST. What the economist can not overcome is the reality that large exporters gain the most because their products are sold at world prices. Relief from PST provides them greater profitability, it does not result in lower prices.

Most consumer goods are imports that carry very little burden of PST in their selling price so price reductions will be tiny, if any. Locally made products, beer for example, might cost less but BC Liberals already said they won't let that happen.

If business saves almost $2 billion, and does so every year hereafter, the money can only come from consumers if HST is revenue neutral to government.

Consumption taxes may be appropriate but you should not change one element without addressing all parts of a complex tax system. One SFU economist touting the HST has written that consumption taxes should be balanced with increased income tax rates on high earners.

Government should have initiated a public debate over tax policy to consider tax incidence - the effect of all taxes on wealth distribution. What happened instead is that they responded to big business operators who want to pay less tax.

Why did Liberals conduct a one sided examination?

Anonymous said...

The NDP. A net importer of political power.

And the constant writer Norman.

Why go after high income tax earners? Income Tax should be fair and equiable for everyone, based on their income. The constant bashing of high income earners is old news. Reminscent of the old days of the 1980's NDP.

Back when Bill Tieleman was a pup
looking up to Mike Harcourt.

DPL said...

Interesting article in the Globe and Mail today suggesting Gordo should leave soon. His past business experience, using his money shows he sure wouldn't make it in business.

Anonymous said...

"Interesting article in the Globe and Mail today suggesting Gordo should leave soon. His past business experience, using his money shows he sure wouldn't make it in business."

What business experience? He's never worked in private buiness other than a short time with Marathon Realty. Most of his time was spent being Art Phillip's Aide
or on Council, other than his Peace Corps duty.

If people think he's the pinnacle of Corporate Howe Street when it come to business experience in large companies, they're sadly mistaken.

Glen Clark has built up more business experience than Campbell has, and Clark originally hated the corporate world.

Anonymous said...

I will understand if you don't post this, but ... I thought it was kind'a funny, in a sick sort of way.
Direct from friends in East Van!

-----
Information about Gonorrhea Lectim (Liberalis strain)

The BC Center for Disease Control has issued a warning about a new virulent strain of this old disease. The disease is called Gonorrhea Lectim. It's pronounced "Gonna re-elect 'em," and it is a terrible affliction

The disease is contracted through dangerous and high risk behavior involving putting your cranium up your rectum. Many victims contracted it in 2008...but now most people, after having been infected for the past 1-2 years, are starting to realize how destructive this sickness is.

It's sad because Gonorrhea Lectim is easily cured with a new drug just coming on the market called Votemout. You take the first dose in 2010 (HST variant) and the second dose in 2013 and simply don't engage in such behavior again; otherwise, it could become permanent and eventually wipe out all life as we know it.

Most ridings are already on top of this, like many in the interior , and apparently now on the Island, with many more seeing the writing on the wall.

Anonymous said...

Chris Delaney writes in the Vancouver Sun May 3, 2010: "Former B.C. cabinet minister Rick Thorpe is either misinformed or confused when he says I advocated for the harmonized sales tax in the last election. To set the record straight, in the last election the B.C. Conservative party stated in its platform that it would "investigate the benefits of an HST." This statement, created at a meeting of candidates, was never adopted as policy."

[...]

"As much as I detest the HST and will continue to oppose it, at least the Conservatives had the forthrightness to present their ideas in their platform, even if I didn't agree with that particular one."

Is this the same Rick Thorpe who spent a year, and untold taxpayer dollars, coming up with a tailored in BC PST that would specifically address the needs of British Columbians?

Anonymous said...

Former New Democratic Party premier Glen Clark, during a recent Web interview with NDP MLA Guy Gentner as summerized by Vaughn Palmer: "The HST does not create more revenue," said Clark, who served as finance minister in the early 1990s and as premier later in the decade.

"The HST is a shift in the tax burden away from business and onto individuals and it's revenue-neutral. It's a great irony that a government would take this huge political shift away from business onto individuals and not gain, really, any more revenue ... The HST is a little bit more ideological than it is a tax policy."

[...]

"Forgetting the debate about whether the HST is a good thing or a bad thing, a lot of the debate has to do with the fact that there was no discussion or process that [they] went through before they arrived at that decision.

"Of course I did some of that as well," he added.

Anonymous said...

"The BC Center for Disease Control has issued a warning about a new virulent strain of this old disease. The disease is called Gonorrhea Lectim. It's pronounced "Gonna re-elect 'em," and it is a terrible affliction

The disease is contracted through dangerous and high risk behavior involving putting your cranium up your rectum. Many victims contracted it in 2008...but now most people, after having been infected for the past 1-2 years, are starting to realize how destructive this sickness is. "

Obviously the carriers of this disases are those afflicted with
N. democratii partisumostasis a contagious disease with symptoms
such as delirum, pronounced dilation of the pupils and constant shaking and sweating with
fits of adequate memory function
and not being aware of their surroundings.

Henri Paul said...

Anonymous 2:37 PM PDT
---------------------------------
Quick as you can, get to the nearest VD Clinic, you have contracted "Clap of the yap" you obviously have had your cranium up your rectum and partaken in past Gonorrhea Lectims.

Anonymous said...

"Quick as you can, get to the nearest VD Clinic, you have contracted "Clap of the yap" you obviously have had your cranium up your rectum and partaken in past Gonorrhea Lectims"

Seems this disease is spreading fast. Already have the previous poster as the first carrier, with delirium, profuse sweating, dilated pupils and noticeable shaking.

Might want to sweep your blog with anti-viral disinfectant there Bill.

Could be a major problem if allowed to persist.

No sense in the rest of us canvassers and supporters of your blog being infected with it.

Anonymous said...

A triplet of corporate media stories on the HST. It would seem that unlike the BC Liberals, the monied media have caught on that folks know they need to pay taxes - they despise the sleazy way the BC Liberals lied about the HST during the last election.

There is a new phrase in Canada's political lexicon: “patently absurd” and that is what BC's voters think of the BC Liberal's HST story.

If Campbell feels that the electorate will be grateful for him spending untold millions telling them they were fools for signing the anti-HST petition, well...

Here, in no particular order, are the HST stories:
B.C. Liberals retuning their sales pitch for HST Justine Hunter, Globe and Mail

Feds' cash sold Campbell on the HST Les Leyne, Times Colonist

Liberals face uphill HST battle: experts Rob Shaw, Times Colonist

and one from the 'Flat Earth Society'
The anti-HST initiative is doomed. Here's why Geoff Plant, a former BC Liberal attorney-general of British Columbia and former Victoria room-mate of Gordon Campbell

Anonymous said...

First Things First

Just wondering what BC's First Nations have to say about the HST?

I have no idea how the HST will impact our province's native communities, but my interest was piqued when I saw this story out of Ontario:

First Nation calls off highway closure planned for tomorrow David Helwig,
SooToday.com

Anonymous said...

Here's what BC's First Nations have to say:

BC First Nations join Vander Zalm legal challenge to HST

See the press release at fighthst.com

Anonymous said...

Thanks Anonymous 8:48 AM - here is a direct link to the June 8, 2010 'Fight HST' press release

http://fighthst.com/press-release-bc-first-nations-join-vander-zalm-legal-challenge-to-hst/

Grand Chief Stewart Phillip said the HST will devastate native peoples in BC, who are among the poorest people in the province, “The HST will hit our peoples the hardest. They will have to pay it on the majority of their purchases, which are made off reserve. Many First Nations people struggle just to survive, and this tax will severely hurt them.”

Phillip pointed out that not only does the HST appear to contravene Section 92 of the Constitution which grants exclusive authority for provincial sales taxes to the provinces, but it also contravenes aboriginal sovereignty over taxation for natives.


-----

Here is the Union of British Columbia Indian Chiefs June 8, 2010 press release: HST – A Failure to Communicate

Last week, the Chiefs Council of the Union of BC Indian Chiefs met to discuss different issues facing First Nations in BC. As a very urgent issue facing First Nations families and communities, the pending Harmonized Sales Tax was discussed.

A panel consisting of Chief Keith Matthew, Cliff Atleo, Bill Vander Zalm, Chris Delaney and Merle Alexander provided an overview and updated the Chiefs Council.

Subsequently, the Chiefs Council discussed and passed UBCIC Resolution 2010-21, Support for Legal Challenge to Implementation of HST.


see the UBCIC link for a copy of the resolution

Anonymous said...

?nteresting

I don't always read the Ottawa pundits, but when I do I prefer Barbara Yaffe at the Vancouver Sun.

An interesting article from Yaffe today. She states the Ontario opposition to the HST there is at 74%, while here in BC it is 82% opposed.

[side note: the sample error was +/- 2.3% in Ontario and +/- 3.1% in BC, meaning that the two provinces could be as close as 3% (or as distant as 13%) - the Ipsos Reid poll was done in late November 2009... who knows what the numbers are now]

Yaffe goes on to attribute the slim difference in opposition to how each government played the news to the people. I'm having a hard time agreeing to her logic.

I think voters are sick and tired of hearing that cure all for economic malaise is economic trickle down from the rich (it used to be rich people, but that was thoroughly disproven) corporations to their wage slaves below... not a lot of faith in trusting big business these days... especially when the ticket price in BC is $2Billion.

Anonymous said...

I couldn't find anything about this on the FightHST site, so I thought I'd leave it here.

Ron Knight writes in today's Vancouver Sun: "Currently, management fees and administration fees are subject only to the five-per-cent GST. Since the management expense ratio of a fund includes taxes, it is expected that the HST will result in an increase in a fund's MER."

"MER" refers to the cost of running a mutual fund. Any fees and taxes are charged, whether or not a fund shows a yearly gain or loss, and are paid before any money is returned to investors.


Perhaps somebody who really knows this stuff could enlighten the rest of us. Are our pension savings really going to take a 7% tax hit on July 1?

Anonymous said...

Ontario HST will take a bite from middle-income earners

One half of the 5.3 million households in Ontario will feel the brunt of the province’s looming harmonized sales tax, including middle-income earners who were supposed to be unaffected by the new levy, the government’s own study shows.

The study released on Tuesday by the McGuinty government says that households with annual incomes of $60,000 to $70,000 will be out of pocket $45 a year. The study is the most exhaustive attempt to date to measure how the sweeping tax changes will affect households at various income levels. It reveals that the harmonized tax will take a bigger toll on middle-income earners than previously believed.

Premier Dalton McGuinty is under attack by opposition members over the harmonized tax, which Progressive Conservative Leader Tim Hudak says is an “unmitigated attack” on the pocketbooks of Ontarians.


Karen Howlett, The Globe and Mail

-----

The Ontario government study - Ontario’s Tax Plan for Jobs and Growth - is here [.PDF / 46 pages]

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If business saves almost $2 billion, and does so every year hereafter, the money can only come from consumers if HST is revenue neutral to government.well my blog usagamezone.blogspot.com