You are invited to a tax party

B.C. residents tune out the spin, and turn to each other for the HST vote

You are invited to a tax party

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This month, for the first time in B.C. history, every British Columbian has the chance to play finance minister for a day. HST referendum ballots have landed in mailboxes across the province. But not everyone is thrilled with the opportunity. Navigating the complexities of tax policy isn’t easy, and even the referendum question is causing confusion. Voting “no” means you want to retain the HST, which strikes many as counterintuitive. A “yes” vote, meanwhile, is a vote against the new tax. The last poll showed that almost 20 per cent of respondents misunderstood. And that was just the question.

Both sides of the debate—former premier Bill Vander Zalm’s Fight HST campaign, and the government and its allies, calling themselves the Smart Tax Alliance—are fighting hard, deploying TV, print, radio and Internet ads, automated “robo” calls, lawn signs and spin doctors galore in a last-ditch effort to pick up votes. Yet some British Columbians, grown weary of the din, are turning to more trusted sources: their friends, family and colleagues.

Vancouver writer Christine McLaren was so thoroughly confused, she decided to gather her informed friends for a party to try to make sense of the referendum. Despite closely tracking the debate, the self-described news junkie had “no idea” how to vote. A lot of her friends, including her housemates, a shiatsu therapist, and a yoga and meditation teacher, were equally stumped. So the trio invited pals from all walks of life—engineering, finance, the arts, a mix of low- and middle-income families—to their purple house in Strathcona, a gentrifying neighbourhood bordering the Downtown Eastside. By hashing out the arguments, and “picking each’s other’s brains,” McLaren hoped to help make the decision a little less, er, “taxing.”

Last June, B.C. “harmonized” its provincial sales tax with the GST, creating a single “HST.” This meant some things that hadn’t been subjected to both taxes before are now more costly to consumers, but the tax is meant to be a boon to business and the economy; it removes compounded PST, which had been charged at every stage of production, increasing costs.

But in B.C., the debate has, by now, devolved to a “screaming match,” says UBC economics student Colin Fraser. “All that people really understand is that haircuts and restaurant meals cost seven per cent more.” Fraser grew so sick of the rhetoric and misinformation that he wrote a long, thoughtful blog post last week, which has since gone viral, to help his friends understand the value-added tax.

“For the average person who hasn’t been trained to understand the effects of a shift in taxation, it’s confounding,” says McLaren. “You’ve got to consider whether corporations will be taxed less, and consumers more, and then if the HST doesn’t go through, whether corporations will choose to ship elsewhere.”

McLaren served tabbouleh, hummus and wine, to get conversation flowing at her party. She needn’t have worried. Within minutes, her first three guests were “screaming and yelling at each other.” Among the 15-odd guests, the pro- and anti-HST sides were evenly split, but more than a third were undecided. As a group, they went through Vander Zalm’s arguments opposing the HST one by one, fact-checking his figures with independent reports that McLaren printed out for the occasion. At that point, she says, the atmosphere shifted: “People were bouncing ideas across the room, thinking deeply, digesting the numbers and facts.” It felt like “going back in time” to the parlours of Paris or the ancient Greek polis, “when there was no Internet or newspapers, the only way you got information was by debating,” says the 24-year-old Penticton native. “It felt like democracy at its purest.”

For the past two weeks, informal gatherings like these have been taking place in classrooms, coffee shops, dinner tables, and on email. In a message last week, Toby Chu, president and CEO of CIBT Education Group Inc., which runs private colleges across Canada and Asia, told his friends and colleagues he was voting “yes” to extinguish the HST. The tax, he said, cost his company $500,000 last year, translating to “job losses, benefit cuts and reduced spending.” A day later, the chair of the Vancouver Board of Trade, Wendy Lisogar-Cocchia, fired off an email urging local business owners to “share the knowledge” of the HST’s “economic advantages” with their employees.

In the end, no one left McLaren’s party undecided, and a few minds were even changed. Ultimately, McLaren decided to vote “no” and keep the HST. In digging through the reports, she realized low-income earners would not be disproportionately affected. And the costly process of reverting back to the old dual system just wasn’t worth it.

With most polls showing a 50-50 split, it’s still far from clear whether the HST will survive the referendum. If there’s one thing both McLaren and Fraser are sure of now, though, it’s that citizens should not be making decisions like these; it’s too costly and time-consuming. “We trust our leaders to have an understanding of these issues, and make decisions in our interest,” says McLaren. “That’s why we elect them.”




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You are invited to a tax party

  1. The clearest explanation I’ve found is here:

    http://www.youtube.com/watch?v=nZXu3LXNwEg

    To me, once you understand the various gains and losses, its not clear how anyone came to the conclusion that the HST isn’t the obviously better choice.

    The only reason I can see for people voting against it is simple hatred for how it was introduced.

    • The only reason I can see for people voting against it is simple hatred for how it was introduced.

      Or they don’t understand (haven’t bothered to investigate) the various gains and losses.

      • Hi Phil,

        OK, so this is humbling: But that is not necessarily always a bad thing.   I have been browsing the web for about two hours now “investigating”.  I just finished reading the independant report as compiled by four independant analysts at http://www.hstinbc.ca/.  I did not know about it before.

        I made a mistake by not separating emotion from reason.  The report started by issuing an apology for the way the HST was conceived, delivered and imposed.  That is probably all I really needed to read.  The rest of it was interesting, and I found myself willing to change my mind based on the information I read.

        I was also uncomfortably reminded about the rebates I recieve which amount to about $180.00 every three months.  I still don’t understand what “basic groceries” are; my grocery bill seemed to go up quite a bit at the time; but nevertheless, as a low income earner much of that; correction:  Most of that is refunded.  Obviously I can’t afford very many restaurant meals anyway, and I get my hair cut once every six weeks, for $16.00.  But I can’t afford a tip. 

        As I have said many times myself:  “There is nothing more difficult to open than a closed mind”.  I feel like such a hypocrite.  If I could, I’d get my ballot back . . . darn it anyway.

        Now I am hoping that the HST ”Yes” by voting No” side wins, and hopefully that will settle the issue. 

        -Brian Leslie Engler

    • It’s easy to conclude that the HST is a bad choice if business owners (of which I’m one, by the way) remove their selfish self-interest and consider what life is like for those who don’t get the input tax credit.

      Quite simply, low income people are now paying more for the essentials, which means they can’t afford as many of them, which means that somebody might have to make do with even less than they already have.

      I’m a small business owner, and I don’t have a problem dealing with two taxes, so I don’t see what large companies can’t figure it out. I’d  happily forgo the input tax credit for the satisfaction of knowing that I’m not contributing to someone else’s poverty.  If big corporations have a problem with separate taxes, let them leave the country and let loyal Canadian businesses pick up their slack.

      Also, don’t forget that the HST ties BC’s tax policy to Ottawa and robs it of the autonomy to raise or lower the sales tax in response to changes in the economy.  Consider this: if raising sales tax is no longer an option for a government in deficit trying to balance its budget, what is?  Cutting health care?

      • You’ve just repeated two misconceptions I’ve heard over and over again.

        First of all, all the studies done on this, including the anti-HST report, show that those in the lowest income brackets are actually BETTER OFF financially as a result of the HST both because of the rebates and because the PST compounded prices.

        Secondly, the ability the province to raise or lower the tax rate is clearly not correct given that the province is lowering the rate over the next couple years.

        Again, if you’re not clear on the facts, watch this clip. You can’t possibly come away thinking the PST is the best option.

        http://www.youtube.com/watch?v=nZXu3LXNwEg

        • I’d LOVE to see the methodology of the studies that show low income people are better off under the HST.  The right-wing think tanks must’ve bent themselves over backwards to come up with that one.

          I provide services to mostly low-income people.  My prices are now 7% higher.  I don’t need a study to show me how much that hurts my customers.  I can see it with my own eyes.  Anybody with an ounce of common sense can figure out that paying more for things hurts people on fixed income.  And it hurts my business too because they now buy less.

          You also don’t need a study to project the outcome of the HST.  All you have to do is look at the Maritimes, who’ve had it for years.  The result:  prices went up.  Fact.

          • No need to look to the “rightwing” for a study, just look at the study commissioned by the anti-HST folks.

            It clearly stipulates that after one considers the income tax changes and HST rebates, people in the lowest bracket are nearly $200 richer even with the price increases in some areas.

            Those in the next bracket break even.

            It isn’t until you reach the middle class that prices go up… by $44 dollars a year, and temporarily at that.

            An honest look at the HST in the Maritimes points to the fact that while prices go up initially, after a couple years the prices drop.

          • Hi again Phil,

            First of all, let me say that I appreciate the validity of “some” (not all) of your comments and where you are coming from.  No apologies are necessary.  You may see me as irrational, but that does not mean that my opinions are invalid, or even that my precious little feelings have been hurt.  You are supporting the HST for your reasons, and in my way I support it also.  I just am not in favour of voting for it.  My “irrational” reason for it is because of the way it was introduced and imposed.  I think that the democratic principle of honesty, openness and transparency in government is more important.  If the ordinary common citizens can’t keep (their) government honest, (through democratic process) then who can?

            I watched the links you provided and I have so many questions about them; which obviously we don’t have either the time or space to discuss here.

            For me, it is a question of priorities.  We simply have different priorities in this matter.  On this basis; I hope that we can agree to disagree, and in any event I have enjoyed exchanging different points of view with you.

            Best wishes and best regards,

            -Brian Leslie Engler 

          • @BrianLeslieEngler:disqus 

            While obviously I can’t agree with your decision to vote down the tax, I do sympathize with the reasoning behind it, so I hope you get the best of both worlds somehow.

            I look forward to debating you in the future. People capable of agreeing to disagree are in short supply these days and are greatly appreciated for their sense of perspective.

            Just based on that reasonableness, I suspect on many issues we will inevitably agree.

            Cheers.

      • Hi M_T_B,

        By the way, in addition to tending to agree with Jonas’ comments I also tend to agree with yours.  I don’t really care about the “studies”  I care about how the higher prices I pay affect me.  My rent, food and utilities now add up to about $1170.00 per month.  That leaves me about $230 in discretionary spending. 

        Obviously, I need to be very discreet – and responsible – about how I spend it.

        By the way, I don’t consider myself to be “poor”.  I am very well off compared to about 95% of the rest of the world’s population.  Although it is a learning mprocess, There is a great deal to be said for a simple, happy, quiet and contented life.

        Once again,  I appreciate your comments.

        -Brian Leslie Engler

    • Hi again Phil,

      Re:  “The only reason I can see for people voting against it is simple hatred for how it was introduced.”

       Please see my final comment to PhilCP at the end of this thread.

  2. Your article makes it sound as though this has been some sort of two-sided debate, or at least a more or less even-handed one.  But it hasn’t.  The Campbell government never did any kind of a sell job on the HST, never had a communication strategy at all to deal with it.  They treated the HST like Mrs. Bates hidden in the attic.  The anti-HST forces had the whole field to themselves during the whole campaign to get the referendum going.  And this has basically continued:  if you drive around Vancouver, the only signs you see are anti-HST signs.  There are no pro-HST signs, period.  I’ve never been able to figure out why the BC government has been so meek, mute, and seemingly unwilling to proactively defend this tax (assuming they belive it’s a good thing).

  3. If the citizens don’t want it, get rid of it.

    • Yeah, that’s what the voting’s all about in case you missed it.

      Frankly though, this is a case in point for why we have a representative democracy and not direct democracy, ie you vote for someone you trust to look into the details instead of assuming every citizen has sufficient capacity to do so, because they don’t.

      Those who know enough to make an intelligent decision on any single issue are always out numbered by those who don’t.

      Not a great basis for rational decision making.

      • As I like to say, the phrase is “ignorant masses” for a reason.

  4. Asides from building & grounds maintenance & other incidental costs costs, which were mostly PST exempt in BC, PST shouldn’t be compounded if all the companies are involved their paperwork properly.

    HST SHOULD be the better choice.  It reduces the number of tax filings (& potential audits) for companies 4 to 3 (corp income tax, HST, payroll) and reduces the size and decreases the size and invasiveness of provincial governments.  Unfortunately, organisations whose sole purpose is to deal with money, whether public or private, have a tendency to fubar things; fear of change may be a good thing.

    The typical consumer MOSTLY only pays sales tax on discretionary & semi-discretionary items such as vehicles, boats, electronics, entertainment & personal & home hygiene (unfortunately, hygiene is discretionary).  I’m not sure what it says about us that we squawk more about this than more important issues, other than we’re a bunch of reactionary crybabies with self-identity issues.

  5. Hello all,

    There are a lot of things very incorrect about how the HST was introduced and imposed; including what has been described as a $1.6 billion dollar “bribe”.  Honest people (and I like to think that includes most of us) just do not like being deceived or played for fools.

    This referendum is non-binding.  If the ”No” – by voting “yes” – side succeeds or fails (depending on your point of view and whose side you are on) we won’t have an election.  The Liberals would need to call it.  Our current premier has already waffled on this issue, so if the “No” by voting “Yes” side wins that result will simply be ignored.  The ratioinale being that somehow “we” will grow to like it better than other ways of being taxed.  And after all, our politicians know better than we common people.  Ummm, aren’t our politicians supposed to be “common people”?

    Taxes are necessary.  But when decisions like this are made “unscrupulously” (using the term advisedly) and then rammed down peoples throats without debate or full and complete disclosure it feels somehow “unscrupulous”.

    As Abraham Lincoln is purported to have said,  “You can’t do the right thing the wrong way”.  The HST may indeed be a more bureaucratically efficient method of taxation but the way it was imposed was not “democratic”.  Actually the way it was imposed still really stinks.

    That is why I voted “No” by voting “Yes”.

    -Brian Leslie Engler

    • Great.  So I hope you feel really good about having a stupid, inefficient system of taxation rather than a rational, efficient one.  And forcing BC (and, thus, BC taxpayers) to pay back that $1.6 billion.  You’re a regular hero.

      • Hey “Bean”,

        I guess you feel really good about having an intelligent, efficient system of taxation:  Good for you.  Beyond the fact that I live on $1400.00 per month, actually so do I.  So what if “we” are forced to pay back a bribe?

        If the new HST is so “good” for everybody, why did we take it in the first place?  As far as the feds are concerned the increase in tax revenues from BC has already paid off (their) bribe.   

      • have you actually looked into this mythical $1.6b dollars they are spouting off about? do you think bc has received all of it? you’d be wrong, therefore we do not have to pay back all of it. on top of that, since the HST bc has brought in roughly $800m extra revenue, it is easily enough to call this whole fiasco a wash.

        hst may be more efficient, but it is more expensive for the average consumer. i would actually be fine with it if goods and services were all taxed at the same rate as pre-hst, but that’s not the case. all sorts of things are taxed at higher rates than before, why? ask ottawa and victoria.

        then people start bringing up the whole “well they have to tax something” and, “if hst is scrapped then they will just up income taxes”. i ask, WHY? why do taxes always go up?? what are we gaining? as a small business owner and regular consumer i have not seen any increase in what i receive for the increased taxes i pay. hst was suppose to make everything cheaper, i haven’t seen it.

        you want an answer? cut govt. there is so much bloat and misuse of funds in govt it is staggering, both federal and provincial. have you ever walked into the surrey tax center and tried to actually get anything done? it’s a nightmare. it reminds me of a quote from one of my favourite authors, “the left hand not only doesn’t know what the right hand is doing, but doesn’t seem to know that there is a right hand”.

        and before you pipe up and say “hst IS cutting the bloat!”, i agree. but i refer you to my second paragraph. sure, go ahead and introduce a more efficient way of taxing sales(that’s a good thing), but why get all greedy and try to tack on another extra tax? people wouldn’t be so angry if the govt explained the hst system properly, were level about wanting to introduce it and didn’t ask for another 5-7% on things like used cars and new homes, etc……

        • “…hst may be more efficient, but it is more expensive for the average consumer….”

          Yes, and the calculation according to both sides is that it will cost the BC consumer an average of…. ready for it… $44 more per year, ie 12 cents a day in the first two years.

          However, as noted by the implimentation in the Maritimes of the HST those costs drop considerably over time and end up as savings within a couple years.

          Why?

          Because the old sales taxes compounded at every level increasing the price of the average unit by over 10%. The HST is more efficient and less bureaucratic so prices drop at a rate relative to the degree of competitive pressure on each particular industry.

          Beyond this, the poorest are better off by an average of $193 a year (according to the anti-HST folks no less), and those in the second lowest tax bracket break even.

          So what’s the problem really?

          None that I can see.

          The PST is outdated. Let it rest in peace!

          • Nonesense.  Prices went up in the Maritimes as a result of the HST.  Check your facts.  Unless of course you’re getting them from the Fraser Institute.

            Companies don’t pass the savings from eliminating compound PST onto the consumer. They put that straight into the pockets of their shareholders, the same place they put all those tax breaks we give them that they’re supposed to use to create jobs. If you seriously believe companies are passing savings onto the customer, I’ve got a piece of land in Florida to sell you.

          • Cynicism isn’t a good subsitute for fact.

            Companies pass on the savings over time because of competitive pressures regardless of whether they’re nice people or not.

            Yes prices go up initially, that’s the main drawback after all, but then that’s why the feds gave the province those billions, so they could pad the change with income tax reductions and rebates.

            Again, you need merely look at the anti-HST study Vander Zalm commissioned. Despite the rhetoric on the front end, the numbers tell a different story.

            This fifteen minute presentation spells it out in black and white.

            http://www.youtube.com/watch?v=nZXu3LXNwEg

        • Why do taxes have to go up?
          Have you heard of inflation?

          • really? if you are going to use that argument then wages should be going up along with the inflation and raise in taxes. but that is not happening. i’m certainly not making any more than i did before.

            wages have increased over time, but nowhere near the rate of tax increases.

            also, why do we have inflation in the first place? you can thank central banks and the fractional reserve banking system for that, which is nothing short of criminal in my mind. but that is another subject altogether.

          • Actually, it *is* happening.

            Just not for you.
            Or most of the middle class, for that matter.

            But we are making more money.. it’s just concentrated above you.

            And incidentally, the reason we have inflation is because we have profit.

            Think about it. Profit is that money in excess of what it takes you to create something. When you make a profit, you’re charging beyond what it cost you. Which means to afford it, your purchaser needs to ensure that what he gets paid for whatever not only covers his cost and profit, but yours as well.

            Inflation, then, is a measure of aggregate profit.

    • That’s one of the silliest rationalizations of a bad decision I think I’ve ever seen.

      The question isn’t whether you like politics or politicians, but whether the current tax system is better than the old one.

      That’s it that’s all.

      Vote for the most efficient tax system for pete’s sake.

      • Hi Phil,

        Well, as I have already voted; and as “my” or anyone else’s vote doesn’t really matter because the Liberals aren’t going to change anything – we are not going to have an election about this – and as my vote represents my ummm, “principled” opinion about a highly unprinicipled issue; what is “bad” about it?

        What can possibly be “bad” about one vote that is not going to change anything?

        If I did not like politics or politicians, I would not have voted at all.  But, and this is important:  I wanted to express my opinion.

        So, where does that leave us?   Back to you. . . .

        • All any of us are doing here is expressing opinion, and I’m certainly not criticizing the holding or expressing of opinions, but debating the issue itself.

          In terms of that you seem confused concerning what this vote is actually about. It isn’t a referendum on principles, it’s a referendum on a preferred tax arrangement.

          Voting against an intelligent tax system for the sake of chastizing an idiot Premier/party seems like cutting off your nose to spite your face.

          • Hi Phil,

            With respect:  You don’t get it.   This referendum is politically non-binding.  That means that the governing party of the day does not need to pay any attention to it.  Somehow, if the NDP replaces the Liberals in say three years, I have a hunch that they won’t pay any attention to it either.

            Being non-biniding, this referendum has really been about letting the electorate “vent” and blow off some frustration.  That’s it. That’s all it is.  So, I have vented . . . by voting “Yes” in order to vote “No”. 

            My vote is cast.  Neither you or I can change that,  Maybe I’m taking your comment personally, but chastising me for something that neither you or I can change seems somewhat spiteful, too . . . . 

            By the way, perhaps you could refer to my comment to OrsonBean at the end of this thread.  I already know that a more efficient taxation system is going to be in place.  I actually like that idea.  And I tend to agree with Jonas’ comments as well.

            Are there any other ideas you would like to debate?

          • Whether binding or not, the government has created for themselves something they can’t afford to ignore in my opinion. Can you imagine the backlash? Yikes, talk about political suicide.

            I’m sorry if I’m making you feel bad, that’s not my intent, it just seems like your position is an emotional one rather than a rational one and I hate seeing people do irrational things that actually hurt them in the long run for the sake of sounding off on a bunch of idiots.

            The means and methods of this government were and are atrocious, but someday they will be gone and you will be left with a debacle of a tax system if the HST is voted down.

            Anyways, as you say, what’s done is done and its pointless to go on about it as perhaps I have. My apologies.

            I really wish the best for my fellow Canadians, and it’s my perception that returning to the PST at this stage will be somewhat disasterous in the short term and give provinces like Ontario an obvious advantage over the long term.

  6. There has been one major piece of misinformation that has been circulating about this matter and which has been repeated, to my shocked surprise, in this article by Nancy Macdonald, namely that the PST was a compounding tax.  It was not, as every retailer and distributor in BC knows perfectly well. Virtually every business in the province has a registration number which is used for purchasing and exempts the buyer from PST. In other words, only the consumer/end-user pays this tax, exactly the opposite of a compounding tax. This lie has been shamelessly used to promote the HST.

    Furthermore, no one seems to have mentioned that PST was not applicable to services, only to material goods.  This makes a huge difference to a lot of us.

  7. The question isn’t whether you like politics or politicians, but whether the current tax system is better than the old one.
    We must  vote for the most efficient tax system!!!!

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