We are now in a moment in Canadian politics where tax policy is based mostly on how people feel about different taxes. B.C. premier Christy Clark is now at the cutting edge of feeling-based tax policy, thanks to her decision today to cut the HST, hike the provincial corporate tax rate, and distribute cheques to some of her fellow British Columbians. Economists find every part of this notion vexing. On Twitter, Stephen Gordon linked to this old blog post explaining why Canada needs a lot more HST-ish taxing and a lot less corporate-tax-rate-ish taxing.
This is pretty nearly conventional wisdom among the wise. Colleague Coyne will surely be gallumphing along any moment to explain that the only way Clark could make British Columbians’ lives any worse would be to make them wear bicycle helmets all the time. But no matter. Clark has inherited an unpopular HST policy from her predecessor Gordon Campbell. Defeat in a referendum on the tax could blow a hole in Clark’s premiership before it really gets started. So she must be seen to be Doing Something. Cutting the HST, which looks to consumers like a tax on everything, looks popular. Hiking corporate taxes, which look to consumers like a magical kind of tax that no real person pays, looks painless.
I’m not sure it’ll help as much as Clark needs it to help. BC voters’ referendum options now come down to a choice between less HST and none at all. I think it just became easier to vote for “none at all,” because “as much tax as we’ve been paying” suddenly has no champion.