When all is done, 93% of Ontarians come out ahead
HST: get facts, not open-mouth rhetoric
Two events this week struck me as especially relevant to Ontario's discussion as the
antiquated, cumbersome, expensive Provincial Sales Tax is repealed and replaced with
a modern, value-added tax:
- New British Prime Minister David Cameron ran on a staunch promise
not to raise the UK sales tax, called the "value-added tax," or VAT. Echoing familiar nostrums
emanating from the Canadian right-wing, the UK Conservatives piously pledged one
thing, and then promptly raised the national VAT (from 17.5% to 20%);
- I did some e-mailings to several hundred people all across western Mississauga
in late June, and wondered what the reaction might be. Precisely three people
e-mailed back echoing the usual drivel you hear on open-mouth radio. The reaction
among homeowners now runs parallel to that of businesses at the start of the year.
The comments and questions at this stage have moved beyond "what"
and "why" into "when" and "how." Once people wrap
their minds around the idea, they get it, and realize that repealing the
destructive PST was something that was long overdue.
So what do we say to the skeptics?
In doing my responses to the last of the pre-implementation critics who steadfastly
refuse to acknowledge that their taxes went down to stay; that the new tax credits
are here to stay, and that most things are already subject to a 5% GST
and an 8% provincial tax, now the HST, I developed what people told me was a pretty
effective message. Exerpted from my discussions and responses with western Mississauga
constituents in June, here is my last pre-implementation word on the tax reform,
tax reduction, and PST elimination/HST introduction package.
In the past year, I have returned every call related to the HST, and answered every
letter. I visited every single retailer in Meadowvale, Streetsville and Lisgar earlier
this year. I have spoken with every service club, every seniors group, every
homeowners organization, and just about anyone else who would agree to meet and
grant about 30 minutes to talk with me.
The challenge faced by consumers is that the case against the comprehensive
tax cuts and elimination of the PST is easy to make; quick to say; emotional; and
wrong! The case for getting in step with the rest of the world requires you
to think; takes time to explain; is rational and is right. And make
no mistake, I am a h-u-g-e personal proponent of this move. I advocated for it as far
back as right after I was first elected in 2003. I take ownership of the best thing
done for Ontario since medicare in the 60s.
A value-added tax dispenses with the tax-upon-tax-upon-tax ad infinitum that permeates through
the Ontario economy with the regressive, expensive, obsolete and stupid PST. A value-added
tax (VAT) is what the rest of the world uses applies to most things. The issue was
how to make it neutral for consumers. Canada has had experience implementing a VAT,
which is what the GST is, in the 90s. Quebec and Atlantic Canada implemented essentially
what Ontario is doing in the late 90s. We know how it affects people, and have local and
recent experience to draw upon in Ontario.
What's the whole truth about the HST?
- Your income taxes are down permanently. The first $39,100 of income is
now completely tax-free. That frees up after-tax money for the 1/6 of things you
normally buy that may go up, because 5/6 of everything you buy is
already subject to a 5% GST and an 8% PST;
- Everyone qualifies for a $260 permanent sales tax exemption. Per person. That
pays all the additional tax on $3,250 of purchases not previously taxed. For a
family of four, for example, this means that all the additional sales tax on
$13,000 of purchases not previously taxed has been paid. This includes
utilities;
- Seniors have had their property tax credits doubled to $500 per year, and it
can be applied to rent. The additional amount pays all the taxes on
$3,125 of purchases not previously taxed;
- The assertion on talk radio that these tax credits will be gone is incorrect.
Make that read, "dead wrong." These tax credits are permanent, as are the lower personal income tax rates;
- During the first year, when prices adjust (downward for about 5/6 of items,
upward for about 1/6 of items), Ontario is providing the transitional payments
because some of the expense comes early while the tax credits come next April.
For a couple, or a family, these transitional payments ($1,000) pay all
the additional tax on $12,500 of purchases not previously taxed. That is the
reason why Ontario is using one-time rebates in three stages: to counterbalance
the fact that manufacturers, distributors and retailers all have inventory on
which the PST has been paid that will need time for a few stock-turns for lower
prices to be passed through. This province has learned from how the GST was
introduced and the HST in Quebec and Atlantic Canada;
- The TD Bank has estimated that 80 percent of the savings will be in the hands of
the consumer within a year; 90 percent inside of two years; 95 percent within
three years, and all of it shortly thereafter. In a mature, competitive market
like Ontario’s, to believe otherwise suggests you also believe that millions
of merchants can, or will, collectively collude to price-fix against 13 million
consumers. By extension, it also suggests that these same merchants can defy the
law of gravity as well as that of market economics.
Typically then, a couple earning below the $160,000 per year threshold stands to
benefit from tax credits that pay all the additional tax on some $25,000
of purchases not previously taxed in 2010. Considering that about 83% (5/6) of everything
that people buy is already subject to both a 5% GST and an 8% PST (5% + 8% = 13%)
and will, after July 1st, be subject to the exact same tax amount (GST of 5% +
HST of 8% = 13%), the tax credits suggest that unless you are spending $25,000 x 6 =
$150,000 or more in after-tax expenses, you ought to come out ahead.
The tax reductions are yours to keep. And the effect of removing the “embedded sales
tax” causes the 5/6 of tangible things currently subject to both the 5% GST and 8%
PST to come down in price, as they have everywhere in the world. Ontario will not be
the only exception to market economies in the history of the world. Those price
reductions amount to the uncollected “embedded” PST of $4.5 billion per
year. These measures result in a net revenue drop for Ontario.
Let's repeat that, just for effect. Ontario takes in $4.5 billion
per year less, not more. Not only
does this not constitute either a “cash-grab” or a “tax-grab,” it represents a
windfall for businesses, the people who work in them, and the consumers who buy
from them.
How can you sum the whole thing up in a single thought?
It comes down to this: by the time you have bought all the
things you normally buy; paid all the bills you normally pay; filed your income
tax return and received your tax credits, refunds and other allowances, 93% of us,
overwhelmingly low- to middle-income people will have more disposable income.
Personal reflections from your MPP
If all Ontario did was get rid of the PST and implement the HST, I would not have
supported it. Taken within the complete program of a comprehensive change in how
things are taxed, who gets taxed and at what rate stuff is taxed, there is no
question that this is the right thing to do. Ontario now has a permanent,
sustainable competitive advantage over the USA. This advantage leaves my counterparts
in the U.S. states frustrated, as their system perpetuates legislative gridlock that
prevents American state legislators from doing progressive things.
So why do this? Jobs!! Prosperity, investment and opportunity come
to the places that welcome them the most. Now we do in Ontario.
Click to read the study by the University of Calgary. Jack Mintz, a
prominent Canadian economist, estimates the impact of the Ontario tax changes to be
591,000 net new jobs, $47 billion in net new investment and
a rise in real incomes for Ontarians of an average of 8.8% in the ten years,
beginning July 1, 2010.
I didn’t run for office to watch Ontario stand still while the rest of the world
passes us by. I didn’t run to make sure nothing of any consequence ever changed in
this Province. I didn’t run because I was afraid of changing the status-quo, or shy
in the presence of a sacred legislative cow. I didn’t run to see our kids have to
leave Ontario to do what they studied in university.
I did run to expand the range of opportunities to my neighbours; to rip down
barriers to doing better – and the cold-war relic we know as the PST is exactly such
a barrier; to bring more of Ontario’s wealth into our community, and
people here know I have
done that. I take my share of personal ownership of the most ambitious legislative
measure a government I am intensely proud to serve has done in this mandate.
Send a blank e-mail to
MississaugaTaxpayer-subscribe@yahoogroups.com to stay updated on
the HST and other issues directly from me. I have neither the time nor the
inclination to spam anyone. The site is run entirely by Yahoo. You can join or leave
at your discretion. If you are a Facebook user,
click here to go to my Facebook page, and click "Like" to stay updated from it.
The authoritative source on the HST is at
http://www.ontario.ca/taxchange.
Better stuff than e-mail chain letters
As Mayor Hazel (one of my constituents) would advise any critics, “do your homework.”
There is a reason major newspapers, business groups, poverty advocates, and such
Conservative luminaries as Mike Harris and John Tory support these tax changes.
Click some of the links below, and read the truth, directly from the source:
Third-Party Studies:
Take a deep breath, leave the purple prose of radio talk show rage behind. Rage is
the easy refuge of the lazy. Read and think.
Posted or revised:
June, 2010