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Taxes - Choosing How To Be Gored

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The election season is upon, as all probably are aware. First the federal election on May 02, then an election this summer on the fate of the HST, possibly a provincial election in the late summer or autumn depending upon how Premier Clark feels, and then the municipal elections in November. If Clark goes for it that will be seven elections in three years. Voter fatigue, anyone?

The HST referendum is the interesting one as the public gets to make a direct decision on something, rather than pick which bag of promises looks better. Unfortunately the decision is limited, and the public only gets to choose between which kind of goring it would prefer.

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The referendum question is:

Are you in favour of extinguishing the HST (Harmonized Sales Tax) and reinstating the PST (Provincial Sales Tax) in conjunction with the GST (Goods and Services Tax)? Yes or No.

The decision on this should be a no-brainer since Statistics Canada found that the HST added about $521 to the tax burden of the average household. However, this is also not a fair question. What we should be having a choice on is whether we want the HST, or the PST and GST, or just the GST. The GST portion is a given since it is a federal tax and this is a vote on provincial policy, but the PST should also be on the table. Why not? Let us vote directly on how we want the government to raise its revenue.

Both the GST and the PST (or the combination which is the HST) are what are known as regressive taxes. That is, they tax people not on their ability to pay, but on their ability to spend, often on things that they need to have to live, thereby reducing the ability of the average family to support itself. Rich people like to call this fair because it leaves them with a lot more of their discretionary income to play with than a progressive tax on wealth would do.

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One argument is that the rich spend more so they pay more taxes. True, but the rich and poor alike have the same basic requirements for survival, and regressive taxes do not impact the rich nearly as severely as the rest of us. Progressive taxes, like an income tax without lots of exemptions and with a fair basic deduction, target income in excess of that which is required to survive on.

The trend in Canada has not been progressive as the rich have been increasing their income at a much greater rate than the rest of us. In fact some of the rest of us have lost ground in real income where income increases do not exceed the rate of inflation. As the gap grows the total share of income gets larger and larger for the few at the top. According to a recent report by Armine Yalnizyan published by the Canadian Centre for Policy Alternatives (CCPA), the richest 1% of Canadians have an average income of over $400,000 and collectively account for about 14% of the income in the country, about twice their share thirty-five years ago.

A bigger share of income has not resulted in a bigger share of tax burden in relation to income, however. In a study done by Marc Lee of the CCPA comparing all forms of taxes from 1990 to 2005 it was found that the lowest earning 10% of tax payers saw their overall tax burden increase by about 5% while the top 10% saw a decrease of about 4%, putting them at the same level of taxation as the lowest at about 30%.

Part of the reason that the total tax burden on the rich has declined is tax breaks that have benefited them more than the rest of us. And part of the reason that taxes on the lower incomes has increased is because of increased in regressive taxes like the HST which take a bigger percentage of low incomes than high ones.

It is a good thing that a public outcry in BC has forced the government to go to the voters for approval of a regressive tax which apparently is one straw too many. The voters should have a direct say in whether they want this tax or not. It is only too bad that they do not have a choice at this time to say whether or not they want any regressive taxes at all.

Links:

The Rise of Canada's Richest 1%

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Eroding Tax Fairness

9 Things The Rich Don't Want You To Know About Taxes

Why We Must Raise Taxes On The Rich

The Right's Pushback Against Taxing The Rich

 

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Jerry West grew up on a farm in California and is currently Editor and Publisher of THE RECORD newspaper in Gold River, BC. Graduate with Honors and graduate school, UC Berkeley. Member, Phi Beta Kappa. Vietnam veteran and Former Sgt. USMC

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