Email from Colin Hansen :: Why the HST and why now?

[cabotp]

Originally Posted by djmk

who do you think works and owns these businesses? it is ordinary people. walk up and down the street (hastings, the Drive etc) and check out all those little stores. those stores are owned and operated by individuals and families who have the guts to go and do it themselves.

and businesses pay corporate tax. a lot of it. and they pay your EI + CPP as well.

Funny I don't recall having ownership of any business. I must not be an ordinary person.

So how can the HST benefit me. When I have to pay extra taxes on items I didn't have to pay the PST on before.

I laugh every time I hear the bull crap line that businesses will pass on the savings onto customers. If anyone believes that then have I got a deal for you.

And yet I'm not 100% against the HST. I understand that it will make it easier for businesses to collect and submit taxes. Instead of having to deal with two governments businesses would only have to deal with one government. Businesses would save money by having to spend less labour on collecting and submitting.

What irks me is how the government tried to act like we were a bunch of kids who wouldn't understand what is going on. Instead of trying to sell the HST to us they just decided to shove it down our throats and tell us it is good for us now shut up.

[mezzanine]

^ well, now we'll have the referrendum to decide. And believe me, if ppl think that the HST is a good policy move, then I would encourage to get out there and vote for it in the referendum. People who dislike the HST no matter what will be motivated anyway, it's people who are ok with it, and realize its benefits, but aren't motivated to vote for it that i would want to motivate from.

And if you don't like the Libs, well, there's the general election in 2013, or recall if you feel that strongly. Mulroney was turfed ages ago, but the GST/HST still stands...

[madmigs]

Originally Posted by mezzanine

Then I am sure that everyone would be pleased if we halted tax credits to support our film, digital and gaming industry, as I am sure that the next government will do. Or they will not.

Personally, I agree with the Georgia Straight (never think i'd say that, twice...)


====================
And this is off-topic, but as an urbanist, I am a strong support of the gaming industry and its effects on a city...

The problem is that these industries get so much tax cuts, that some aren't paying any taxes at all and even being subsidized by our tax dollars. And this is the same everywhere, these industries work states/provinces against each other. Then every year they convince states that they are not as big in, to cut deeper, to "make it worthwhile" for them to move to their state, and when these other states do that, they go to the one they are in and say see what they've given us, and then demand the same thing or else they threaten to leave(leaving utter devastation in their wake).

Sure some companies within the industries are deserving of this, but the big budget movie and tv companies? Please... Now if only we could get everyone in North America to give up these cuts at the same time, and suddenly cities/states etc aren't so broke anymore(it won't fix everything but it will help)

[madmigs]

Originally Posted by WarrenC12

NDP would axe it, costing the $1.6B the Feds gave us, then crank the minimum wage up to $10/hr. Ask the restaurant industry what they'd prefer.

But guess where those people now earning $2/hr more would spend their money? Yup at local restaurants, stores, entertainment, etc. People earning those low of wages, tend to need to spend all their money to survive and spent it pretty much exclusively in nearby businesses.

Trickle down economics doesn't work overall. Yes some businesses aren't greedy and out to squeeze every last dollar out of everyone and will pass the min wage savings on(as compared to the rest of the country which has higher min wages). But a large portion are greedy, and keep the savings for themselves, thus breaking the trickle-down. Now on the flip side, if you support those barely making it, by increasing min wage, they have more money to spend(and spend it they do), thus making businesses happy, making more money, providing more jobs, and the gov't is happy as the economy is good providing revenue to the gov't.

Not to mention employees being paid enough to survive, instead of wondering how they are going to afford food until the next paycheque(or any other bill), makes for happier and more productive employees.

---

Oh and I agree the HST makes doing all the numbers for taxes a lot easier on businesses. It's the tax shift to consumers and all the lying/games, that I don't like. Now if the gov't had lowered the provincial tax rate to make up for the additional items taxed by the HST(instead of just the GST before the change), things might have been a lot different.

[WarrenC12]

^^^^^

I guess you haven't taken any economics classes. The HST has nothing to do with trickle down economics and everything to do with efficiencies in the economy.

Consumption taxes are shown time and time again to be the best driver to encourage the right behaviour (saving) and discourage spending.

Groceries aren't taxed, so don't give me that food BS. I bring up the minimum wage because if there's anything the restaurant industry fights harder than the HST, it's a raise in the minimum wage.

Who says that I should pay PST on my cell phone but not a dinner out? Why is that "fair"? Doesn't make any sense.

If we want government services and programs, we need to generate tax revenue. I'll take the HST over higher income taxes (like most of the rest of Canada) any day.

[BCPhil]

Originally Posted by cabotp

Funny I don't recall having ownership of any business. I must not be an ordinary person.

So how can the HST benefit me. When I have to pay extra taxes on items I didn't have to pay the PST on before.

I laugh every time I hear the bull crap line that businesses will pass on the savings onto customers. If anyone believes that then have I got a deal for you.

And yet I'm not 100% against the HST. I understand that it will make it easier for businesses to collect and submit taxes. Instead of having to deal with two governments businesses would only have to deal with one government. Businesses would save money by having to spend less labour on collecting and submitting.

What irks me is how the government tried to act like we were a bunch of kids who wouldn't understand what is going on. Instead of trying to sell the HST to us they just decided to shove it down our throats and tell us it is good for us now shut up.

Without the HST, you still pay extra in taxes, even if you're not paying PST.

Under the PST, companies and businesses would pay PST on items THEY BUY. To cover that cost, they embed it in the price YOU PAY.

When you buy a haircut with no PST, you are in fact covering the cost of the business's expenses. Under PST, they had to pay sales tax on things like shaving cream, hair gel, shampoo, chairs, scissors, clippers, combs, brooms... almost everything in the store that they bought so they can provide you with a service, they paid PST on. So they pass that cost on to you in the price of their service. You think they charge what they do because that's the internationally regulated fee for providing hair cuts? No, it covers their cost, which includes every single penny they paid on PST. You are already paying their taxes when you buy stuff.

Under HST, they get full rebates on items they pay HST on that go to add value to their business. That's why it's called a value added tax, businesses get full rebates when the products they buy are consumed by their business. Therefore their cost to provide services is cheaper, so they can reduce their price, or use the money they save to invest in expanding/improving their business.

While it might not be noticeable right now, as many businesses are set up and had already paid PST on everything they bought, it will be more beneficial as we go along. If you were to go out and start your own hair salon today, the set up costs would be between 5% and 12% cheaper than they were before July 1, and more once the cost of those supplies is reduced because the people selling them don't have to cover their own PST expenses. And when you're talking about tens of thousands in start up supplies, that's a lot of money that can be saved by a sole proprietor. Apply the same principles to a company looking to invest in starting up a warehouse or manufacturing plant, and the savings are huge.

In fact, once the HST has been in place for a while, at the end of the day, less of your income will be going towards taxes, and instead go directly to businesses (who invest that money creating more jobs) than if we went back to the PST. With the PST, so much of the cost of the item you buy (even if it is a PST exempt service) is going to cover the costs of sales taxes that dozens of other businesses have paid to get that item/service to you.

[madmigs]

Originally Posted by WarrenC12

^^^^^

I guess you haven't taken any economics classes. The HST has nothing to do with trickle down economics and everything to do with efficiencies in the economy.

Consumption taxes are shown time and time again to be the best driver to encourage the right behaviour (saving) and discourage spending.

Groceries aren't taxed, so don't give me that food BS. I bring up the minimum wage because if there's anything the restaurant industry fights harder than the HST, it's a raise in the minimum wage.

Umm, oops, the whole section of my comment before the "---" was meant to be about the previous minimum wage comment, including the groceries part, not the HST. I guess I was still thinking about my previous comment, and put lower taxes in there when I meant lower wages(which has to do with trickle-down economics as it saves the business money which according to trickle-down would mean lower prices than places that have higher min. wages, like the rest of the country). And apologies for going off on a bit of a tangent from the discussion(blame it on me falling on my head last night requiring 3 stitches). PS: It's now edited.

That said, the HST is in a way is attached to trickle-down economics, in that it saves businesses time and money, increasing efficiency as you said, so those savings should be passed down. Only time will tell if they do, but history indicates most won't.

Originally Posted by WarrenC12

Who says that I should pay PST on my cell phone but not a dinner out? Why is that "fair"? Doesn't make any sense.

If we want government services and programs, we need to generate tax revenue. I'll take the HST over higher income taxes (like most of the rest of Canada) any day.

Not sure where the fairness thing came from. I even said that I agree with the idea of the HST over separate taxes, just not how it was implemented in terms of the tax shift and the gov't games/lying. But as for being fair, would it not have been more fair that in exchange for streamlining business processes, that businesses pay that tax elsewhere? Instead, businesses are paying less tax and getting a more efficient operation, with the consumer paying more tax and most likely the same amount for the goods/services(pre-tax).

Yes, I agree we need to generate tax revenue. However, placing consumption taxes on everything, like you said, discourages spending(thus slowing the economy and cutting tax revenue), as now everytime people are in a store, they see a price, they think tax. Income taxes, on the other hand, are taken at one point, and being in a store looking at prices, if there was no consumption tax, one would see a price, not think about tax, and would probably tend to spend more. This helps businesses grow and to hire more people and similarly to increase the tax revenue, as I doubt people would stop working or work less simply because it is taxed because that would also result in lower income.

[quobobo]

Originally Posted by madmigs

That said, the HST is in a way is attached to trickle-down economics, in that it saves businesses time and money, increasing efficiency as you said, so those savings should be passed down. Only time will tell if they do, but history indicates most won't.

Most scholarship indicates that they will. Look into research on the incidence of corporate taxes.

[quobobo]

Originally Posted by madmigs

Yes, I agree we need to generate tax revenue. However, placing consumption taxes on everything, like you said, discourages spending(thus slowing the economy and cutting tax revenue), as now everytime people are in a store, they see a price, they think tax. Income taxes, on the other hand, are taken at one point, and being in a store looking at prices, if there was no consumption tax, one would see a price, not think about tax, and would probably tend to spend more. This helps businesses grow and to hire more people and similarly to increase the tax revenue, as I doubt people would stop working or work less simply because it is taxed because that would also result in lower income.

Please look into relevant research. This is a good summary of why consumption taxes are generally believed to be more efficient than income taxes (corporate or personal). In a nutshell, income taxes reduce the rate of return on investment but consumption taxes do not. Investment is generally believed to be a key driver of long-term economic growth.

[mezzanine]

Originally Posted by madmigs

The problem is that these industries get so much tax cuts, that some aren't paying any taxes at all and even being subsidized by our tax dollars. And this is the same everywhere, these industries work states/provinces against each other. Then every year they convince states that they are not as big in, to cut deeper, to "make it worthwhile" for them to move to their state, and when these other states do that, they go to the one they are in and say see what they've given us, and then demand the same thing or else they threaten to leave(leaving utter devastation in their wake).

Sure some companies within the industries are deserving of this, but the big budget movie and tv companies? Please... Now if only we could get everyone in North America to give up these cuts at the same time, and suddenly cities/states etc aren't so broke anymore(it won't fix everything but it will help)

I would agree with that sentiment. To BC's credit, the tax cut they mentioned in the Georgia Straight is 17.5%, versus ~ 35% in Ontario and Quebec. In BC's favor is (currently) a lower tax environment overall that is spread across more economic activity as detailed by the KPMG report.

The HST will add further to a more transparent tax structure. For instance, prior to ontario's HST, they had a whole host of PST rebates to industries, such as the farming industry. How did farmers get on the list and not other businesses? Why not put that advantage to all business within the province? Interestingly, this rebate on things like machinery and drainage pipes did not extend to non-farmers = how did they enforce that and how much money did it cost?

[whatnext]

Originally Posted by mezzanine

Then I am sure that everyone would be pleased if we halted tax credits to support our film, digital and gaming industry, as I am sure that the next government will do. Or they will not.

Personally, I agree with the Georgia Straight (never think i'd say that, twice...)


====================
And this is off-topic, but as an urbanist, I am a strong support of the gaming industry and its effects on a city...

Well, if Gordo was so interested in preserving well-paying jobs in BC, he shouldn't have opened the floodgates to raw log exports now should he? Oh wait a minute, there's that pesky fact of logging industry workers largely being NDP supporters...

Why not tax credits for abbatoir operators?

As to mom and pop businesses being such big benefitters of the HST, what a larf. I wonder why it is the coalition challenging Zalm's petition in court tended to be well-heeled big business Liberal bagmen?:
http://communities.canada.com/vancou...-liberals.aspx

[madmigs]

Originally Posted by quobobo

Most scholarship indicates that they will. Look into research on the incidence of corporate taxes.

I do understand incidence, in that with lowering business taxes, either the prices will fall or wages will increase for employees of that business. Trouble is, these days, most of any tax cut seems to be going to wage increases for the higher-ups in the business, with a token amount to either lower prices or increase wages for the average employee. Thus resulting in the North American scenario where the rich/poor divide is ever increasing.

Another scenario is that with lower taxes, business owners(who are in many cases shareholders) make more money, but the people owning most of the shares of these companies, are typically the wealthy. Thus also resulting in the same increasing rich/poor divide.

[quobobo]

Originally Posted by madmigs

I do understand incidence, in that with lowering business taxes, either the prices will fall or wages will increase for employees of that business. Trouble is, these days, most of any tax cut seems to be going to wage increases for the higher-ups in the business, with a token amount to either lower prices or increase wages for the average employee. Thus resulting in the North American scenario where the rich/poor divide is ever increasing.

Let me know when you have data indicating that corporate tax is mostly incident on higher-wage workers. I haven't seen anything indicating that.

[madmigs]

Originally Posted by quobobo

Please look into relevant research. This is a good summary of why consumption taxes are generally believed to be more efficient than income taxes (corporate or personal). In a nutshell, income taxes reduce the rate of return on investment but consumption taxes do not. Investment is generally believed to be a key driver of long-term economic growth.

I had read that article or one very very similar some time ago. I did go through it all again, but yes those sound like good ideas and I'll take his word and yours that consumption taxes are better for the overall economic numbers, but depending on the implementation, not necessarily for the majority of the population, especially the lower income bracket.

Yes the rebates given are supposed to compensate for this, but by and large they don't. If the rebates would cover all of the tax that people below the poverty line pay and some progressive percentage otherwise up to some point(I don't know - mean income maybe. ie. similar to your linked article section VI), then by all means, lets do the best thing for the economy or in other words the VAT.

My original argument was based on the previous comment I had quoted, as I had taken his word that consumption taxes cause people to spend less, save more, and was contrasting that with the current widespread economic theory that says we need to spend more, not save, to get the economy started again.

[mezzanine]

Originally Posted by whatnext

As to mom and pop businesses being such big benefitters of the HST, what a larf. I wonder why it is the coalition challenging Zalm's petition in court tended to be well-heeled big business Liberal bagmen?:
http://communities.canada.com/vancou...-liberals.aspx

If anything, retail sales taxes tend to favor larger companies ('vertical inegration' in the link). If Jimmy Pattison owned the Western Family food plant and the retail outlets, they would do their transactions internally and not get charged PST, as opposed to a small business selling individually to separate stores.

With a cascading turnover tax there is a strong incentive for firms to integrate vertically to the detriment of economies of scale in a given line of production. The manufacturer may absorb the wholesaler and the retailer (or vice versa) to avoid the cumulative tax.

For example, since there is sales tax for every transaction of sale of parts, which are assembled to make a motorcar, it is better to make the parts in the same shop floor so that no sale is involved.

Similarly, for every manufacture of parts, there is excise duty that is to be paid if it is bought from another factory. So it is better to manufacture it in the same factory so that no extra excise duty is payable.

Link

[madmigs]

Originally Posted by quobobo

Let me know when you have data indicating that corporate tax is mostly incident on higher-wage workers. I haven't seen anything indicating that.

I didn't say that, or at least didn't intend to. What I meant was that when tax rates are cut, the higher-ups in the business take most of the monetary difference for themselves, not that corporate tax is mostly incident on them. ie. they take more $$$ than what their level of incidence in the business says they should.

As an example, let's say each person's incidence is 10% and there are 10 people(6 employees, 4 managers) and for simplicity assume they all earn $50 every 2 weeks. Tax cut comes along that saves the business say $100 every 2 weeks. What I am saying is that the 4 mgrs, each take 20%(or $20) of the tax cut, and now earn $70 every 2 weeks. That leaves $20 to to give to the other 6 employees(roughly $3.33 each), who now earn $53.33 every 2 weeks.

[mezzanine]

Originally Posted by whatnext

Well, if Gordo was so interested in preserving well-paying jobs in BC, he shouldn't have opened the floodgates to raw log exports now should he? Oh wait a minute, there's that pesky fact of logging industry workers largely being NDP supporters...

Why not tax credits for abbatoir operators?

And why not HST input tax credits for abbatoir operators?

For me a VAT-style HST transcends left/right politics. It's smart public policy that does things like add more transparancy instead things like businesses trying to lobby for special treatment/rebates with a regular retail sales tax. If you are worried about the impact on lower wage-earners, HST rebate levels can be changed to reflect that.

@Whatnext - I know what you think of the Liberals; what do you think of the HST, as public policy?

[quobobo]

Originally Posted by madmigs

I didn't say that, or at least didn't intend to. What I meant was that when tax rates are cut, the higher-ups in the business take most of the monetary difference for themselves, not that corporate tax is mostly incident on them.

If lower taxes on the business mostly result in higher wages for the higher-ups, that would indicate that the tax was mostly incident on the higher-ups - i.e. they were the ones that were paying the tax.

[whatnext]

Originally Posted by mezzanine

@Whatnext - I know what you think of the Liberals; what do you think of the HST, as public policy?

I was fine with the PST. And I know for a fact that many of the routine things I spend my money on: coffee, restaurants, haircuts, movies have gone up. So I'm against it. If all those businesses start passing on their purported savings to me <snicker> maybe I'll change my mind.

[cabotp]

Originally Posted by BCPhil

Without the HST, you still pay extra in taxes, even if you're not paying PST.

Under the PST, companies and businesses would pay PST on items THEY BUY. To cover that cost, they embed it in the price YOU PAY.

When you buy a haircut with no PST, you are in fact covering the cost of the business's expenses. Under PST, they had to pay sales tax on things like shaving cream, hair gel, shampoo, chairs, scissors, clippers, combs, brooms... almost everything in the store that they bought so they can provide you with a service, they paid PST on. So they pass that cost on to you in the price of their service. You think they charge what they do because that's the internationally regulated fee for providing hair cuts? No, it covers their cost, which includes every single penny they paid on PST. You are already paying their taxes when you buy stuff.

Under HST, they get full rebates on items they pay HST on that go to add value to their business. That's why it's called a value added tax, businesses get full rebates when the products they buy are consumed by their business. Therefore their cost to provide services is cheaper, so they can reduce their price, or use the money they save to invest in expanding/improving their business.

While it might not be noticeable right now, as many businesses are set up and had already paid PST on everything they bought, it will be more beneficial as we go along. If you were to go out and start your own hair salon today, the set up costs would be between 5% and 12% cheaper than they were before July 1, and more once the cost of those supplies is reduced because the people selling them don't have to cover their own PST expenses. And when you're talking about tens of thousands in start up supplies, that's a lot of money that can be saved by a sole proprietor. Apply the same principles to a company looking to invest in starting up a warehouse or manufacturing plant, and the savings are huge.

In fact, once the HST has been in place for a while, at the end of the day, less of your income will be going towards taxes, and instead go directly to businesses (who invest that money creating more jobs) than if we went back to the PST. With the PST, so much of the cost of the item you buy (even if it is a PST exempt service) is going to cover the costs of sales taxes that dozens of other businesses have paid to get that item/service to you.

So in the case of the barber who had to pay PST on the items they used and thus passed on that extra cost to the customers with a slight increase in prices.

Now if the business pays less for those items. Theoretically the price of my hair cut should drop. But with the HST it should come back to what it cost before.

Basically PST+Original cost = HST+New reduced cost

The problem is there is no incentive for a business to pass on the savings it received in paying less PST to its customers.

I get the feeling that outcome will be more like

Original Cost + HST = Higher cost than before.

Or looking at my shaw cable bill. In theory what I pay for my monthly services should of dropped yet I'm still paying the same for my monthly services but with the added 5% of the HST.

As I said I'm not against the HST per say. What I'm against is being given the run around.