The taxing logic of sales taxes

Brian
Brian Jones
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Many Newfoundlanders (and Labradorians) boast — mistakenly — this province is full of sophisticated political animals who effortlessly combine wisdom and wit in the public sphere. But Newfoundlanders are neophytes compared to our fellow Canadians on the Pacific Coast.

Residents of B.C. recently did an amazing thing, and I’m not referring to June’s Stanley Cup riot. They held a referendum and voted down their provincial government’s decision to adopt the harmonized sales tax (HST).

Newfoundland and Labrador, we must remind ourselves with shame, long had the highest sales taxes in the land, but even a 19 per cent levy at cash registers couldn’t prompt a lethargic citizenry to rebel against such obvious gouging.

In B.C., in contrast, people quickly and angrily dispatched former premier Gordon Campbell for allegedly lying about his plan to adopt the HST.

The vote in B.C. is a refreshing and encouraging throwback to another era.

The B.C. referendum on the HST makes you nostalgic for the time, two decades ago, when Canadians were almost unanimous in their hatred of sales taxes. (Except in this province, where consumers quietly and obediently paid the 19 per cent levy with barely a whimper or complaint.)

 

Tax twists

Hold your nose and call to mind former prime minister Brian Mulroney. He oozed sleaze the way a slug oozes slime, but his obvious moral decrepitude wasn’t what made him the most hated PM in history when he left office. Mulroney’s precipitous popularity plummet can be pinned on his implementation of the goods and services tax (GST).

The culture has changed dramatically since the 1980s and early 1990s.

Back then, there were Canadian-based hockey teams that had a chance of winning. “Jihad” would likely have been mistakenly identified as a sultry pole dancer, perhaps part of a twin sister act with Jasmine.

And most Canadians opposed sales taxes.

We’re older and wiser now. When a Canadian team advances deep into the NHL playoffs, police reach for their riot gear. Jihad is now just another aspect of multiculturalism. And sales taxes are good. (Except in B.C.)

Economists and business thinktanks were quick to lambast B.C.ers for their supposedly shortsighted and simplistic rejection of the HST. The most common argument in favour of the HST is that it is “efficient.” (So are serfdom and slavery, but let’s leave those for another time.)

How things morph. Twenty years ago, the business community’s most strenuous argument against the GST was that it forced them to act as tax collectors for the state.

 

Coin collecting

People used to hate sales taxes because they punish the poor and the middle-class, and favour the rich and the well-off. Picture a single mother with a minimum-wage job, and a millionaire matron’s nanny, both standing in line to pay for a pack of diapers — each will pay the same amount of tax.

It used to be widely accepted that the fairest way to collect taxes was to base them on income. Those with more paid more.

No more. The tax burden has shifted downward.

We have forgotten that the essential aspect of a fair tax system is not the amount that you pay, but the amount you have left over.

Consider Common Bob, with an annual salary of $40,000. After paying about $10,000 or so in taxes, he has a mere $30,000 left for mortgage payments, car payments, groceries, utility bills, children’s clothes, school supplies and perhaps an occasional trip to Las Vegas or Gander for a weekend of debauchery.

Now consider Uncommon Bob, with an annual income of $400,000. After paying $150,000 or so in taxes, he has $250,000 left.

Sounds fair to me. But then, I used to live in B.C.

 

Brian Jones is a desk editor at The Telegram. He can be reached by email at bjones@thetelegram.com.

Organizations: NHL, The Telegram

Geographic location: B.C., Newfoundland and Labrador, Las Vegas Gander

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  • Carl
    September 03, 2011 - 12:22

    The GST did indeed make people hate Mulroney. In fact, they kicked him out of office for it, instead electing Jean Chretien, who promised to abolish the GST. Chretien broke that promise of course, and instead of being punished for it, he took credit for balancing the budget - which he could not have done without Mulroney's GST. So, you see, sometimes polticians are punished for doing what is right, and rewarded for dishonesty.