Thursday, May 26, 2011

The HST changes

I am not a fan of the HST changes proposed by the government.   The only reason I am supportive is because this might mean the public will vote to keep the HST.

As I said in December of 2009, the 12% rate for the HST is too low and it should be more like 15%.  In BC we are too dependent on the government collecting revenues from productive activities.   We levy large natural resource revenue rents and use that money for government services in urban areas.  We tax incomes, business and personal, a higher rate than we need.   We do not focus on enough on taxing consumption.

The way the HST is structured, the effect is that the burden of the tax falls most heavily on the richest 20% of the population.   I do not have the exact figures, but working from what I can find, the top 20% of income earners seem to pay more than half the HST collected by BC.   As I said, I do not have access to enough data to be certain but it is not likely to be dramatically off from that.

Allowing people to keep more of their income allows people to save more of their money.  Allowing business to keep more of their income allows them to re-invest or to provide dividends to owners.  

Allowing business to retain income is important for the majority of people in BC because publicly traded companies in Canada are heavily owned by pension funds, insurance companies, mutual funds and other methods by which the general public saves their money for retirement or a personal safety net.   As we move to defined contribution pension plans, better returns for companies in BC means better pensions for people in the province in the future.

For me it comes down to where we get our taxes from and relying heavily on taking our pound of flesh from productive activity is just a bad idea.   A higher HST will allow us to reduce the burden on people working.
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