Friday, August 27, 2010

update to last blogpost

I penned (ok, typed) "the more we hear from Danielle the better!" comment before I read this story.
"There are some theoretical issues that Professor Mintz and others have identified, and we’re looking at those, and we take them seriously,” [Finance Minister Ted] Morton said [with respect to tax reform].
Frankly I am surprised to hear this. If Morton had said this prior to heading up the Finance department I would have even been downright shocked, since that would have been prior to his being briefed by his department about the "theoretical issues."

Danielle Smith's reaction? "It’s shocking that he wouldn’t rule [a consumption tax] out."

Smith goes on to declare that "[t]hey don’t have a revenue problem. They have a spending problem," which I could not agree with more, but the context of Morton's "musing", if one can call it that, appears to be "looking at all the options we have for smoothing out revenue volatility," i.e. exploring tax reform within a revenue-neutral constraint.

For what it's worth, I agree with U of C economist Frank Atkins that
It's a really tough sell now because we all know that the whole reason that sales tax talk is heating up now is because of the size of the deficit. This is the wrong time for sales tax talk. This is the time for cutting expenditure talk.
As such, it can be reasonably argued that Morton is, indeed, just looking to raise money, not least because he attacked a spending control bill introduced by a Wildrose MLA earlier this year as being too constraining. Furthermore, "we take [the argument for taxing consumption] seriously" is rather at odds with what Morton's government has actually legislated, since the preamble to the "Alberta Taxpayer Protection Act" states categorically that "a general provincial sales tax is not a desirable tax."

But be that as it may, Danielle's position seems to be that it will always be "the wrong time for sales tax talk." It appears to be an a priori rejection instead of a conditional one that allows for a consideration of the evidence.

According the Edmonton Journal's editorial board, I apparently should never be too concerned about what Danielle Smith says, because she is one of those "opposition politicians who can say anything an audience wants to hear without having to worry about having to deliver." But I am concerned on the policy front and frankly I don't get the politics either. A comment by LarryAlberta on the CBC News website, "[e]liminate provincial income tax and then put in a sales tax. User pay is the fairest of all tax systems" currently has more than half again as many thumbs up as thumbs down. I dare say that the party should not refuse to consider supporting a issue with even just 40-some percent support in Edmonton when almost any constituency in the capital city can be won with 40% of the votes cast and the party would be extremely competitive in any Edmonton riding in which its support was running at 30%.


Anonymous said...

What I don't get is why is everyone talking about an instituting old style PST. Wouldn't the most logical thing in the future would be get the Federal govt to add in the additional "HST" points Ontario and BC get to the GST that is already being collected. By discussing irrelevant old style PST's all the parties are doing is obsfurscating the real option on the table. If you look at how BC somewhat controversily did this you wouldn't even need a vote in the legislature or a referendum all you have to do is call Ottawa and tell the to add the points. (BC only voted to repeal the old PST). If Manitoba and Saskatchewan went along with harmonization(I consider the non denial denial's to be pretty weak) you would be on the verge of having a coast to coast national integrated sales tax system which both major federal parties(The conservatives in both their progressive and reform/alliance iterations) have supported strongly and enthusiastically for over 25 years. Alberta could probably with a national single rate get tax included pricing(there are already dormant provision in the Federal Excise Tax Act that allow the Minister of Finance to this by order in council if enough provinces agree) which would take out a lot of the sting of HST/GST.
I would sure love to see the look on Bill Vander Zalm's face if a national integrated HST/GST was announced. Both federal parties would also have to admit in BC that harmonization is a long standing policy of both and not something dreamed up by Gordon Campbell. I also think it is in the interest of Alberta not to have an NDP government in BC and supporting a national "manditory" HST would take a lot of pressure off of Campbell. Supposedly when this was last discussed in the mid 1990s Ralph Klein and Jim Dinning were not as opposed as one might have thought though wanted the federal govt to give them substantial income tax points in return for supporting a manditory HST. It was actually Ernie Eves and Mike Harris in Ontario along with some of the NDP govts in SK and BC which deeped sixed the idea and forced Paul Martin to do the existing HST a la carte with Atlantic provinces and now ON and BC.

Brian Dell said...

Thanks for the informed comment. I don't think an "old style PST" would, in fact, be implemented in this day and age. It would inevitably be harmonized. "PST" or "sales tax" is just a way for the media to get a handle on it. Unfortunately the terminology is indeed misleading. It also shouldn't be seen as a provincial imitative but as a federal one that the province is responding to.

Chris said...

Well Brian, I think sales taxes at least in the Alberta context are an example of perhaps good policy but bad politics. A tax shift from taxes on income to consumption is certainly something alot of economists support. But you should note that you are recommending adopting a policy position that 60-70 percent of people including most conservatives are against. The thing about taxes is that "temporary taxes" never are. The income tax was initially introduced as a temporary measure although it didn't work out that way. And offsetting taxes usually wind up becoming "higher taxes" as governments always seem to find more ways to spend our money and run out of their existing revenue.

On the other hand Milton Friedman did rather famously say "I'm in favour of cutting taxes under any circumstances, for any excuse, for any reason whenever its possible." So its perfectly legitimate to argue that a discussion of introducing new taxes is not an area where we want to go to. At the moment Alberta spends more per capita than any other province. If there isn't some fat to cut when you're spending more than the socialists in Quebec, give me a red pen, a copy of the budget and an afternoon and I'll happily demonstrate otherwise.

Brian Dell said...

In line with the first comment, I note the following exchange between BC finance minister, Colin Hansen (Liberal), and his opposition counterpart, Bruce Ralston (NDP) on Nov 23, 2009:

Hon. C. Hansen: actually activate the harmonized sales tax in British Columbia and Ontario, that would require federal legislation. The legislation that would be brought into the provincial Legislature is the legislation that would be required to repeal the existing provincial sales tax.
B. Ralston: ...Is the minister saying that the federal government, pursuant to its powers under the Excise Act, has authority to transfer $1.6 billion to the province in the absence of specific legislation? Or is he saying that at the federal level, legislation [i.e. a money bill passed by Parliament] is required to make that transfer...
Hon. C. Hansen: It's the former. Under the Excise Act, there is the authority that the federal government would require to transfer the $1.6 billion...