Wednesday, September 1, 2010

HST in the news again

According to the BC Hansard, last November 23 Finance Minister Colin Hansen (right) said that "...the most important piece of information that I saw in the middle of May was a chart that shows the marginal effective tax rate on investment province by province..."

What I find interesting about this is that that chart was generated by Finance Canada as opposed to Hansen's own department. I have included such a chart in my own blogposts before, and I took it directly from the federal department's website. Indeed, in response to a question about the chart's origin from NDP finance critic Bruce Ralston, Hansen stated that "the table .... was prepared by the federal Department of Finance." This was a federal initiative that the province happened to find convincing.

Of current interest to most British Columbians, however, are portions of the rest of the exchange that November afternoon between Hansen and NDP finance critic Bruce Ralston:
Hansen: ... we were [not] in discussion with the federal government with regard to harmonized sales tax [at the end of March 2009 when Ontario announced its 2009 budget].

Ralston: ... from ... January 2009, until after the election ... there was no discussion either by the minister or his officials of the implementation of an HST. Is that the minister's position then?

Hansen: That is correct.... The very first indication that anyone in the federal government would have had that British Columbia was reconsidering its previous opposition to the HST was ... at the end of May. It was only subsequent to that that there were discussions that commenced at the officials level.

This week, emails between BC Ministry of Finance officials and Finance Canada were revealed which some media sources are saying "show that talks between staff in Ottawa and Victoria began on March 26, 2009."

In fact that emails don't show that. On the afternoon of March 26 the acting ADM of Finance Canada's Tax Policy Branch, Louise Levonian, emailed all four provinces that had not indicated an intention to harmonize (BC, Sask, Manitoba, and PEI) saying "I am available to discuss." The BC Finance official who received the email, Glen Armstrong, had earlier advised other BC officials that Levonian had indicated that she was available for a meeting the next day "if we think we need a meeting." There is no indication that any such meeting occurred. Levonian emailed Armstrong again on May 11, the day before the BC election, and Armstrong responded with a substantive question, but even if that minimal exchange constitutes "discussion", this occurred in mid-May, contrary to the media claim that "talks ... began on March 26." Furthermore, Armstrong's response to Levonian's email is hardly evidence that "British Columbia was reconsidering its previous opposition to the HST" coming as it did from an official whose job it is to keep on top of his files as opposed to a politically responsible minister.

With respect to discussion internal to the BC government, I'd first note that internal discussion does not contradict Hansen's remarks, above. It is true that on March 27 Armstrong sent an email to another provincial official saying that the minister should be given an updated brief on harmonization issues in light of the Ontario experience. There is, however, no evidence (in these emails) that the minister solicited this. The memo, or an update to it, may be seen as part of the ministry's general responsibility to keep its minister briefed on the developing issues the ministry identifies.

This isn't to say that there isn't a real issue when a political party makes a major policy move shortly after forming government that it had not campaigned on. It is rather to say no significant evidence has yet been revealed that indicates that the BC Liberals were planning to implement the HST and just hid those plans during the campaign. Minister Hansen's contention is that after the election it was then time to think about long term policy and a consequence of that think was the HST. I see no reason to doubt that aside from the natural cynicism that one may reasonably have about politicians and politics in general. If I am not inclined to indulge that cynicism it is because I have worked on the inside of a finance ministry and seen the extent to which the general public is inclined to a conspiratorial mindset that distorts perceptions of how policy is developed.

I do think the BC Liberals hurt the cause of investment friendly (and therefore consumption "unfriendly") tax reform by not at least musing about the possibility of harmonization during a political campaign. They could have done what Ted Morton has done in Alberta and mentioned it as something that warranted further study and that should not be ruled out. But the BC Liberals are not to blame for the FUD spread by Bill Vander Zalm and his NDP allies. Hansen made it clear that his government was getting about $5 billion in revenue with the old PST and will collect about $5 billion under the new HST regime such that it is a tax reform, not a tax hike.

There was a time when it was the political left that had little time for abstraction, laying charges like "that's racist" or what have you based on an immediacy of perception such that appeals to sophisticated argument at all removed from subjective, unfalsifiable "feeling" were summarily dismissed. Today it is the ascendant political right that has no time for concepts that cannot be reduced to a slogan. Self-styled "conservatives" have hijacked and even destroyed essential conservatism by upending its traditional emphasis on responsibility in favour of a self-indulgent demand for tax cuts. Spending cuts are an afterthought, and on the rare occasion when meaningful attention is paid, the typically "conservative" conclusion seems to be that it is spending that affects others, like the young, that should be put on the chopping block. The locus of reference remains circumscribed to me, myself, and I, which I could sympathize with as someone who salts his communitarianism with respect for the individual were it not for the fact that the reference point is not only metaphysically constrained but chronologically constrained: what's good is good for me AND good for me NOW. Saving for tomorrow? That's so yesterday.


Anonymous said...

My personal opinion is that today's "serious politicians" make a big mistake in not doing more to take on publicly the likes of Bill Vander Zalm and the tea party movement in the United States. (I think there is some evidence that Harper and Flaherty are using the likes of Randy White to behind scenes cause trouble for Vander Zalm but tactics like this only fuel the impression the current federal conservatives are sneaky) I don't think people realize this all the time but in the past sucessful politicians were often defined by many un Prime Ministeral moments such as Chretien's Shawinigan Handshake, Trudeau's "Just Watch me" line or from the other end of the spectrum Margaret Thatcher calling the striking coal miners the enemy within or even the various escapades of Ralph Klein. This is especially true in the American context where Barack Obama is being seen as just sitting around and "taking it" from the tea party types without fighting back has just been politically devasting. I have actually joked to some American friends of mine that Barack Obama needs to go to a tea party rally and give a Shawinigan Handshake.

Anonymous said...

I'm really happy that the Wildrose wants a sales tax. Let's abolish income tax and go with the HST.

Derek said...

Abolish income tax? Good idea! but go with the HST? You must be joking! Income tax destroys jobs but GST/HST destroys jobs and profits and makes entry into the market more difficult for new firms into the bargain. Plus it's a paperwork nightmare.

One of the great things about Alberta is that it doesn't have a provincial sales tax. That's part of what keeps the economy humming along. Let's keep it that way. Income tax is a bad tax but GST, HST and other sales taxes are worse.