HST Dies!

[Ben Kenobi]

Yes! Finally!

I am so happy today! I knocked on doors, talked to people, and now HST is gone!

BC keeps their PST!

[Asher]

I can only presume that Ben is celebrating the death of HST, like all socialists were.

Conservatives are upset. HST was sound.

[Asher]

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/frances-woolley/hst-good-economics-lousy-psychology/article2143233/

HST: Good economics, lousy psychology

Frances Woolley is a professor of economics at Carleton University, where she teaches public finance

The HST is a highly visible tax. According to the standard undergraduate textbook, Public Finance in Canada, that’s a good thing: “…it is generally agreed that visible taxes are preferable to hidden taxes…. Most economists view the visibility of the GST as one of its beneficial characteristics.”

The alleged advantage of visible taxes is better policy choices. Supposedly, if people know how much they are paying in taxes, they will be able to make informed decisions about how much government spending they are prepared to support.

Making taxes visible might be good economics. But it’s certainly lousy psychology.

Behavioural economics research consistently finds that people are averse to losses. Yes, people like receiving a $50 cheque in the mail, but they really hate having to pay an extra $50 at the cash register. Over all, some people have gained from the introduction of the HST. For example, university students who don’t spend much, but still get an HST refund cheque, are now better off. Some people have lost out, for example, people who spend a lot of money on the services that were tax-exempt under the old provincial sales tax. And some people are no worse off than they were before the HST was introduced.

But when people weigh losses more than gains -- when they care more about paying an extra $3 for a hair cut than getting an HST refund cheque -- even people who gain from the HST might still oppose it. The losses register, the gains don’t. That’s why visible taxes are lousy psychology -- and bad politics.

I’m not even convinced that making taxes visible is good economics. The crucial point is that when it comes to taxes, what you see isn’t always what you pay. For example, suppose you pay $700,000 for a new home in the Fraser Valley. After the BC new housing rebate, $57,750 in HST will be added to the price of your home. That’s what you see. A visible tax of $57,750.

But $57,750 is not a good measure of a new home buyer’s true tax burden. To figure out how much more you are actually paying as a result of taxes, you need to know: what would the new home have cost in a world without HST?

In fact, without the HST, the before-tax price of a new home would almost certainly have been higher, for two reasons.

First, before the HST was introduced, construction companies had to pay provincial sales tax on many of their inputs -- and passed some of those costs onto consumers. The HST isn’t a straightforward tax increase. Instead, it substitutes a visible tax -- the HST -- for a tax that consumers couldn’t see -- the PST that companies paid on their equipment and some other goods and then built into the price of new homes.

Second, people in the Lower Mainland can only afford to pay so much for a new home. The introduction of the HST increased the after-tax price of homes, giving property developers a choice: keep the before-tax price the same, and shut some people out of the market, or lower the before-tax price, and continue to sell homes. The basic economics of supply and demand predict that the introduction of a tax on new homes creates downwards pressure on the before-tax home price.

When prices change as a result of taxes, the burden of the tax is shifted. As a general rule, taxes are shifted to those who can’t move, or change their behavior, in response to the tax. In the new homes example, that would be the original land owners. They can’t move their land. They can only hold onto it, or sell it for the most that the market will bear. The point is: the visible tax is on the new home buyer. But the person who is made worse off as a result of the tax might be someone else, for example, the owners of prime Fraser Valley real estate.

Economists are overwhelmingly in favour of the HST. The opposition the HST has encountered in B.C. should, therefore, cause us to re-think our support for visible taxes.

When a visible tax replaces an invisible tax, people may overestimate the impact of the tax change on their tax burden – and will therefore oppose the tax, even if the revenue is necessary to finance the goods and services, like health care and education, that the public wants.

[Ben Kenobi]

The B.C. Liberals unveiled the HST just weeks after they won their third straight majority in 2009 with then-premier Gordon Campbell. It quickly became one of the most unpopular policy moves in the past decade.

The opposition to the HST was loud and persistent. After 700,000 people signed a petition, the government was forced to hold a referendum on the issue.

“It sends a message to politicians throughout our country, especially, that they can’t simply do things because it’s the will of the premier or the party; that they have to, in fact, on issues big as we see it here, consult the people,” said Bill Vander Zalm, the former Social Credit premier who became the face of the anti-HST movement

“We recognized when we started from a place where 85 per cent of the public was opposed to the HST, in large measure due to our own mishandling of the introduction of that major policy change, that we had an uphill battle,” he said.

Conservatives were against the Bill. Bill VanderZalm is a conservative and all us true conservatives rallied around him against the HST.

Big government liberals like you were in favour of it because it meant more money to Ottawa every year. BC taxes went up dramatically, but not like you know about that.

I was opposed to the HST because Ottawa shouldn't be collecting provincial taxes. That's against the constitution. Provinces have the right to set provincial sales taxes, and hopefully, we can press on to eliminate it altogether.

[Asher]

I feel like I'm missing out on some tremendous insight there...

[Ben Kenobi]

Conservatives are upset. HST was sound.

Sure, if it were zero, like it is in Alberta. Not at 12 percent. Alberta was eating our lunch, and HST just cemented this, and took tax policy out of the hands of British Columbians.

How would Alberta feel if your GST went up from 7 to 12 percent and Ottawa collected? I bet you'd be raging.

Anyways, thrilled to have made a difference.

The only big problem is that now our freedom costs us 1.5 billion bucks thanks to Campbell's ****ty deal. Worth it though. First time any province successfully rejected an HST. Not like have-not Ontario, where surprise surprise, taxes went uniformly up.

[giblets]

Asher, what exactly is the HST?

[KrazyHorse]

The only time asher is right on economics is when he contradicts ben

[KrazyHorse]

Asher, what exactly is the HST?

VAT

[giblets]

Okay so what was the GST then?

[KrazyHorse]

GST is also a VAT. Read the ****ing wiki entry.

[Ben Kenobi]

Gribbler,

HST is a VAT that is collected by the federal government. It 'harmonizes' the GST with the PST. In BC, the PST was 5 percent and the GST was 7, (used to be 7 and 7) but was cut to 7 and 5.

By merging the VATs together, it meant that BC could no longer raise or lower their VAT, instead taxation policy wrt the VAT would be set by Ottawa. Most of Canada operates like this.

It would be like Washington collecting state taxes for New York, and then paying back New York their 'fair share'. It's done this way in Canada, usually due to equalization payments. HST makes sense for chronic debtors like the maritimes, Quebec and Ontario, but it makes no sense at all for the chronic creditors like BC and AB out west. It's a millstone.

[giblets]

GST is also a VAT. Read the ****ing wiki entry.

Okay, I checked Wikpedia. If I read correctly, the HST replaces the GST and PST, and the PST is a cascading tax in most provinces, so the PST is stupid and should be replaced.

[Ben Kenobi]

The only time asher is right on economics is when he contradicts ben

Why do you believe that the HST is sound? BC taxes went up dramatically when it was instituted. HST was far broader than the GST + PST and applied to more things.

The HST proponents would have won, had they packaged it as a 7 and 3. They were idiots in how they marketed it, dropping it 2 would have meant that it was truly 'revenue positive' in that more people got back more under the new regime than they gave up under the previous.

The reason they didn't is because they wanted to raise taxes, and the HST was a way to do it while sidestepping accountability and blaming Ottawa.

[Ben Kenobi]

so the PST is stupid and should be replaced.

It should be eliminated, not replaced with an even crappier tax.