In a recent article, Todd Whitcombe questioned whether the HST is good public policy, suggested that the HST is a new tax, and generally left me with the impression that it is a step backwards for the people of B.C.
Of course, taxes are unpopular. Quick - everyone who wants to pay more tax, raise your hand. HST detractors know this, and will use it to their advantage to sell you their case. However, a few points get lost in the outrage.
The HST is not a new tax, but instead replaces one that hits businesses and consumers alike. As a consumer, I am going to see a lot more evidence of that tax in my life as I pay for my goods and services, and therefore will tend to feel like the government is hitting me harder than they were. However, they are not - I am paying that tax now.
When a firm's costs rise, they pass those costs on to the customer through higher prices. Taxes they currently pay have to be recovered from their customers, and ultimately the end consumer: namely, you and me. When their costs go down they have room to lower their prices - and they know that their competitors will do so in order to win the customer's business.
Often firms cannot charge higher prices. If customers will not pay a premium for made-in-B.C. products, they lose markets to competitors from lower-tax areas. Then the customers get the cheapest goods, but we lose jobs to places with more competitive tax structures - and those incomes are paid to people in other places.
These are the two reasons why consumption taxes (paid by the consumer) make more sense than production taxes (paid by firms). The consumer ultimately pays for the tax burden anyway through higher prices to cover higher costs, and local firms are not hamstrung when they try to compete with those who do not pay the heavier tax burden.
Therefore, as we rant over seeing the actual tax burden that we pay anyway, let's remember that the last time we mistakenly believed that business would just "absorb the cost", we got higher prices and a made-in-B.C. recession. We may not like it, but the HST is a better approach than what we have been doing.
Charles Scott
Prince George
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