as of Dec 2, 2009: My mea culpa appears to have been premature.
Table 3 (p. 85) in the
September budget documents provided an estimate of expected
HST revenue of $6.5 billion.
Culpa on HST Revenue Estimate
is a strong possibility that my estimate
is wrong that the HST will raise $6.5 billion for the BC government.
What is wrong with the argument is not obvious, but three
alternative methods of estimating the likely HST revenue for
BC yield different and roughly consistent results. Apart from
being bad for my ego in having originally estimated incorrectly,
the lower estimates are also bad because, apart from the one
time transition grant of $1.6 billion from the federal government,
BC might not have sufficient revenues to adequately compensate
consumers and businesses who suffer from the $1.9 billion
tax shift (that's the savings government estimates for industry).
three estimates of HST revenue. First, Public
Accounts for Canada, for the fiscal year ending March
31, 2008, show GST revenue of $29.9 billion. As a back-of-the
envelope estimate, take 13% of that to represent BC and multiply
by 1.4 to represent the ratio of 7% to 5%. That gives an estimate
for BC's HST revenue of $5.44 billion. Second, using 2002
data, the CD
Howe study cited on the Ministry
of Finance's HST webpage estimated HST revenue of $4.092
billion, an increase of $224 million relative to their 2002
PST figure. Third, it is possible to do a rough estimate by
looking at the per capita HST revenue in Nova Scotia and New
Brunswick, multiplying by BC's population and by 0.875 (the
ration of their 8% to BC's 7% tax). Using their 2008 fiscal
year results, that gives an estimate for BC HST revenue of
$4.4 billion using NS and $4.3 using NB. If those estimates
were close to the mark, BC would have a significant revenue
shortfall relative to the $5 billion the PST currently brings
in. None of these methods produce results anywhere close to
my previous estimate of $6.5 billion in HST revenue for BC.
would be fascinating to see what the Ministry of Finance did
to estimate HST revenue prior to entering into the Memorandum
of Understanding. British Columbians need to worry about government
revenues since they fund health, education and other important
services, but they also need to worry about their own household
finances. Long before we see the results which show which
HST estimate is correct for the provincial treasury (probably
not until the Public Accounts come out in July 2011), BC families
can look at every receipt they receive and notice whether
it has just the 5% GST or also the 7% PST. Those with just
the 5% GST will show a 12% HST starting July 1, 2010. A $1.9
billion tax shift from industry to BC families will mean $1,700
in higher taxes for a family of four.
system ideologues argue that the market will solve the problem
and compensate consumers with lower prices, but they also
acknowledge that the primary beneficiaries of the change from
a sales tax to a value added tax are capital intensive industries.
Lowering costs for the forest and mining industries might
help to create jobs, presuming prices for their products eventually
recover, but British Columbians don't directly purchase products
from export industries. It is good to make them more competitive
but that won't lower the cost of a restaurant meal or a haircut.
Tax Grab is $1.5 Billion
allowing for $1.9 billion in savings for some businesses (mostly
capital intensive industry), Gordon Campbell's new HST will
bring in $1.5 billion more per year than the current provincial
sales tax (PST). Unlike the one-time federal bribe of $1.6
billion for "transition assistance", the additional
$1.5 billion goes on forever, above and beyond the $5 billion
currently collected through the PST, and the combined $6.5
billion grows as the economy grows. Those windfalls fully
account for input tax credits and major rebates, including
point of sale, rebates to public sector bodies and housing.
the Ministry of Finance didn't answer my question regarding
the size of the increased
HST tax base, it provided an even more useful figure when
it suggested the HST base net of credits and rebates would
have been $93 billion in 2007. Dividing that useful figure
by 7% gives the estimate of the tax take from the HST.
the absence of any new relief for consumers, the corporate
tax shift of $1.9 billion plus the $1.5 billion increase in
tax means consumers will get hit with $3.4 billion per year
in new tax starting July 1, 2010. That works out to a tax
hike of over $800 per person, from infants to seniors.
the Campbell government keeps the tax shift revenue neutral
from the government's point of view, it can disgorge $1.5
billion in any form it chooses, e.g. low income tax credits
and cheques for every family, like your $100 carbon tax cheque.
Even if the government gives back revenues in excess of $5
billion, the old PST take, consumers will still suffer from
the $1.9 billion corporate tax shift, which works out to over
$450 per person.
families of four cannot afford to get hit with between $1,900
and $3,300 in new taxes without cutting spending somewhere.
That cannot be good for families or the businesses that rely
on their spending.