Saturday, May 28, 2011

Planks in their own eyes

Reporting on taxation, commerce and consumer issues and serving the interests of business funded think tanks, the Vancouver Sun never lets truth get in the way of its agenda. In a rather flippant piece by James Kwantes, the newspaper promotes an internet video posted by a person from the pro-HST Smart Tax Alliance. Kwantes notes the YouTube video relies on a statement extracted from a 30-page paper by an economist associated with the Atlantic Institute of Market Studies and also published by the Fraser Institute.

The result is a false exposition, not surprising since business agencies promoting HST are driven by their obvious self-interest. They love to accuse tax opponents of circulating misinformation but, instead, that is their own style. They conveniently ignore words from a famous Jew of ancient history,
"Why do you look at the speck of sawdust in your brother's eye and pay no attention to the plank in your own eye?"
Professor David Murrell's HST paper is less than outstanding in examining British Columbia's resource based export economy. It is not easily compared to that of Ontario, the hub of Canada's secondary industry, as well the country's corporate office and national distribution centre. In this work, Prof. Murrell focuses more on the commerce of central Canada than west coast economics. As an example, in reviewing HST, Murrell assumes that,
"60% of input tax savings . . . are passed on to consumers."
That is a guess but not a good one for British Columbia. No one can demonstrate that prices to consumers of BC's major products (mining, oil and gas, forestry and logging, etc.) have reduced because of HST. The evidence is lacking because these prices are determined by international markets. Cost inputs matter less to large consumer product distributors than most people realize, and almost all economists claim. British Columbia subsidizes movie production hugely but consumers here pay the world's highest admission rates. There is no pass-through savings to movie goers.

In 2002, the Canadian dollar traded below the 62-cent U.S. level. Today, it is almost 2/3 higher. Strangely though, as noted in the preceding Northern Insights article, Canadian prices of cars and most imported consumer products remain higher than in the U.S., often by 20-25%. Prices are influenced less by the country's tax structure than by Canada's lack of competition in key product distribution. Oligopoly or monopolistically-competitive markets are Canada's reality, a situation not accidental.

Prof. Murrell also justifies HST in British Columbia because of what he calls "accompanying personal income tax relief measures." This statement is false. There were HST rebates for the poor but no income tax relief. Premier Campbell and his Finance Minister associated no personal income tax rate relief with the July 2009 HST announcement. No easing of personal income tax in any budget prior to then was amelioration of the consumption tax. Nor was a change announced by Hansen months later when he was struggling to save Campbell's sinking administration.

In the autumn budget of 2009, Hansen provided modest personal income tax relief through an increase to the basic personal tax credit. However, that was largely clawed back by increased Medical Services Plan premiums announced concurrently. Economist Murrell considers that subsequent tax measure tempered the effect of HST but Liberals also claimed it as a moderation of MSP premium increases. It cannot be both and, of course, MSP fees were only a part of user fee increases imposed by Liberals in the time frame.

Biased selection of data raises issues about Murrell's entire paper. A quick glance at the professor's CV may offer clues. Not surprisingly, Murrell is a member of the Research Advisory Board at the Atlantic Institute for Market Studies (AIMS), another part of the right wing think tank network that cares for the interests of Canada's economic elites. He is also editor of WatchDog Newsletter, a quarterly newsletter of right-wing opinion and has consulted for and advised various business organizations.
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  1. Norman,
    I don't know if you've noticed this as well, but there seems to be a much more centrally-organized and coordinated effort on behalf of the HST during the past two or three weeks.

    Ian Reid appears to have pulled up the rug a bit on some of the players and there are several new posters at Tyee of late who are running out the flag for this effort.

    Generally the spin is: (1) that the two-point reduction (two years into the future no less) and a small increase in corporate tax has returned some 'balance' to the mix; (2) that we need tax revenue to pay for services (which has always been the case and flies in the face that the change to the HST was meant to be revenue neutral in the hands of the government - of course practical experience and their own study by Dinning show that isn't the case); so therefore - (3) we should vote to keep the HST because the alternative is going to be either an increase in taxes somewhere else or a reduction in services.

    As you know, a little pushing and prodding proves that none of this is true - the amount recovered from a small increment in corporate tax is notional from a comparative point of view since corporations are taxed on their net profits - not on their sales and with the HST all the tax burden for consumers still depends upon their purchases not their profit or their income: Which is why the tax is regressive in the first place.

    The PST brought in little enough from business to start with - now, by combining it with the GST - businesses PAY NO SALES TAX WHATSOEVER - (which is the main advantage for business and which will still be the case despite the lowering of the rate sometime in the future). But, and particularly because of the increase in the number of goods (and the inclusion of a great many services which were NOT taxed under the PST regime) the impact of the new tax is still totally borne by consumers.

    This is a point picked up nicely in a short piece written by a former Finance Ministry bureaucrat, Ed Turner, here:

    He also mentions the campaign in support of the HST and emphasizes how disingenuous it actually is.

    There is a further point which is being ignored in this matter which I’m sure you’ve noticed. Not only is this effort to save the tax important for business, I think it’s fundamentally important for government (and I’m not sure why the NDP hasn’t taken up this side of the debate) to put down a working model of voter activism as a FAILURE.

    I’m not certain of this, but I expect, if the HST referendum goes down to defeat, that this will have been the first time in political history in this country that collective ‘democratic’ action from voters has actually succeeded (outside of an election) in rejecting an act by an elected legislature and removing it from the books.

    I believe this battle hasn’t been won until that vote on the 24th finally rejects the Liberals’ HST moves and rolls back the clock. Even if one can suggest, as Schreck does, that by 2022 the costs/benefits from the tax to families will have roughly equalized – a claim far too tendentious for me – the effect of voters working together and standing up against an undemocratic government in a successful initiative is far too important a principle to lose by voting to keep a tax that’s a little less ‘offensive’ than it once was.

    I think we need to get both messages out there and counteract the increasing pressure on the other side.


  2. The referendum is just another BC Liberal scam. Campbell would never have offered the referendum. unless it could be cheated.

    Listen to the b.s. of Christy's families first. The HST has done more to hurt families, low income families, seniors and the blue collar wage earners, than anything in the history of this country. Why don't the BC Liberals stop their lying crap and say it the way it is.

    There is nothing in this province, the BC Liberals, haven't corrupted. The courts, their own party, judges, police, Elections BC, their media propaganda machine. The Globe and Mail, spewed out the crap, that the BC people are turning around and, now want the HST.

    This BC Liberal party is built upon a, mile high hill of stinking odure. Christy has thieved our tax dollars, for those asinine pro HST ads on of course, the Liberal propaganda TV media.

    And, if Christy wins her HST, it will have been cheated. What's more, Falcon said, he doesn't have to honor it anyway. Nana-na-na-na-na.



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