December 14, 2009

HST is "virtually revenue neutral"

CANADA - Ontario's controversial amalgamation of the GST and PST into a harmonized sales tax (HST) is "virtually revenue neutral" and not a cash grab some people say it is, argues a new report released today.

The report (by the Canadian Centre for Policy Alternatives) says low and middle-income families will come out slightly ahead under the changes, which includes increased property and sales tax credits and income tax cuts, while households with incomes above $100,000 will come out just slightly behind.

In other words the majority of the population (poor and middle class people) will benefit from the change, while rich Ontarians will end up paying slightly more.

"No group is significantly worse off or better off as a result of the province's HST plan," says Ernie Lightman, an economist and University of Toronto professor of social work who co-authored the report.

The researchers admit they are "surprised" to discover a vast majority of Ontarians will be better off or unaffected by the tax changes.

"Assertions that this is a tax grab have no foundation in reality," Lightman said.

If anything its a tax rebate, because the majority of Ontarians will see more money back in the form of income tax cuts.

The NDP, both provincially and federally, have roundly condemned the new tax. The Ontario Conservative Party has also gone out of its way to spread misinformation that the HST is a tax grab. The report says that this is wholly untrue because it ignores the income tax cuts.

Furthermore the report indicates the decrease in income taxes will actually boost the economy by giving people more spending money.

Here's how it works.

Hypothetically lets say you are making $30,000 / year and paying approx. 6% in income taxes. That is $1,800 in taxes.

However, if that is cut to 5% you end up saving $300.

Regardless of how much money you use for buying stuff every year (whether its $5,000, $10,000 or more) the sales tax you pay remains the same:

#1. 8% PST + 5% GST = 13% sales tax.
#2. 13% HST.

Regardless its still 13%. Low and middle income earners are overall getting a rebate thanks to the income tax cuts, money that can be spent at their discretion and will ultimately help boost the economy.

The only people feeling the pinch will be wealthy people who make more than $100,000/year.

1 comment:

  1. No one believes that Ontario will emerge from this recession the same as it went in. We need to become more competitive.

    A report by TD Bank estimates the HST will reduce cost of doing business in Ontario by roughly $5.3 billion and that the majority of these savings will be passed on to customers within the first year. In fact, the majority of items you purchase - 80 percent – will see no tax change at all.

    A recent report by economist Jack Mintz confirms that Ontario needs to reform its tax system to create jobs and put Ontario back on its feet. It says, as a result of the HST, within 10 years Ontario would see:
    o An estimated 591,000 additional new jobs
    o Increased capital investment of $47 billion
    o Increased overall annual worker incomes of up to 8.8 per cent, or $29.4billion

    We have a choice: we can refuse to fix what’s broken, resign ourselves to the idea that Ontario will be less competitive or we can move forward and get the jobs Ontario needs.

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