The provincial government claims the new Harmonized Sales Tax (HST) will create jobs and benefit businesses, but many residents awoke on Canada Day with one upsetting thought: they will now pay more for basic costs of living.
As of July 1, items previous taxed just the 5% goods and service tax (GST) will be levied a 13% tax under the HST, including gasoline, electricity, home heating, hair cuts, gym memberships, taxis, internet services and household renovations and repairs.
“It benefits businesses, while it screws the average consumer,” said Kevin Gaudet, director of the Canadian Taxpayers Federation (CTF), a citizens advocacy group.
Minister of Revenue and Perth-Wellington MPP John Wilkinson said 83% of what Ontarians spend money on will not increase in price – those items either are not subject to sales tax or already had both GST and provincial sales tax (PST) included.
“His argument’s just stupid … it’s frustrating,” Gaudet said when asked about Wilkinson’s claim that most costs will not be affected by the HST.
Gaudet noted the average person spends far more on gasoline and home utilities than they do on most of the items included in the 83% of goods unaffected by the HST. He noted the added tax at gasoline pumps will alone generate an extra $1.6-billion for the government.
Wilkinson acknowledged one of the major items affected by the HST is energy – gasoline, home heating and electrical costs – but the government was up front about that from the start, he said.
And, he said the province is lowering income tax and providing HST rebate cheques, which will provide Ontarians with more money from the start.
The HST is but one part of the largest Ontario tax reforms in 40 years, Wilkinson said, noting the changes will mean Ontario will have the lowest personal income tax rate in?Canada on the first $37,000 worth of income.
“[That will result in] a more competitive economy,” he said. “And that’s exactly what we need in Ontario.”
Gaudet said Wilkinson is “choosing to be very selective” in his comments on income tax cuts. He acknowledged the government is dropping from 6.05 to 5.05% the income taxes for those in the lowest tax bracket – which he said results in nominal savings – but those in the upper tax brackets may actually pay more.
“It’s the middle class that’s getting hammered,” said Gaudet, adding the provincial government does not seem to care about those individuals.
Wilkinson told the Advertiser it made little sense to have the federal and provincial governments “stumbling all over themselves” trying to tax people, when the federal government could collect everything and pay the province back its portion.
Wilkinson also said the HST will mean Ontario businesses will now pay half the taxes paid by their counterparts in the “Great Lakes states” in the U.S., which will make Ontario businesses more competitive and create more jobs.
“We want to have a recovery with plenty of jobs,” said Wilkinson, adding much is being made of the “jobless recovery” from the recession currently underway south of the border. Gaudet said some states in the northeastern U.S. actually have no corporate sales taxes at all, so Wilkinson is being very “selective” in that assertion, as well.
Wilkinson acknowledged any change in taxes is not going to be popular, but the Ontario government made a difficult decision to do the right thing and try to avoid a situation like the one in the United States.
“We’re driving home a competitive advantage,” said Wilkinson.
Plus, he opined, businesses will transfer savings to consumers, although it may take some time for that practice to materialize. Gaudet said it will likely be three to five years before consumers see any trickle down effect, if there is any at all.
Wilkinson noted some estimates are that the HST will create 590,000 jobs and attract $47-billion of additional investment in Ontario.
Gaudet said he is familiar with the government’s claims of job creation through the HST, although it remains unclear where those jobs are coming or when – if ever – they will arrive.
Gaudet told the Advertiser the CTF is not opposed to the HST, but the Liberal government is implementing it in a way that does the most possible harm to the average taxpayer.
The transition would have been much easier for Ontarians had it been accompanied by a two or three point reduction in the tax – to 11 or even 10% – as well as broad-based income tax cuts that would benefit everyone, he concluded.
