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Sunday, April 19, 2009

Some PC leadership candidates have picked the wrong time to grow a pair

HstIt's no secret that the Ontario PCs have been largely useless since they were ousted from government in 2003. Despite the disaster that has been Dalton McGuinty as Premier of Ontario, the PCs have feebly disagreed with the most egregious of the Liberal government's policies (at best) and endorsed them (at worst) for five and a half years. So...

... what happens when McGuinty, after 5½ long years of unopposed incompetence, finally gets one right—and not just right, but spectacularly, gloriously right, right on a matter of huge importance to the province’s future, right in substance, right in timing, and right in a way that conservatives, if not Conservatives, ought to be cheering to the skies? Ah, that’s the point where the Conservatives decide to stand and fight.

That's what Andrew Coyne has to say, and I've got to agree with him, about the McGuinty government's decision to harmonize Ontario's sales tax and the Ontario Progressive Conservatives' vehement opposition to the first good policy to come from the Premier.

So what do leadership candidates think of harmonization?

Disappointingly, Tim Hudak, the perceived frontrunner, has come out very strongly against this policy, even giving it a cheeky name "DST" - the Dalton Sales Tax. You see what he did there? (Note- this is actually a policy position on Hudak's part that's displayed on his website and easy for PC members to find. Good for him for at least getting involved, even if he's picked the wrong side.)

Christine Elliott has also come out against the HST. This is confusing to some since she is Jim Flaherty's wife. Watching her try to distance herself from his position on this issue has been amusing. To me, anyway.

Frank Klees hasn't said much, so I can't figure out where he stands. I think he's against the HST without exemptions. I think. This Frank Klees supporter seems to think that this particular instance of Frank Klees not saying anything is illuminating - maybe readers will get more out of it than I did.

Randy Hiller doesn't appear to have taken a position on harmonization, but hasn't slammed it. Instead he has come out against bribing Ontarians with their own money and in favour of shaving down the provincial share of the sales tax.

When I first blogged about the Ontario budget I didn't feel strongly about the harmonization of the sales tax, though I acknowledged that economists seem to be in favour of it. Since then I've been convinced, and Coyne does a great job of explaining why you ought to be, too:

It isn’t as if there’s much division among expert opinion on this. Economists are as unanimous as they can be, not only on the merits of consumption taxes over income tax, but of value-added taxes like the GST over retail sales taxes. Ontario’s current sales tax, because it applies to many (though not all) of the inputs that businesses use, cascades through the various stages of production. Some of this eventually falls upon the consumer, haphazardly. But much of it amounts to a tax on investment: you know, the stuff that makes economies grow.

By eliminating this tax on inputs, via the GST’s familiar system of input credits, the [C.D.] Howe analysts estimate that harmonization alone would cut nearly 11 points off Ontario’s effective tax rate on new investment by 2012. It’s the single most positive thing the province could do to improve its competitive position. But what is that, compared to the delights of shouting “tax grab”?

Read the rest of Coyne's article here. I hope that we can count on Ontario's PC membership to give their leadership candidates a figurative slap upside the head on this one.

Posted by Janet Neilson on April 19, 2009 | Permalink


"That's what Andrew Coyne has to say, and I've got to agree with him"

Coyne recently gave a speech in which he candidly admitted he is a socialist:

"I fear I am here under false pretenses. I was introduced as being a real conservative, somebody who sees things in pure, free-market terms, sort of the good old-fashioned religion.

I’m actually not a conservative — either in name, or in any other way. If forced to describe myself, I’d say I’m a socialist, because by any usual or sensible definition, I would be.

I favour public pensions, public health care, public education, public unemployment insurance. I favour a whole battery of things involving the state function. In fact, I’ve had tangles with some of my conservative friends over things like user fees for health care, or the necessity of carbon taxes to combat global warming. " - Andrew Coyne


I don't see why Brock gets so bent when I call him a socialist, if it's good enough for Coyne it's good enough for him.

Harmonized tax is good in theory, as long as we are to have taxes anyway, I was pissed off when Harris declined to harmonize the GST. A broad based consumption tax is non-distortionary, this is good.

Introducing it now, 5 and a half years in power, during the single worst quarter of economic performance since the 1930s (-15% GDP drop!), is a bad idea. Recent immigrants don't get into the tax system, they won't get their offsetting refunds, to name one problem Coyne ignores. It's a big tax hike for businesses, a big jump in the cost of living, and the refunds themselves are distortionary. It's like they want to kill off the service sector now that they have bled manufacturing dry, that's a horrible message to send to businesses thinking of investing in Ontario and families thinking of moving/staying there.

But it gets better. McGuinty introduced this consumption-restricting tax in a budget designed to stimulate consumption, featuring billions in new deficit spending with borrowed dollars.

One measure cancels out the other, and it is telling that McGuinty gets a free pass from the WS gang for introducing a huge deficit, and running a deficit his entire time in office, when Stephen Harper has yet to deliver a single deficit.

Harper was criticized to no end for giving the wrong tax CUT, yet we are to praise McGuinty, for raising taxes, during a recession? Um, no. He could have reduced the provincial rate a point at least and brought it down to 12%, he didn't.

Campaigning on an anti-HST platform isn't the brightest idea, but really, Tories get enough criticism as it is from the MSM. Let's criticize, say, Dalton McGuinty, the guy who just hiked taxes and spending immensely, for a change.

Posted by: No Commies | 2009-04-19 8:42:00 PM

"Let's criticize, say, Dalton McGuinty, the guy who just hiked taxes and spending immensely, for a change.

Posted by: No Commies | 2009-04-19 8:42:00 PM"

Wow, that's a great idea, Commies! I'll write a post saying that Dalton McGuinty has been a complete disaster as Premier by the second sentence. Oh wait, that's this one.

I'm not going to give the folks who are supposed to be the good guys a free pass just because the alternative is monstrous (much like I don't give McGuinty a pass because hey, he could have been Hampton) - especially since that alternative has been able to be *more* monstrous because of them.

Besides, posting just to say that McGuinty is an awful Premier would be a lot like posting to let everyone know that yes, the sky is still blue.

As for Coyne labelling himself as a socialist, he's right. He is a socialist.

Brock and others on this site will justifiably get bent out of shape if you call them a socialist because they are not socialists. Many of us strongly disagree with Coyne on public pensions, public health care, public education and public unemployment insurance. It's simply the state of affairs in this country that a socialist is one of the most bright and principled small-government commentators we've got.

At any rate, Coyne is indeed a socialist, and so is *every single* Ontario PC for exactly the same reasons. If I can't agree with Coyne on any other issues because of that, I guess you'll also have to find another party to support and we'll both be SOL.

That aside, I agree with you (and disagree with Coyne) that this is not the best time for this tax to be introduced - a year or two ago when Ontario first started having problems (or earlier!) would have been better. But doing it now is still better than waiting. The faster we can get more investment (way more important than spending) into this province, the better.

Posted by: Janet | 2009-04-21 12:58:05 PM

I usually agree with Coyne but he's wrong on this one. The trouble is that when you "harmonize" the sales tax two things happen: (1) there is a big, multi-billion dollar cut in taxes on business inputs, and (2) there is a big, multi-billion dollar increase in consumption taxes on individuals.

It's true that overall this is likely good for the economy. It would also be good for the economy overall if we cut corporate tax rates and offset the revenue loss with an increase in the GST. But that's not good enough. Hudak is right in saying that we can't just accept a huge increase in taxes on consumers, especially in the middle of the recession. Just one example: the new tax would apply to gasoline, increasing prices by about 6 1/2 cents per litre. That's worth $1.4 billion a year in gov't revenue. Even Dion understood that he could never get away with a gas tax increase and exempted gas from his carbon tax. And there are billions of dollars in other tax hikes.

Hudak actually hasn't even said that there should never be any kind of harmonization. What he's said is that a recession is a terrible time to put a big tax increase on people, and that he would prefer that any harmonization be accompanied by a permanent reduction in other taxes on individuals so that the overall burden does not rise (quite different from McGuinty's redistributive one-time bribe, giving everybody $1000 regardless of how much tax they pay).

This all seems like a pretty sensible position, not just some kind of cheap pandering as it is being portrayed. If the business input tax and the consumption tax were actually separate, nobody would ever agree to a huge increase in the consumption part to fund the elimination of the business input part.

Posted by: thinktwice | 2009-04-24 4:16:36 PM

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