Monday, June 21, 2010

The HST affair showcases all that’s wrong with politics today

If you’re looking for a case-study for all that’s wrong with modern politics in this country, one issue that is a microcosm of all the practices, methods and tends contributing to the degradation of political debate in Canada, then you can’t do any better than the “debate” around the Harmonized Sales Tax (HST).

At the federal level, you’ve got the Conservatives who have sent billions of dollars to Ontario and B.C. to sweeten the deal encouraging them to harmonize, while their backbenchers insist no, that’s a provincial thing, nothing to do with us, we think it sucks. You’ve got the Liberals who pushed harmonization in government and don’t want to piss-off their cousins in Ontario but, at the same time, would dearly love to capitalize on the populist anti-HST feeling, result: a muddied position that pleases few. Luckily the NDP aren’t troubled by ideological consistency, the party that never met a tax it didn’t like will oppose this one in Ontario and B.C. for pure politics, while ignoring that the Nova Scotia NDP government just jacked-up their HST to the highest level in Canada. And the BQ say we’re cool with the HST, just as long as you give a few billion to Quebec because they made changes to their tax system that aren’t really the same but, hey, give us money.

Then there’s the provincial level. In Ontario, you’ve got the McGuinty Liberals only seeming to start to get serious about selling this thing to the public and counter-acting some of the hysteria out there. You’ve got Tim Hudak’s Conservatives breaking with their federal cousins to oppose the HST, even though they can’t seem to articulate why it’s bad policy and won’t even promise to repeal it if elected. And then there’s the Ontario NDP, blind in their opposition and happy to distort and misinform.

Out in BC, Gordon Campbell’s Conservaliberals are facing more public outcry because they seemed to rule out harmonization during the last election, then announced they were harmonizing mere days after the ballots were cast. They thought they could ride-out the storm but are now waking-up to some serious trouble. Former Socred Bill Vander Zalm, of all people, who left the premiership in disgrace, is leading a popular revolt against the tax, with the support of the BC NDP (strange bedfellows) that could lead to a referendum to repeal the HST there. But Vander Zalm and the BC NDP (unlike their Ontario cousins, they could actually form government so they need to face a few more serious questions) don’t seem willing to address how this would happen: how would you revert the tax system back, and how about the billion dollars in harmonization funding the feds will want back. Which hospitals will you close to find that money? They just want you angry, they don't want you thinking.

Instead of a debate of facts around the HST, we’ve been treated to mass hysteria. It’s like the ugly baby with no parents. The federal government doesn’t want it. Ontario has been low-key about selling it; B.C. even more so. And the opposition parties have all been more interested in stoking populist fervor to paint this as a tax hike instead of opposing on policy grounds, and proposing reforms or alternatives, or just what they'd do differently. Or even how they'd repeal it, and what that would mean.

Myself, I think the timing was bad (and in BC, it was handled stupidly) but sales tax harmonization is good policy. It’s more efficient, and will save government and business money. Value-added taxes are just more efficient than taxes on production, or on income. Some items will cost more for consumers in the short-term, but it will net-out in the long-run as savings are passed on, investments are made and new jobs are created. This has been the case in every other jurisdiction in Canada where the HST has been implemented. I think there is room for tinkering and adjustment, but overall it’s good policy that should be supported.

There’s plenty of room to debate that, I just wish the debate would be on the facts and on the policy, not on hysteria. To that end, I found this list from the Ontario government on specific items and how their tax treatment will change (or not) to be interesting. They’ve also put out information on how it will impact people, and impact businesses.

We've all been ill-served by all our politicians in this affair. Partly, it's our own fault. I think most people that sit down and consider it objectively will support harmonization. But, knowing most of us can't be bothered or just don't have the time, we're pandered to with sound bites and simplistic arguments that don't do this debate justice. Unless we demand better, we can only blame ourselves for the result.

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Ted Betts said...

Good post. And so true not just about this particular issue but about most issues, the HST just being an example.

And it comes down to one thing, I think: a lack of true political leadership.

The kind of leadership that sees issues of the day and makes decisions based on what is considered in the best interest of the country or province and not just political gain, and is upfront and open enough to explain the decision. The kind of leadership that sees the issues of tomorrow and explains why something must be done, lays down a roadmap for achievement and follows through.

We are so caught up in the politics of small.

I have to quibble with one part of your post though. I don't think Ontario has been slow to defend itself. In fact, I think this is an example of exactly what we want from our leaders. He made the decision because he thought it was best for Ontario, knowing it would be controversial. He has never shirked from the decision or tried to pass it off as someone else's responsibility or decision or just tried to bury the issue like Harper has. As you point out, there is a lot of good information on government websites. He has not tried emotional blackmail or scaremongering the way Vander Zalm has and Hudak has tried and Harper uses as his default position.

In fact, he's been doing a bit of a roadshow for many months, reaching out to Ontarians. I've seen three different ministers speaking about HST. Each time admitting to difficult facts - there will be some higher prices that will hurt some - which on its own I thought impressive honesty... for a politician... but concluding and explaining in varying degrees of detail how, in the end and on balance, this was still way better for Ontario.

And now full ads, directly from the Premier, not even some generic voiceover. The Premier made the difficult and controversial decision, stands behind it, explains it, and does so without feeling any need to demonize his critics. Indeed, he acknowledges the critics and simply disagrees with them. He treats us voters as adults.

Like the policy or not, like McGuinty or not, but that is the way policy should be implemented.

Dave said...

The problem in BC is much more complex than you allude to. Either the Campbell right-wingers outright lied when they said HST was not on the table during the last campaign, or they dove into it post-campaign without consultation and no planning process. Either way, they are unfit to govern.

I have no doubt we a stuck with this, a tax increase, no matter what the outcome of the initiative petition which has more than enough support to force the government to go to the people. What it does do however, is provide substantial energy to a likely recall campaign which will see a large chunk of Campbell's ministers and probably Campbell himself sent to the electoral guillotine.

Certainly, anyone in the current government faces the likelihood of a total wipeout at the next election.

As for the HST itself, in BC little has been done to compensate companies having to deal with extended accounting requirements during a mid-fiscal changeover. And this harmonization benefits only one particular group. The myth that manufacturing will pass on any savings is just that - a myth. They didn't do it when the GST was imposed and they won't do it now.

Now, there will be increased taxation in almost every sector of the economy. Given that Campbell has never provided a tax reduction without a set of increased taxes or fees elsewhere, this is an obvious and onerous tax increase in a multitude of areas which were previously provincial tax exempt.

FWIW the Campbell government found themselves in an unenviable position of not being permitted to promote the HST since Elections BC had a registered initiative campaign on the slate. The result is that they have been allowed to say nothing and have had to rely on the business community to speak for them. They have come out in favour at a volume close to a whimper. If it was such a bright idea why aren't they being more vocal?

Kim said...

Hi Jeff, interesting post. Following your links I see that Ontario has done a much better job handling the optics of this tax. Also, there have been some substantial income tax changes to offset the negative effects on consumers. Not the least of which is the $1,000 transition payment you may have already received.

This is not the case in BC. CCPA provides some good comparison on this.

It's also important to note that Gordon Campbell has told major lies during every election campaign. "I will not sell BC Rail." See The Legislature Raids (BC Mary's blog). "I will not privatize BC Hydro." "I will strengthen the BCUC" Most recently, "We are not contemplating the HST, we feel it is not in the best interest of British Columbians. And the deficit will be $495 million."
Turns out, not so much. Days after the election, there comes the HST, and the deficit? 2.65 Billion.

The tax is a shift of the burden from business to consumers, supposedly revenue neutral for the province. Ontario is a manufacturing province, savings may well trickle down. BC relies on raw resources, prices are set on the global market.

The provinces that have the HST have not seen an increase in corporate spending on infrastructure or jobs and it should be noted that the HST actually lowered their tax rates, at least initially. Also VAT countries in Europe have not demonstrated any improvements for consumers. If you look at Greece and Spain, the VAT actually drove the economy underground, forcing the government to coninue to raise taxes to make up for the lost revenue. This is how it will go in BC. People will flock across the borders to Washington state (who is promising tax breaks to lure BC customers) and Alberta, which has no HST or PST. Hope that wasn't too emotionally charged for you, LOL!

The Rat said...

BC,as stated, is more complicated. The Campbell Liberals lied to the restaurateurs' association when asked directly if they were contemplating the HST. But they also have Kash Heed to anchor them. Here's a guy who never met a microphone he didn't like, or a secret he wouldn't spill. He tipped a friend that one of the employees in her company was about to be charged with child porn possession and only slipped disciplinary proceedings by resigning. And oh what irony that he becomes the solicitor general and brings in legislation that removes resignation as a shield to investigation but conveniently not retroactively. He went on to bring in a useless law on cell phone use in cars because it made a media splash. And he brought in more restrictive laws on drinking and driving giving police more discretion in administrative actions. These actions, like extensive driving bans and vehicle seizures are more severe than most b&e convictions, assaults, and drug offenses receive. And again none of this was mentioned during the election.

He is also accused of violating election laws with a brutal flyer lying to the Chinese community regarding NDP policies. He resigned, was found innocent by an independent prosecutor, and then resigned again when the prosecutor admitted that his law firm was a heavy contributor to Heed's campaign.

And lets not forget the corruption trial of Basi and Virk, and their connections to their federal Liberal friends. Allegations of pay-offs in federal jobs with the defunct Liberal government, and sweetheart deals leave a stench reminiscent of Adscam.

Oh, and we haven't heard much recently about the aboriginal reconciliation act but that was a real stinker, too, a bill that basically removed any need for aboriginals to prove title despite the fact that aboriginal claims cover 120% of BC when you count overlapping claims. We may as well have abandoned the province if that bill ever went forward.

All in all it is really bad for the BC Liberals, which is a real shame as the conservative/liberal (maybe better described as blue liberal) alliance was working very well for BC. Too bad that some members of the government can't seem to keep their hands out of the cookie jar or act in a way consistent with the law.

Jeff said...

Ted, I accept what you say but, as a person who doesn't follow Ontario politics closely (hardly at all, to be honest) the campaign hasn't hit my radar. My perception has been a recent ramp-up in activity, though. I do agree with crediting politicians for making tough and correct but unpopular choices.

Dave, I agree very different scenarios. At the end of the day though I think the policy is correct and the way to punish the process is at the ballot box on e-day. The referendum is a bad idea for a number of reasons.

Kim, the studies I've seen on other HST provinces say differently. As for other VAT jurisdictions, I don't think your comparisons hold. A primary driver of efficiency here isn't just going to a VAT, but harmonizing two taxes that needed to be administered and collected separately and applied to different thing into one single tax, with one set of books and one list of taxes items.

MERBOY said...

This is one reason as a Liberal I wouldn't mind if John Tory ran for mayor and won... I listen to his talk show most afternoons and though he's the last person you would think of as a friend to Dalton... he has been quite vocal about how the HST is a good thing for Ontario... honesty in politics ???