Monday, 25 July 2011

The HST in trouble: why do we hate consumption taxes?

In British Columbia, a referendum is being held on the Harmonized Sales Tax, or HST, which has boosted the effective sales tax on most goods and services in the province. The previous system of a Provincial Sales Tax (PST) and a federal Goods and Services Tax (GST) was a bit confusing, but lower.

There has been considerable grumbling about the way that the BC HST came to be, and in fact led to the resignation of Premier Gordon Campbell. But process concerns aside, most of the unhappiness over the HST is really about unhappiness with higher taxes. The next sentence might ordinarily be, "of course, nobody likes higher taxes." But why? Would taxpayers really prefer, for example, to see their government default rather than pay higher taxes? In the case of the absurd stubbornness of the Tea Party Republicans in the US, how many rich people -- say, households with more than $250,000 in gross income -- would actually object to higher taxes from repeal of the Bush tax cuts? Certainly, they be better off paying higher taxes than having their federal government default. But, I suppose, Tea Party activists would reply that the alternative is not default, but reduced spending.

But do we really want reduced spending? Do Americans know that the decades-old Reading is Fundamental literacy program, government spending that has leveraged private support, and costs the American taxpayer a measly $25 million per year, has been thrown under the bus? Are we really so adamant about getting rid of such government "waste"?

This is British Columbia, of course, and probably the childish theatrics of Washington DC do not extrapolate well to Victoria, BC. But undoubtedly the same anti-tax sentiment cuts across both Americans and British Columbians, and in both cases, cuts across political party lines. Much of the HST-bashing has been at the behest of the left BCNDP, as opposed to the right Tea Party. But there is a populism in both cases that plays to what I think is a pathology about taxes.

Public opinion polls generally ask voters to make false choices, like choosing between higher taxes and lower taxes. Because polls intrude upon the private time of respondents, the nuances of public policy choices are omitted, so the condition of lower taxes -- less government programs -- is omitted. And taxes are the most conspicuous targets of opportunistic politicians, because it is so easy to conceal the tradeoffs of paying taxes. Ask yourself this: if it was put to American voters whether they would be willing to pay 8 cents per year to continue Reading is Fundamental, would most Americans vote for it? Of course they would. Everybody loves programs, and everybody hates taxes.

The question I have for opponents of the HST is this: what exactly would you propose to make up for the lower government revenue? Would it be higher income taxes, or less government programs? And tax whom higher, or cut which government programs? Be specific. See? It's not simple, is it?

1 comment:

  1. Personally, I don't hate it because it is a higher tax, I hate it because it was forced upon us.