I’m voting ‘NO’ in the HST Referendum & Why I Think You Should Too!

As we know, this month (June 2011) we in British Columbia have a chance to vote on the HST referendum.

It’s counter-intuitive and confusing but by voting ‘NO,’ actually, you’re voting to keep the HST. Voting ‘YES’ means you want to eliminate the HST and go back to GST & PST. I highly encourage you to vote ‘NO’ and keep the HST.  Below, I’ll explain why.

The first point that I’d like to mention is this is NOT about punishing the government or the people running the government; that is why we have elections.  This referendum is about which tax system you believe is the best one for B.C.

My second point is please make sure that you are a registered voter for BC by calling 1-800-661-8683. You have to actually call as there is no online registration.

Here are my reasons for why I’ll be voting “NO” and why I hope you will too:

1) A good tax is simple to understand and work with.

The HST will benefit not just big business but small businesses as well. I know, I have retail clients that have welcomed the HST as it reduced their administration costs and their time as they only have one return to prepare instead of two. As well it reduced the time in determining what is exempt and what is not from the old GST/PST system. Under PST, when asking the government questions about what was or was not exempt, you’d sometimes get a different answer on the same question from the same person.

Any time that a business can become more efficient allows it to be more profitable and a more profitable business will be around much longer. Businesses that are more profitable will invest in new equipment, new employees, or increase wages for those that are already employed. And, in the end even if the business owner keeps this profit for himself, he is going to spend that in other businesses by buying things he needs for himself or his family.

PST had it’s own rules, exemptions, procedures, and loopholes. It was complicated, and the cost of working with it was added to the retail price.

2) A good tax keeps local businesses competitive.

Yes, businesses in BC have a competitive advantage with the HST as there is only one tax to worry about, it is on most goods and business gets it back as a credit. If we revert back to GST & PST many businesses, such as the movie industry, are now paying PST on all items needed to make a movie and don’t get that back which makes it more expensive to produce a movie here as compared to Toronto where they are not paying PST. There is nothing stopping movie production from moving to Ontario lock, stock & barrel and I’m not just saying that to be provocative; it could happen.

Note that most businesses were paying PST on items before the HST and that was added to their cost and in turn factored into the price you the consumer paid. I know for myself that before HST, I paid PST on office supplies, printing, and many other items which increased my cost of doing business. Now, I get those amounts back in HST credits and this makes my business more profitable and I have not had to raise prices in the past year due to this factor. Other businesses have experienced similar cost reductions. Although the retail price may not drop, the pressure to increase prices is reduced.

3) HST is a fairer tax

The HST, being a consumption tax, really affects the rich much more than the poor or even middle class. The poor get tax credits (and quarterly rebate cheques) when they file their income tax that, in the end, gives them money back more than they spent on HST.

Income taxes are really about avoidance, as most people with lots of money can afford to pay someone so they pay as little income tax as possible. Consumption taxes on the other hand are paid by everyone and how much they pay depends on how much they consume; the more you buy the more you pay. Income taxes on the other hand are so lopsided that some people who make hundreds of thousands a year pay less tax than someone who makes half that.

While there has been talk of a tax shift of billions of dollars onto the consumer, that is not necessarily true. The consumer was paying that tax before but it was embedded into the cost of goods and services. Businesses will pass onto the consumer any cost that must be added to their goods or services. You could say this is more about a tax shift from income taxes to consumption taxes as our income taxes have gotten lower over the past few years.

4) HST is not really costing that much more

Yes, I said that. I do not believe that the HST has cost me that much more over the past year. Maybe I don’t buy that much, or maybe it’s just not affecting me as much as some.

Cable Bill: My cable bill (which includes phone, internet & digital cable) which is about $150/month has $18 of HST on it now. Prior to HST, the amount of GST & PST was $13 so an increase of $5/month or $60/year. Not much that much really.

Hydro: Hydro is on thing that as gone up for residential. On $60/month I pay 6.42 in HST and $2.86 under the old system. A total increase of $3.56/month or $42.72/year. Note that businesses paid GST & PST on hydro which never made sense to me.

Meals: I go out on average once/week and generally spend $58 ($38 for food & appy and $20 for alcohol (4 drinks)). Under HST I am paying $6.96 in HST. Under the old system I paid $4.90. That’s an increase of $2.06/week or $107.12

House Cleaning: This is about $75 every two weeks and the HST is $9 and under the old system it was $3.75. That’s an increase of $5.25/visit or $136.50 per year.

I can choose not to pay the tax by not eating at a restaurant. Basic groceries are HST exempt.  Even a daily coffee habit can be HST free, just brew it at home and bring a thermos.

On those four things, I’m paying an extra $346.34 in HST over the GST & PST. However, if I look at my income tax bill over the last few years that is down more that amount, so in the end I’m not really paying more in tax as I’m paying less income tax than I have in the past and it’s shifted to a consumption tax.

If you look at an income of $55,000, in 2001 you would have had $15,054 in federal and provincial tax and in 2010 it was $12,520 which is a savings of $2534. The BC portion would have been a savings of $1511 alone; that’s equivalent to $21,585 worth of goods and services on just the BC portion (7%) of the HST.

There is talk about services which are now taxable at the HST rate. This is true that services now have an extra 7% on them compared to the old system. Renovations are one area that this occurs. If you take a roof for example that costs $20,000 then under the old system the owner pays just $1000 for GST but now pays $2400 for HST. Now take that over the lifetime of the roof of say 25 years and that’s an extra $56/year you pay in HST over GST/PST. That’s really not much is it when taken over the life of the roof.

I believe that the HST is the best system for collecting the taxes necessary to run government. Remember if you want health care, education and basically for the government to do everything for you like BCers seem to want, then you need to get taxes from somewhere. Tax my consumption, not my income.

Even the United States is considering a consumption tax, and you know how they feel about taxes. Here’s a good article from the USA about consumption vs. income taxes http://www.investorguide.com/igu-article-1134-tax-basics-consumption-vs-income-tax.html