Depending on our stations in life, everyone has a bias on how fairly taxes are devised and applied. No one loves them, but we hate them to varying degrees.
Still, it’s clear, pretty well consensus, that our provincial sales tax (PST) is uncompetitive and a bigger burden proportionately on those with less to spend than on those with more to spend.
Yes, it is true: those with more obviously spend more and thus save more when the tax reduces or vaporizes. But as it stands, the tax is regressive, taking more of the disposable income from those with fewer means to buy goods and services upon which it applies. In an economy of substantial inequity, many experts are proposing change.
John Horgan has suddenly tried to deflect from this generally accepted view in claiming that a moratorium on the tax, as proposed by BC Liberal Leader Andrew Wilkinson in this election campaign, would only help the rich. He clearly worries that the revenue he needs will disappear, and he resorts to the BC NDP narrative that shellacks higher-incomed British Columbians and associates the Liberals with all things disreputable in that realm.
But let’s be fair: more will be available from higher-incomed British Columbians to spend on goods and services to quickly rejuvenate the economy, and a moratorium would proportionately help poorer people keep more of their funds. It assumes that more income will be generated by business to help replenish the provincial treasury.
The gambit of the BC Liberals is that a tax moratorium more rapidly improves one’s financial position than a government program that takes time to unfurl. The concept is simple: Wake up one morning (January 1, 2021, it seems), the tax break has kicked in, you experience it most likely on your next transaction, and the process is tidy and tangible. Your restaurant bill is lighter, the appliance is cheaper, the clothes are more affordable. It makes a difference – sometimes quite a difference, because the tax is generally 7%, but 8% on accommodation, 10% on liquor, 20% of vapour products and somewhere between 7% and 20% on vehicles and boats. (Wilkinson has said luxury cars would still be subjected to the tax.)
This concept of incentives for spending is not lost on the NDP. Its economic recovery plan calls for rebates on PST for machinery and equipment as part of any company’s capital spending. Consumer breaks, though, are not in the cards.
Still, it calls Wilkinson’s idea “desperate” and “not thoughtful.” Well, the laconic pot is calling out the frisky kettle here, because in seven or so months of contemplation, the NDP has delivered negligibly to juice the economy. Its focus has been on taping up our torn muscles to reduce the limping, not rehabilitating them to perform.
It launched into an election no one but a professional opportunist wants and thus put the government for many months on cruise control on the rocky road. We could use a little less of its reflective pose and a lot more determination.
The BC Liberals have come to terms under Wilkinson, if uneasily, that we are in the deficit-spending years of government for the foreseeable future. His proposal of a one-year moratorium would be followed by a resumption of the tax at a more acceptable 3%, with the presumption of a recovering economy. Wilkinson is shrewd enough to know that any recovery requires a few jolts.
Ideally, too, this two-step process would precede a third, more significant step that reforms consumption taxes to introduce a value-added tax – at a lower rate – that would be applied broadly and thus more consistently, with rebates for those in lower-income straits. This would help establish a competitive climate for consumers and businesses and reset the inequitable system. It is an intelligent but complex fix, not easily explored in the short, virtual campaign we occupy. But the system we have is eating us alive.
For all of the pivots that governments are trying to effect, this eventual reform of tax competitiveness ought to be job one. What Wilkinson proposes is a step in that direction. •
Kirk LaPointe is publisher and editor-in-chief of BIV and vice-president, editorial, of Glacier Media