Bob Delaney
Member of Provincial Parliament
Mississauga-Streetsville Provincial Liberal Association
Riding Association Web Site
Wednesday February 22, 2012
29 days until spring!
Time to get the facts, and not the open-mouth rhetoric

Taxes lower now than on last day of last Tory government!

Two events this year struck me as especially relevant to Ontario's discussion as the antiquated, cumbersome, expensive Provincial Sales Tax is repealed and replaced with a modern, value-added tax:

  • New British Prime Minister David Cameron ran in 2010 on a staunch promise not to raise the UK sales tax, called the "value-added tax," or VAT. Echoing familiar nostrums emanating from the Canadian right-wing, the UK Conservatives piously pledged one thing, and then promptly raised the national VAT (from 17.5% to 20%);
  • After supporting the idea of harmonizing Ontario's sales tax with the federal GST, the Conservatives promptly opposed it as soon as the idea was announced in the 2009 budget. However, their platform flip-flops and now says they will keep the single, harmonized sales tax. Once people move beyond "what" and "why" into "when" and "how," and wrap their minds around the idea, they get it, and realize that repealing the destructive PST was something that was long overdue.

So what do we say to the skeptics?

In doing my responses to the last of the pre-implementation critics who steadfastly refuse to acknowledge that their taxes went down to stay; that the new tax credits are here to stay, and that most things are already subject to a 5% GST and an 8% provincial tax, now the HST, I developed what people told me was a pretty effective message. Exerpted from my discussions and responses with western Mississauga constituents in June, here is my last pre-implementation word on the tax reform, tax reduction, and PST elimination/HST introduction package.

I have returned every call related to the HST, and answered every e-mail and letter. I visited every single retailer in Meadowvale, Streetsville and Lisgar earlier this year. I have spoken with every service club, every seniors group, every homeowners organization, and just about anyone else who would agree to meet and grant about 30 minutes to talk with me.

The challenge faced by consumers is that the case against the comprehensive tax cuts and elimination of the PST is easy to make; quick to say; emotional; and wrong! The case for getting in step with the rest of the world requires you to think; takes time to explain; is rational and is right. And make no mistake, I am a h-u-g-e personal proponent of this move. I advocated for it as far back as right after I was first elected in 2003. I take ownership of the best thing done for Ontario since medicare in the 60s.

A value-added tax dispenses with the tax-upon-tax-upon-tax ad infinitum that permeates through the Ontario economy with the regressive, expensive, obsolete and stupid PST. A value-added tax (VAT) is what the rest of the world uses applies to most things. The issue was how to make it neutral for consumers. Canada has had experience implementing a VAT, which is what the GST is, in the 90s. Quebec and Atlantic Canada implemented essentially what Ontario is doing in the late 90s. We know how it affects people, and have local and recent experience to draw upon in Ontario.

What's the whole truth about the HST?

  • Your income taxes are down permanently. The first $39,100 of income is now completely tax-free. That frees up after-tax money for the 1/6 of things you normally buy that may go up, because 5/6 of everything you buy is already subject to a 5% GST and an 8% PST;
  • Everyone qualifies for a $260 permanent sales tax exemption. Per person. That pays all the additional tax on $3,250 of purchases not previously taxed. For a family of four, for example, this means that all the additional sales tax on $13,000 of purchases not previously taxed has been paid. This includes utilities;
  • Seniors have had their property tax credits doubled to $500 per year, and it can be applied to rent. The additional amount pays all the taxes on $3,125 of purchases not previously taxed;
  • The assertion on talk radio that these tax credits will be gone is incorrect. Make that read, "dead wrong." These tax credits are permanent, as are the lower personal income tax rates;
  • During the first year, prices did adjust (downward for about 5/6 of items, upward for about 1/6 of items). Ontario provided the transitional payments because some of the expense comes early while the tax credits come in April. For a couple, or a family, these transitional payments ($1,000) pay all the additional tax on $12,500 of purchases not previously taxed. That is the reason why Ontario is using one-time rebates in three stages: to counterbalance the fact that manufacturers, distributors and retailers all have inventory on which the PST has been paid that will need time for a few stock-turns for lower prices to be passed through. This province has learned from how the GST was introduced and the HST in Quebec and Atlantic Canada;
  • The TD Bank has estimated that 80 percent of the savings will be in the hands of the consumer within a year; 90 percent inside of two years; 95 percent within three years, and all of it shortly thereafter. In a mature, competitive market like Ontario’s, to believe otherwise suggests you also believe that millions of merchants can, or will, collectively collude to price-fix against 13 million consumers. By extension, it also suggests that these same merchants can defy the law of gravity as well as that of market economics.

Typically then, a couple earning below the $160,000 per year threshold stands to benefit from tax credits that pay all the additional tax on some $25,000 of purchases not previously taxed in 2010. Considering that about 83% (5/6) of everything that people buy is already subject to both a 5% GST and an 8% PST (5% + 8% = 13%) and will, after July 1st, be subject to the exact same tax amount (GST of 5% + HST of 8% = 13%), the tax credits suggest that unless you are spending $25,000 x 6 = $150,000 or more in after-tax expenses, you ought to come out ahead.

The tax reductions are yours to keep. And the effect of removing the “embedded sales tax” causes the 5/6 of tangible things currently subject to both the 5% GST and 8% PST to come down in price, as they have everywhere in the world. Ontario will not be the only exception to market economies in the history of the world. Those price reductions amount to the uncollected “embedded” PST of $4.5 billion per year. These measures result in a net revenue drop for Ontario. Let's repeat that, just for effect. Ontario takes in $4.5 billion per year less, not more. Not only does this not constitute either a “cash-grab” or a “tax-grab,” it represents a windfall for businesses, the people who work in them, and the consumers who buy from them.

Personal reflections from your MPP

If all Ontario did was get rid of the PST and implement the HST, I would not have supported it. Taken within the complete program of a comprehensive change in how things are taxed, who gets taxed and at what rate stuff is taxed, there is no question that this is the right thing to do. Ontario now has a permanent, sustainable competitive advantage over the USA. This advantage leaves my counterparts in the U.S. states frustrated, as their system perpetuates legislative gridlock that prevents American state legislators from doing progressive things.

So why do this? Jobs!! Prosperity, investment and opportunity come to the places that welcome them the most. Now we do in Ontario. Click to read the study by the University of Calgary. Jack Mintz, a prominent Canadian economist, estimates the impact of the Ontario tax changes to be 591,000 net new jobs, $47 billion in net new investment and a rise in real incomes for Ontarians of an average of 8.8% in the ten years, beginning July 1, 2010.

I didn’t run for office to watch Ontario stand still while the rest of the world passes us by. I didn’t run to make sure nothing of any consequence ever changed in this Province. I didn’t run because I was afraid of changing the status-quo, or shy in the presence of a sacred legislative cow. I didn’t run to see our kids have to leave Ontario to do what they studied in university.

I did run to expand the range of opportunities to my neighbours; to rip down barriers to doing better – and the cold-war relic we know as the PST is exactly such a barrier; to bring more of Ontario’s wealth into our community, and people here know I have done that. I take my share of personal ownership of the most ambitious legislative measure a government I am intensely proud to serve has done in this mandate.

Better stuff than e-mail chain letters

As Mayor Hazel (one of my constituents) would advise any critics, “do your homework.” There is a reason major newspapers, business groups, poverty advocates, and such Conservative luminaries as Mike Harris and John Tory support these tax changes. Click some of the links below, and read the truth, directly from the source:

Third-Party Studies:

Take a deep breath, leave the purple prose of radio talk show rage behind. Rage is the easy refuge of the lazy. Read and think.

How can you sum up tax reform in a single thought?

By the time you have bought all the things you normally buy; paid all the bills you normally pay; filed your income tax return and received your tax credits, refunds and other allowances, 93% of us, overwhelmingly low- to middle-income people will have more disposable income.

Staying updated

Send a blank e-mail to MississaugaTaxpayer-subscribe@yahoogroups.com to stay updated on the HST and other issues directly from me. I have neither the time nor the inclination to spam anyone. The site is run entirely by Yahoo. You can join or leave at your discretion. If you are a Facebook user, click here to go to my Facebook page, and click "Like" to stay updated from it. The authoritative source on the HST is at http://www.ontario.ca/taxchange.