Here's an Idea: Raise Our Taxes

Brandon Sun, June 1, 2020 - David McConkey

Who wants to pay more taxes? I kind of thought there might be only a few of you, but I am going to plow ahead anyway. I am going to humbly suggest some tax measures appropriate for our times: to start paying back the debt being incurred by pandemic costs; to increase fairness and productivity; and to remind all of us citizens that money is not “free.”

Our current situation puts our attention into sharper focus. One thing we should turn our attention to is our tax system. This would be an excellent time for a comprehensive overhaul. I will say more about this in future column, but I would like to start with a few specific suggestions.

MYTH

A myth seems to have sprung up overnight in the midst of the pandemic. The myth is that there is suddenly an unlimited supply of money that governments can spend right now. Let’s disabuse ourselves of this myth. We don’t have limitless money; the bills will come due. To address this myth and remind everyone of reality – and, of course, to start paying back the pandemic debt – I recommend raising some taxes immediately.

One way would be to raise the GST to, say, 7%. This would alert everyone that part of fighting the pandemic is to pay the costs and that every citizen has a role to play. Please hold any complaining, while I remind everyone that low and modest income individuals receive the GST credit, which offsets some or all of the cost of the GST. Also remember that the GST is not charged on basic necessities like groceries, residential rent, prescription drugs or child care.

A second way would be to reverse the income tax reduction that the Justin Trudeau government instituted in its first term. This tax change reduces the tax on those with incomes between approximately $48,000 and $225,000. To help pay for the costs of the pandemic, these individuals would pay what they did before, which was a tax rate 1.5 % higher.

A third way would be to make special pandemic payments taxable. The federal government payment to every senior, for example, would be folded into the existing OAS. This would mean that low-income folks would get the full amount; middle-income people would pay back some in taxes; and high-income individuals would pay back more as the payment not only would be taxed, but also would be partly or entirely “clawed back.”

HARMONY

Here is something we can do now in Manitoba: combine our retail provincial sales tax (PST) with the federal goods and services tax (GST) to produce a harmonized sales tax (HST). Most provinces have already done so. Alberta has no provincial sales tax; of the other provinces, only Saskatchewan and B.C. do not have an HST.

Amalgamating the two taxes could look as simple as adding the 5% GST to the 7% PST to make a new 12% HST. It is not quite that easy, but we can set aside the complexities here. The bottom line: although some consumer costs would go up, the provincial economy would be more efficient, productive and competitive. We would all benefit.

How? First, collecting just one tax is more efficient. Businesses and the provincial government would save tens of millions annually by not having to administer a separate PST. As a provincial bonus, all costs of collecting the HST would be paid by the federal government. The federal government would also cover the costs of converting from the PST to the HST.

Second, and please excuse the jargon, the GST – as a value-added tax – is superior to the PST. The GST is added, but then subtracted, along the supply chain, so the tax is in effect charged only once at the very end. The PST, however, is paid on business inputs again and again along the supply chain and so is hidden in the final price and might even be charged again as a tax on a tax.

Third, because business input sales tax costs would be refunded, the HST would make Manitoba businesses more competitive – nationally and internationally. The federal government has previously noted that instituting the HST is the single most important step Manitoba could take to improve the competitiveness of our businesses.

In normal times, the HST for Manitoba always made sense. But in these times – when many local businesses are struggling to survive – the HST makes even more sense.