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.
See also:
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