The Dangers of an HST Election

Early in the days of his prime ministership, Stephen Harper showed some of his partisan nature when initially dealing with the elected government of the province of Ontario. Some disparaging remarks were flung McGuinty’s way, with the finance minister Flaherty calling his home province one of the last places in North America he’d invest in. Stephen Harper himself showed up at a convention of Ontario Progressive Conservatives and made a speech wherein he called then-leader John Tory “the next premier of Ontario.”

A few days later, I think somebody whispered into Harper’s ear. I think the conversation went like this:

Advisor: Sir? About your address to the Ontario Progressive Conservatives?

Harper: Yeah, wasn’t that great! It felt good to speak before a friendly audience of Conservatives, and in Ontario of all places. Just think of how things will go when Tory becomes premier.

Advisor: Yes, um, sir? About that? There’s something about the Ontario voter that you should know.

Harper: Oh, really? What?

Advisor: Well, they have a history of hedging their bets, you see. During the 43 years that they had a Conservative government, in almost every federal election, they returned a majority of Liberals. That Conservative streak only stopped when Mulroney came to power in Ottawa, and it returned when Chretien took the reins. You see, sir: given that McGuinty is a Liberal and Tory is, well, a Tory, we feel that should Ontarians vote Tory into Queen’s Park, that might mean—

Harper: You mean I’ll lose seats unless McGuinty remains as premier?! Why didn’t anyone tell me! Quick! Get McGuinty on the phone! And, dammit, somebody get me the number for a good florist!

Since then, the relationship between Ottawa and Queen’s Park has been a lot smoother than one would have thought. A number of bilateral deals have been worked out, and McGuinty and Harper remain on cordial, if not friendly, terms — thanks largely to the fact that McGuinty wisely did not react very strongly to Harper’s initial burst of provincial partisanship, but mostly on the understanding between the two that each may need the other to stay in power.

Which brings us to the matter of the Harmonized Sales Tax (the HST) and the fact that we might end up fighting a federal election over it. Earlier this year, the McGuinty government announced that the Ontario provincial sales tax would be rolled into the federal Goods and Services Tax, merging two separate taxes into one. The response has been mixed: small businesses love it; consumer groups less so. The provincial Tories and the New Democrats are promising to fight it, and remind voters about it as much as possible in the 2011 election.

But here’s the thing: the provincial Conservative line of attack is thwarted on several fronts. For one thing, the provincial Tories have talked about harmonization when Tory was leader. Moreover, the provincial Liberals would not have gone for a Harmonized Sales Tax without encouragement from the federal Conservatives, who promised to hand over to McGuinty an additional $4.3 billion in transfer payments to cover the revenue shortfalls resulting from the harmonized tax.

The harmonized sales tax is seen as a tax hike when it really isn’t: more things get taxed, even though less tax is collected overall. The old provincial sales tax applied to a limited number of goods, but applied at the beginning of the supply chain. Some items that went through a lengthy production process, where parts had to be purchased from other manufacturers, ended up being charged PST multiple times. The GST is charged once, when the consumer buys a service or a finished product. So, certain big ticket items might end up costing less under the HST — items like automobiles will now have been taxed less, reducing the costs of production — but items that had previously been exempt from the PST will now be taxed, such as the donut with your coffee, lawyers fees, dentist bills, et cetera — the sorts of things average consumers notice.

I support the Harmonized Sales Tax because it will save taxpayers $500 million in reduced administration costs, and it will save Ontario businesses $100 million by simplifying their tax forms, but the fact remains that other individuals will feel more pain, even as the provincial government prepares to offer tax rebates for a tax change that actually represents a tax cut.

But McGuinty’s Liberals sit with a majority of seats in Queen’s Park from now until 2011; plenty of time to get this issue out of the way and prepare for an election. For the federal Tories, sitting atop a minority parliament, there is a real possibility that the federal government might fall on this issue, and voters sent to the polls. Because the Harmonized Sales Tax is a financial agreement between the province of Ontario (and the province of British Columbia, which worked out a similar deal) and the federal government, the feds offer of additional transfer payments to offset the costs of harmonization must be passed by federal legislation. The federal New Democrats, sharing the same philosophy as their provincial counterparts that the HST is a Bad Thing, are set to vote against this legislation. The federal Liberals under Michael Ignatieff have stated their intention to topple this government as soon as possible, by voting against every single confidence measure that’s placed before it. The Bloc? Who knows what they’ll think. The legislation does little to benefit Quebec, and indeed is an example of a federal bureaucracy absorbing provincial administration — a potential surrendering of control from a sovereign province to a federal government the Bloc simply does not believe in.

I’m interested in having an election, and I have my reasons for wanting to vote the federal Conservatives out sooner rather than later, but the idea that this government might fall on legislation to produce a harmonized sales tax in British Columbia and Ontario gives me a migraine headache. For one thing, the rest of the country probably doesn’t care. For another, it mixes up the partisan politics something fierce, so that it’s nigh impossible to understand who stands for what anymore.

Consider: Ignatieff (Liberal) votes to bring down Harper (Conservative) on a bill designed to send $4.3 Billion to McGuinty (Liberal) to implement a harmonized sales tax that is being opposed by Hudak (Conservative). Only the New Democrats, both here and in BC, come out as anything other than hypocrites in this arrangement. How does Harper respond to criticism by Ontario Conservatives that he is helping McGuinty impose an unpopular tax on Ontarians? And how does McGuinty respond when Ignatieff (whose riding is in southern Etobicoke) votes against sending additional transfer payments to Queen’s Park? I do know that the Ontario and federal wings of both the Liberal and Conservative parties do share organizational and fundraising infrastructure. Are party grassroots of the provincial and federal wing of both parties about to be called in to fight themselves?

The New Democrats can vote how they want on this. At least Layton and Horvath are on the same page; but I would respectfully suggest that it would be in the interests of Harper and Ignatieff — if they truly wanted to go at it in an election now — to cause this government to fall on a different issue. It’s simpler, for one thing. It would allow voters to have a clearer picture of who or what they’re voting for or against, and that makes it more likely (however unlikely it would still be) that the election would be an interesting and positive debate.

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