Depends on what the meaning of the word ‘is’ is

According to a report issued by the Business Council of BC, an organization that supports the 10 year freeze on BC’s minimum wage, HST will lead to better paying jobs in British Columbia. I wonder if the Council has a new policy that now values improved wages.

Author of the report cited by the Business Council is SFU economist Jon Kesselman, a C.D. Howe Institute Research Fellow. However, Dr. Kesselman has favored shifting the personal tax base further toward consumption while also raising tax rates at upper-middle and high incomes. BC Liberals follow only part of that prescription.

Jock Finlayson is executive vice-president of the Business Council. He has been a leader of the pro-HST campaign despite his claims that the business community is not launching “a coordinated campaign to support the tax, or to formally speak out against a petition organized by former Premier Bill Vander Zalm that is seeking its repeal.” In making this claim, Finlayson probably was thinking of Clinton’s infamous remark, “It depends on what the meaning of the words ‘is’ is.”

In 2009, Dr. Kesselman participated in a Globe and Mail live discussion. Kesselman made the claim that is a central talking point of BC Liberals. “Tax harmonization is not part of a scheme to cut business taxes and stick it to the consumers. . . Reduced taxes on business will yield lower consumer prices. . . “

A participant named Dale challenged that claim, noting that many BC companies that will realize tax savings under HST are exporters, who sell at prices set by global markets. No doubt, he was thinking about the province’s main export commodities, which include coal, lumber and natural gas. (Hands up all those people who think consumers will save money because profits of mineral and energy industries rise.) Truth is that allowing tax rebates will simply increase profitability of these mostly multinational companies. And, as is common, much of those profits will be sheltered in overseas tax havens because corporations don’t like to pay income tax. The Campbell government has been steadily reducing corporate income taxes and now they offer relief from consumption tax. Liberals move toward a tax free environment for corporations and this provides a fabulous rate of return for the $20 million or so contributed by business to the BC Liberal Party during the four year election cycle.

The Globe’s anti-HST commenter could have added that most consumer products sold in BC are imports that will not reduce in price substantially. Clothing and shoes I wear this moment are manufactured in Asia, just as is the computer that I use to write this article. Moreover, if the machine suffers problems, I will contact a service centre in India for assistance and if a part is required, it will be mailed from an American fulfillment depot. Again, the so-called harmonization benefits are elusive. To his credit, Dr. Kesselman admitted to the accuracy of the challenge, “Dale, You are right that the taxes lost from rebates of HST to exporting industries will not be reflected in any compensating price reductions to BC consumers.”

Colin Hansen and Gordon Campbell, people who know much about rearranging truth, complain that HST opponents are misleading the public. Yet, whereas the extra HST costs to consumers are readily identifiable, the scale of savings that Liberals claim will ease consumer burdens are at best uncertain and, at worst, improbable. The economist makes arguments that fit theoretical models of mature and balanced economies but British Columbia is an exporter of raw materials and an importer of finished goods.

Kesselman made another interesting remark in the Globe and Mail piece. This was the comment and response:

Robert Matas:

A lot of the resentment seems to stem from a feeling that the Liberals were less than honest. British Columbians are left with the question, when should I start believing what you say?

Jonathan Kesselman:

Robert, Okay, the Liberal government of BC was not forthright prior to the election as to its thinking (or even plans) regarding harmonization. No government could have survived the election while promoting such a hot-button issue. Sad but true, as Kim Campbell said some years ago when vying for prime ministership, an election is no time for candid discussion of real policies. But I hope that you can believe the overwhelming conclusion of tax economists that the HST will be superior to the current BC sales tax and will lead to many benefits for all of us as workers and consumers.

While some voters are outraged by Campbell and Hansen’s tax deception, Dr. Kesselman appears to condone or accept untruths, since the subjects are “hot-button” issues. That would be unfortunate if it were true. We value democracy too little if we tolerate without complaint politicians who promise one thing during an election while planning to do the opposite.

Categories: HST, Taxation

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3 replies »

  1. As a business owner, perhaps there are many of my ilk that also recognize that the HST is not the single best thing for us. If Campbell would actually talk to anyone other than deep minded Fraser Institute, business council so called “economist” dreamers he would know this.
    He also uttered the “no subsidy” comment many times prior to elections and did exactly that by throwing all manner of “incentives” at highly profitable global resource extractors. Who knows how much we gave to poor old BP anyway? Smaller BC based businesses aren't able to “grease the wheels” to the degree that they obviously need to for Campbell to listen, so hopefully he'll observe himself on recall come November.


  2. People who read the initial version of this article will note a few changes in references to SFU economist Dr. Jon Kesselman. I am advised that he has had no direct or recent involvement in papers written for the Fraser Institute. Further, I have considered more of Dr. Kesselman's writings on tax policy and believe that my initial criticism of him was excessive. However, I continue to believe that he should have considered ethical failures of BC Liberals in evaluating acceptability of HST and that he should have discussed British Columbia particular mix of export and import commodities. I remain convinced the “pass-through” of business tax savings is overestimated.


  3. A lot of the resentment seems to stem from a feeling that the Liberals were less than honest. British Columbians are left with the question, when should I start believing what you say?

    The answer to the bolded part, if this refers to the Campbell gang is NEVER, EVER!


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