Fraser Institute says H.S.T. will benefit low and middle income earners.


JLM
No Party Affiliation
#121
Quote: Originally Posted by ToningtonView Post

My understanding is that tax and spend means you raise taxes to pay for more public services. Debt servicing doesn't count as a public service. And they aren't even paying any more on debt servicing, first they have to get out of deficit before they can do that.

So, 1/4

Nope 5/8- 1/2 for taxing- the proper procedure is to pay off what you owe before buying more.
 
Tonington
#122
Quote: Originally Posted by JLMView Post

Nope 5/8- 1/2 for taxing- the proper procedure is to pay off what you owe before buying more.

I'm generous, to a fault.
 
Kreskin
#123
It's forced the resignation of one high-profile provincial cabinet minister and spurred a provincewide voter revolt. The harmonized sales tax, which combines the five-per-cent federal goods and services tax with the seven-per-cent provincial sales tax, begins July 1. Over the next 10 days, the Times Colonist will take a detailed look at how the HST will affect Victoria individuals and families.

The average B.C. household could take a hit of $521 to its bottom line next year as a result of the harmonized sales tax, according to a model prepared for the Times Colonist by Statistics Canada.

The change could range anywhere from $78 for households with single parents and one child to $801 for a married couple with no children, the figures show.

"There are certainly individuals and households that will feel the impact of this tax," said Dr. Herbert Schuetze, economics professor at the University of Victoria.

"For example, if you are unattached and 65 years or older, we're talking about $262 a year. That's a considerable amount of money for some people."

At the request of the Times Colonist, Statistics Canada analyzed 15 different household types and 15 different income classifications using its social policy simulation database and model.

The model is used by the federal government and other organizations to analyze financial interactions between government and individuals.

For the Times Colonist's HST analysis, it synthesized four databases -- the Survey of Household Spending, Survey of Labour and Income Dynamics, EI claimant history and personal income tax returns -- to establish a sample of B.C. households.

The weighted total of households in the sample was 1.935 million.

Statistics Canada determined what that sample spent on various items, its household income and characteristics, and then followed the rules of the income tax system and applied all of the rebates, tax credits and rules surrounding the HST and GST to the sample to determine the impact of the tax.

The figures suggest the more money households bring in, the more they will pay.

For example, a household with an annual income of $40,000 to $50,000 will pay $253 more because of the HST, while households in the $80,000 to $90,000 range will pay $1,128 more annually.

"It looks like families get hit pretty hard," Schuetze said.

Statistics Canada's model incorporated a number of measures designed to offset the effects of the tax.

Those include a B.C. HST credit of up to $230 annually to low-income households, an increase to the personal tax credit, a rebate for home energy and point-of-sale rebates for a number of other items.

Yet each of the 30 household types for which Statistics Canada provided

figures shows some negative impact as a result of the HST.

That does not jibe with predictions in the March provincial budget, although the parameters for the government's analysis were not the same as those used by Statistics Canada.

Neither does it match a Fraser Institute report released Monday.

The budget documents showed a family of four with $30,000 income coming out ahead $535 annually, while a family of four with an income of $60,000 would spend an extra $107 a year and a family of four with an income of $90,000 would spend $178 more.

According to the province, single individuals with an income of $80,000 faced a $314 increase in spending, while single people with $25,000 incomes would end up $2 ahead and a senior couple with an income of $30,000 up $1 annually.

The Fraser Institute delivered a different perspective on the impact of the HST, saying the total tax bill will decrease for low-and middle-income B.C. families. That's because even though these families will pay slightly more in sales tax, those increases will be more than made up for by income tax reductions, as well as the HST credit, said Niels Veldhuis, senior economist for the Fraser Institute.

The Fraser Institute used its Canadian tax simulator, which is based on Statistic Canada's social policy simulation database and model, and factored in provincial income tax changes announced at the same time as the HST, he said.

Under the Fraser Institute's model, families with incomes of between $20,000 and $40,000 in 2011 can expect an average tax decrease of $411. The Fraser Institute used different criteria than the Times Colonist to describe a family, stating it was made up of two or more persons.

Families with incomes of between $40,000 and $60,000 will see their taxes reduced by an average of $159, the institute said. The tax break would shrink further, to an average $34 for families with an income of between $60,000 and $80,000, it said.

The model Statistics Canada used for the Times Colonist analysis did not take into account the effect of the HST on housing, which is significant.

Previously, new homes were exempt from provincial sales tax. Starting July 1, they will be subject to the HST, although purchasers will be eligible for a rebate on the provincial portion of the tax up to a maximum of $26,250.

The model also assumed all costs to business, as well as savings a business might realize as a result of the HST, would be passed on to consumers.

But perhaps the largest unknown is behavioural change caused by the new tax.

Schuetze said that is a significant caveat.

"It may be an overestimation of the impact in part because there's no change in consumption assumed here," he said. The Statistics Canada model assumed households would spend as much as they did pre-HST, something that is unlikely to happen.

Indeed, dozens of Victoria residents interviewed for this series said they would be cutting back on unnecessary expenditures after July 1.

"I may have to make some cutbacks, like eating out, and I will have to think more before I spend," said Jeff McKay, a 33-year-old executive with Oak Bay Marine Group.

"I will have to be more careful," said Caitlin Flanders, 24, who works for the Queen's Printer.

"Going out for coffee or lunches, which I don't do that much any way, I won't do as often because of that tax." aduffy@tc.canwest.com

FOR SOME SECTORS, THE HST IS GOOD TAX POLICY, ECONOMISTS SUGGEST

Like it or not, the new 12-per-cent harmonized sales tax that comes into effect July 1 is good tax policy.

That's the prevailing sentiment from the province, economists and B.C.'s largest industries on the eve of the implementation of the tax, which combines the five-percent federal goods and services tax with the seven-percent provincial sales tax.

More than 700,000 British Columbians have signed a petition to kill the HST, which they say is a tax shift from business to the consumer and will have a significant impact on household bottom lines.

But support for the tax is solid in many sectors.

"Based on experiences in other jurisdictions, this will be very positive," said John Winter, president of the B.C. Chamber of Commerce.

"The bottom line is the job creation that goes with this would suggest it's worth the pain in the end. The net effect of it all will remove a lot of the costs from business in B.C. and enable them to compete."

Victoria has said since it introduced the idea of an HST last summer that the tax will improve the province's competitiveness and lead to more jobs, higher wages, streamlined business processes and increased investment.

The investment is expected to come as a result of the HST's reduction of the marginal effective tax rate on new business investment.

Currently, new investment on capital is taxed at 27 per cent. That will change to 16 per cent under the HST.

The province and economists say the HST will result in the removal of more than $2 billion in costs across the province because the provincial sales tax companies now pay on their business inputs will be removed.

"I still very much feel that this tax change is the right thing to do and B.C. will be much stronger in the future because of it," said Finance Minister Colin Hansen, who says he is seeing some positive results already. -- Andrew A. Duffy

The analysis is based on Statistics Canada's social policy simulation database and model. The assumptions and calculations underlying the simulation results were specified by the Times Colonist and the responsibility for the use and interpretation of this data is entirely that of the Times Colonist.



Read more: HST will hurt consumers, says StatsCan
 
JLM
No Party Affiliation
#124
I think the best thing to is to boycott the H.S.T. by not buying goods, services that aren't absolutely necessary.
 
taxslave
No Party Affiliation
#125
Quote: Originally Posted by JLMView Post

I think the best thing to is to boycott the H.S.T. by not buying goods, services that aren't absolutely necessary.

I've been saying all along that the best way to reduce taxes is to cut the demand for free government services. But if the hatred of the HST makes people stop wracking up credit card debt for junk they don't need I'm OK with that too.
 
Tonington
#126
I really have a bone to pick with those headlines like, StatsCan says HST will hurt consumers.

StatsCan does not say that. They have a model that anybody can use if you commission them. You give StatsCan your assumptions and calculations of various factors based on your sample, they put it into the StatsCan model, and they give you the results. The Fraser Institute used the same model and came up with savings because they did account for income tax savings, as well as housing cost rebates.

That's a pretty significant difference when you're talking about the tax burden on families...
 
JLM
No Party Affiliation
#127
Quote: Originally Posted by taxslaveView Post

I've been saying all along that the best way to reduce taxes is to cut the demand for free government services. But if the hatred of the HST makes people stop wracking up credit card debt for junk they don't need I'm OK with that too.

It's ironic isn't it- you hear all the time on the media about how much debt each Canadian is into and the yet the very people who can stop it encourage it. A couple of months ago I bought a patio table & chairs from one of the major department stores and when I went up to pay for it I was told if I signed up for one of their point cards they'd give me a 10% discount on the patio set. So now I have one more credit card (that I paid off in full) but haven't bothered to activate yet. The next thing will be a letter asking why I'm not using. Nice to have good credit to save embarrassment in an emergency, but it's a p*ss poor way to run your life.
 
Kreskin
#128
Paul, some products that don't have PST will now have it. Anything that didn't have GST will too. The cost to the taxpayer has to go up, unless manufacturers and service providers reduce their costs. I really doubt anyone will. Will there be more "investment"? Who knows, the investment has been pretty solid out here without it. Will people spend less because they have less to spend? Quite possibly.
 
AnnaG
#129
Quote: Originally Posted by JLMView Post

I always considered restaurant chefs to be superior at cooking but with this tax my cooking just all of a sudden vastly improved.

One could always visit neighbors and friends a lot, too.
 
Tonington
#130
Quote: Originally Posted by KreskinView Post

Paul, some products that don't have PST will now have it. Anything that didn't have GST will too. The cost to the taxpayer has to go up, unless manufacturers and service providers reduce their costs.

I'm not saying the price of goods won't go up(though again this is unclear, the HST in the Atlantic Canada showed that prices went down) my understanding is that this will be offset by lowered income tax and capital gain rates. If you take home $801 more because you're not paying as much on income tax, then paying $801 more in HST doesn't really mean you're incurring any extra costs.

That appears to be just one of the differences between the Frasier Institute, and the Times Colonist analyses.

Where the truth lies, I have no idea...there are differences between the existing HST regimes, and the ones BC/Ont are about to implement.
 
JLM
No Party Affiliation
#131
Quote: Originally Posted by ToningtonView Post

I'm not saying the price of goods won't go up(though again this is unclear, the HST in the Atlantic Canada showed that prices went down) my understanding is that this will be offset by lowered income tax and capital gain rates. If you take home $801 more because you're not paying as much on income tax, then paying $801 more in HST doesn't really mean you're incurring any extra costs.

That appears to be just one of the differences between the Frasier Institute, and the Times Colonist analyses.

Where the truth lies, I have no idea...there are differences between the existing HST regimes, and the ones BC/Ont are about to implement.

I think it's impossible to say which way we'll be better off- I predict I will be better off with the tax, because I'll be spending very carefully until I see just how my budget will be affected.
 
Kreskin
#132
Quote: Originally Posted by ToningtonView Post

I'm not saying the price of goods won't go up(though again this is unclear, the HST in the Atlantic Canada showed that prices went down) my understanding is that this will be offset by lowered income tax and capital gain rates. If you take home $801 more because you're not paying as much on income tax, then paying $801 more in HST doesn't really mean you're incurring any extra costs.

That appears to be just one of the differences between the Frasier Institute, and the Times Colonist analyses.

Where the truth lies, I have no idea...there are differences between the existing HST regimes, and the ones BC/Ont are about to implement.

Low income earners don't pay much income tax. Some not at all, and they certainly don't have much in the way of capital gains to report.
 
Tonington
#133
Quote: Originally Posted by KreskinView Post

Low income earners don't pay much income tax. Some not at all, and they certainly don't have much in the way of capital gains to report.

Low income earners get HST credits. It's still progressive taxation.
 
Kreskin
#134
Tax credits usually give you back about 20-25% of what one is out of pocket.
 
AnnaG
#135
Pensioner we know who does not make enough to pay income tax, spends way more than $232 a year on GST (gasoline, home cleaner services, etc.), yet that is all he gets back for his GST credit.
 
Tonington
#136
So, we're still back to assuming that prices will be higher...

That is, you're assuming that there is no competition, and that all businesses will choose to pocket the difference. That's not a tenable assumption, IMO.
 
Kreskin
#137
I'm dealing with factual. Taxes will go up. That doesn't save someone in taxes.
 
Tonington
#138
Quote: Originally Posted by KreskinView Post

I'm dealing with factual. Taxes will go up. That doesn't save someone in taxes.

And some taxes will go down. That will save in taxes....that is factual.
 
AnnaG
#139
Quote: Originally Posted by ToningtonView Post

So, we're still back to assuming that prices will be higher...

That is, you're assuming that there is no competition, and that all businesses will choose to pocket the difference. That's not a tenable assumption, IMO.

lol Um, adding taxes to things that were not taxed before usually results in the gross cost of the item being higher, yes.
Someone already posted what parking in Vancouver will be like once the tax is added.
The proof will out eventually. lol
 
Kreskin
#140
Quote: Originally Posted by ToningtonView Post

And some taxes will go down. That will save in taxes....that is factual.

Some make the claim that an economic magic trick will lower taxes. Lets get real, if this didn't make them money straight out of everyone's pockets they wouldn't be doing it.
 
Tonington
#141
Quote: Originally Posted by AnnaGView Post

lol Um, adding taxes to things that were not taxed before usually results in the gross cost of the item being higher, yes.
Someone already posted what parking in Vancouver will be like once the tax is added.
The proof will out eventually. lol

Only if businesses pocket the difference in the cost of goods sold. If that is the case, there will be flocks of economists examining why that happened, why not one producer tried to gain a competitive advantage by dropping prices below that of competitors.

I'm sure some things will go up, that happened in Atlantic Canada, but on the whole, the price at the checkout went down.

Quote: Originally Posted by KreskinView Post

Some make the claim that an economic magic trick will lower taxes. Lets get real, if this didn't make them money straight out of everyone's pockets they wouldn't be doing it.

Margins?

Seriously, what happened in Atlantic Canada is not fantasy. What happened here is not an economic anomaly...
 
Kreskin
#142
Quote: Originally Posted by ToningtonView Post

Only if businesses pocket the difference in the cost of goods sold. If that is the case, there will be flocks of economists examining why that happened, why not one producer tried to gain a competitive advantage by dropping prices below that of competitors.

I'm sure some things will go up, that happened in Atlantic Canada, but on the whole, the price at the checkout went down.



Margins?

Seriously, what happened in Atlantic Canada is not fantasy. What happened here is not an economic anomaly...

I seriously doubt that any of it was attributable to the HST. I suspect the growth would've been higher without it.
 
AnnaG
#143
Quote: Originally Posted by ToningtonView Post

Only if businesses pocket the difference in the cost of goods sold. If that is the case, there will be flocks of economists examining why that happened, why not one producer tried to gain a competitive advantage by dropping prices below that of competitors.

I'm sure some things will go up, that happened in Atlantic Canada, but on the whole, the price at the checkout went down.

You could very well be right. However, I am not ready and willing to accept that Campbull and Cronies haven't figured out a way to squeeze more money from taxpayers through this HST. He's cut back in health and education and blown wads on the Olys and other things. Taking a cut in gov't income at this point in time is ridiculous. He has to either break even or get more money from somewhere. And judging by his previous activities, he's all for boosting the gov't bank account. In this respect he is looking an awful lot like a mini-Martin, to me: screw the public to balance the books.
 
SirJosephPorter
No Party Affiliation
#144
Quote: Originally Posted by KreskinView Post

I'm dealing with factual. Taxes will go up. That doesn't save someone in taxes.

That is not necessarily a bad thing, Kreskin. It depends upon what the taxes are used for. But I for one, don't oppose each and every tax increase on a knee jerk basis.
 
Kreskin
#145
Quote: Originally Posted by SirJosephPorterView Post

That is not necessarily a bad thing, Kreskin. It depends upon what the taxes are used for. But I for one, don't oppose each and every tax increase on a knee jerk basis.

This is hardly a knee jerk reaction. It's a reaction to a government who blatantly lied about this, and they will pay the price. I understand you guys out east just lay down and take this crap, but we don't.
 
JLM
No Party Affiliation
#146
Quote: Originally Posted by KreskinView Post

This is hardly a knee jerk reaction. It's a reaction to a government who blatantly lied about this, and they will pay the price. I understand you guys out east just lay down and take this crap, but we don't.

Kreskin- I see this as a very easy problem to solve, we reuse, we recycle, we buy lots of duct tape, but that is one of the few things we buy, just buy the essentials, no fast food, no restaurants, reduce the haircuts from one a month to once every three months, use the needle and thread more, and pretty soon I think Ole Gord will get the picture that business isn't quite so brisk.......................:l ol:
 
Tonington
#147
Quote: Originally Posted by KreskinView Post

I seriously doubt that any of it was attributable to the HST. I suspect the growth would've been higher without it.

Why? Why would growth be higher when the cost of capital, and the cost of producing/selling goods is higher?
 
Kreskin
#148
Quote: Originally Posted by ToningtonView Post

Why? Why would growth be higher when the cost of capital, and the cost of producing/selling goods is higher?

How do you sell these products when you take money away from the consumer? It is quite simple, you take money from the poor and give it to those who don't need so they can send it offshore.

Explain to me why BC has grown quite well without the HST and tell me what fiscal problem is it solving?

The following is a second independent post and not a reply to Paul.

Vander Zalm: Who paid for the misleading report?

FightHST

Delta – The once proudly independent Fraser Institute’s recently published report on the HST is so filled with holes it brings into question the credibility of the entire organization, says former BC premier and Fight HST Leader, Bill Vander Zalm.

Vander Zalm says the report is revealing as much for what it didn’t analyze as for the errors and sloppiness contained in what it did look at.

“For starters, how can a ‘think tank’ publish a paper about such a sweeping tax change without ‘thinking’ about anything but the positive aspects of the tax? Right there you have to question their objectivity.”

Vander Zalm says there are volumes of information regarding the pros and cons of value added taxes in Europe. He says for any report to be credible, it would need to at least address problem areas associated with such taxes. “The Fraser Institute Report does not even give a cursory glance to such things as VAT (HST) evasion and the underground economy which has resulted throughout Europe from the tax. They didn’t address the inflationary aspects of VAT’s, or the fact that there is very little embedded sales tax on services, which is the main area where HST will add to costs.”

“They also tried to gloss over the shift in tax policy to a regressive tax like the HST and its enormous impact on low income people by saying high income earners will pay more. But they aren’t comparing the tax burden relative to income level, so their conclusions are meaningless.”

“Perhaps most importantly, they avoid the issue of BC handing its taxation authority over to Ottawa and losing control of tax policy. The Fraser Institute is not simply advocating for a more efficient tax system, which could be achieved with a reformed PST. By failing to distinguish between a reformed PST and the HST, they are also advocating that BC relinquish its sovereign authority over sales taxes to Ottawa. It makes you wonder who paid for this ‘report’,” said Vander Zalm.

Vander Zalm says a Statistics Canada report shows the HST burden on consumers to be significantly higher from the tax. But he says even the Stats Can report is based on the same flawed model as the Fraser Institute Report. He says both reports assume a model where business will pass on significant savings to consumers from the input tax credits in the HST.

“This idea is based more on wishful thinking, hoping, and wanting than on reality. Very few businesses have any significant amount of embedded PST in the cost of their services. Certainly not equivalent to the extra 7% they will now have to charge in tax. The HST’s greatest impact will be on services, where PST was not previously applied.”

Vander Zalm says that means very little PST cost savings resulting from the move to an HST are available to be passed on to consumers.

Vander Zalm says his group did an internal analysis of the Fraser Institute’s Report, and found the following discrepancies:

The report estimates an amount of $3,133 PST paid yearly for 2011 and $3,279 for 2012. Assuming these figures refer to the amount of PST an average family pays on a current basket of goods (the report does not define the numbers coherently) the PST numbers are extremely inflated.

To achieve such PST averages, the average family making $86,862 would have to purchase $44,757.14 in PST(able) goods for 2011, and $46,842.86 PST(able) goods for 2012.

The Fraser Institute also calculated income tax at $11,245 for the same average family.

Federal and Provincial income taxes paid on a gross income of $86,862 would be $28,208.06 (Fed $16,438.58 + Prov $11,769.48 = $28,208.06). This means the Report deliberately left out the federal portion of income tax.

Considering the current PST tax structure which is based on paying tax on limited goods and no tax on services, the Fraser Institute’s numbers are unsupportable, as follows:

Approximate net income on the average family earning $86,862 is roughly $58,653.94 (left to spend on all their household needs.)

According to the report, from this net of $58,653.94, $44,757.14 is spent on PST(able) goods. That leaves $13,896.80 spent on non-PST(able) goods which include: Mortgage, utilities, most food products, most services, and other taxes (Fraser Institute table #3 item page 2).

Using their own numbers with the correct income tax amounts, individuals can’t possibly spend $44,757.14 on PST(able) items.

The Statistics Canada Report’s estimate of the net HST cost to consumers of $1.5B also contradicts the Fraser Institute Report’s underestimated net HST of $410M, which is the same figure proposed by the BC Government.

Vander Zalm says in order for all BC consumers to have a net HST hit of only $410M, business would have to pass on a savings equivalent to 80% of the net tax increase from the HST on all their goods and services. “Not going to happen,” said Vander Zalm.

Vander Zalm says the Fraser Institute report is a sham designed to support the government version of the HST.

“The evidence for that is found in the absurd equations used to calculate PST, the ridiculously low estimate of net HST to be paid by consumers, and the fact the report was released just 9 days before the HST is set to take effect.”

“When was the last time a major think tank offered their thoughts after something was a foregone conclusion? What could possibly be the point of such a report other than to prop up a shaky government and it’s failing policy initiative?” Vander Zalm asked.
 
L Gilbert
No Party Affiliation
#149
Gov't motive is highly suspect. At any rate, I can see a drop in business activity in the service industries (hotels, restaurants, etc.) so they better start hoping for a booming tourist trade.
If they start taxing books more, it could pretty much kill bookstores, publishing companies, etc. because those are already suffering because of I-net business. I can see convenience stores losing business.
Pensioner gets monthly check and has to spend more on a monthly basis. I doubt it makes him/her happy if he/she has to wait till the following May to get some of it back.
 

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