Death and taxes are said to be the only sure things in life.
We do our best to avoid both unpleasant realities. However it is a sad fact that taxes are a necessary evil. Without taxes there would be no border security, no social services and public schools would be non-existent. In short, government would cease to function.
It is the visceral reaction to taxes (and my conservative brethren are often guilty of fanning these flames) that holds tax policy hostage to emotion and leads to bad policy decisions.
The Ontario government is the latest political body to venture down a misguided path driven by political considerations rather than on substantive reasons.
As everyone knows, Ontario will be harmonizing the Provincial Sales tax with the Federal GST. This is a long overdue measure that will increase the efficiency of collection and administration.
The Holy Grail for economists is efficiency and in simple terms we can look at this as the percentage of taxes paid that actually reach government coffers net of collection costs. There are additional measures of efficiency that deal with the effects of the incentive/disincentive aspect of differences in application of the tax.
The HST will exempt fast food that costs less than $4, newspapers, books, children's clothing, diapers, car seats and feminine hygiene products.
While it is politically appealing to exempt such purchases, it increases the costs of collection and distorts consumer choices as well as increasing the cost of doing business.
A business like Wendys will faces the difficulty of keeping prices below $4 in order to avoid triggering the HST. Raising the cost of a 3.99 meal by one penny increases the cost to the consumer by significantly more. A level like this is not indexed for inflation and as such the business will suffer compressed margins and consumers will face a gap move in costs at 4.00. I might ask exactly what is so magical about a 4 dollar figure anyway? Also why would we specifically exempt fast food (hence encouraging its consumption)??? As smoking rates decline and obesity rates rise, fast food may become more deadly across society than the effects of smoking.
Why are books exempt? Books are not inherently good....only good books are. Books are a consumer good and should be taxed like any other.
Newspapers are not taxed but magazines are. Why does this distinction exist?
Feminine hygiene products? Yes I'm aware that only women need these and hence it is inherently unfair that only women have to pay this cost. It is also true that men and women exhibit very different buying patterns across many consumer goods. Men generally consume more calories......very unfair I'd say.
The purpose of taxes is to raise funds for important spending priorities. People should remember that and politicians should shepard these resources very respectfully.
All goods for purchase at your supermarket should be taxed at one uniform rate. With the exception of specifically targetted products like tobacco and gasoline which have a separate delivery system, there should be no exemptions. Greater exemptions mean higher rates of taxes on non-exempt items and greater administrative costs.
This is not an ideological argument. Where taxes get spent can be an ideological battle. Increasing the cost of collection and creating bad consumer choices (ie in favour of fast food) is just plain dumb.
Premier McGuinty....shame!
I have to agree with you. As a conservative, I would like to see the minimum amount of taxation possible, however, if you are going to administer a tax, you might as well do it correctly. Exemptions are inefficient, and there is no way that the classes of exemptions McGuinty is proposing are something that a government could say, that for a policy reason, they want to encourage more consumption of.
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