Linked with Quantitative Easing QE2, debt created out of thin air. – Published on The Bullet’s E-Bulletin No. 410, by Matt Fodor, September 3, 2010.
The Canadian New Democratic Party (NDP) has devoted much of its energy in recent months to opposing the implementation of the Harmonized Sales Tax (HST) in Ontario and British Columbia. The new taxes came into effect on July 1, 2010. The HST merges the Goods and Services Tax (GST) with the Provincial Sales Tax (PST) in both provinces. Items covered by the GST that were previously exempt from the PST are included under the new HST.
Much of the Canadian Left has been supportive of the anti-HST campaign on the grounds that consumption taxes are regressive (i.e. people pay the same rate of tax regardless of income). In contrast, it will be argued here that while Left critics of the HST raise a valid point about neoliberal tax policies shifting the tax burden away from business, the campaign against the HST is misguided, for two main reasons.
First, the anti-HST campaign dangerously dovetails the rhetoric of the Right and serves to foment anti-tax sentiment among the general population. Second, the implementation of a series of social democratic reforms necessitates the use of consumption taxes. As the example of the Nordic social democracies shows, consumption taxes play a key role in terms of financing welfare states and redistributive measures. Defending and expanding progressive taxation must remain a top priority, but progressive taxation alone is insufficient.
A Tax Shift: … //
… Taxation and Left Agendas:
In an editorial written in the Toronto Star, progressive economist Hugh Mackenzie criticized the Canadian Left’s tendency to “[campaign] for better public services as if they can be provided free.” It is assumed that the improvement of public services can entirely be paid for by taxing corporations and the wealthy, while middle-income taxpayers, ‘working families’ and small business can continue to pay the same levels of taxation or even receive tax relief. Mackenzie points out that: “Nations that have the most highly developed systems of public services pay for them with all kinds of taxes, including sales taxes and payroll taxes that everyone contributes to because everyone knows there is no such thing as a free lunch.” This is indeed a key lesson of European social democracy.
There is little (if any) correlation, then, between the degree of tax progressivity on the one hand and the extensiveness of social welfare measures or levels of inequality on the other. There is, however, a positive correlation between levels of direct spending and equality. It is for this reason, that it is important to recognize not only the redistributive function of taxation, but also its role in financing welfare states and providing benefits that fall to low-income and dependent workers. To a substantial degree, this has been done via so-called ‘regressive taxation.’ The size of the public sector, too, is strongly correlated with levels of equality – that is, while the existence of a large public sector does not guarantee higher levels of equality, it is a necessary component in the pursuit of egalitarian welfare state measures … (full long text and Footnotes 1 to 14).
Compared to retail sales tax, HST definitely the better tax, by JOHN CLINKARD, on Journal of Commerce, Sept. 3, 2010.