Thursday, March 26, 2009

The Anti-Stimulus

As I was driving in to work this morning I heard about the Ontario Government's plan to combine the provincial sales tax PST with the national Goods and Services Tax (GST) to form a Harmonized Sales Tax (HST). I also heard how businesses were welcoming the news for the supposed efficiency of the single tax. The thing is the new tax will cover everything the GST covered at a rate of 13%. Currently the tax rate is 5% GST and 8% PST so at first blush it seems fair. The problem is that the GST applies to far more things people buy than the PST most notably services and new home sales. So by keeping the provincial rate the same but taxing way more things the net effect is a massive tax grab that every person in the province will feel.

One big in my face example is home renovations. The federal government announced a 15% tax credit on home renovations that will refund up to $1350 on a $10,000 home renovation. The last time I had work done in my house, the contractor charged 5% GST. Under the new HST the 8% tax increase on a $20,000 (which doesn't go far) home renovation would amount to $1600 - more than offsetting the fiscal stimulus announced in the federal budget.

I'm frustrated - one level of government gives the other takes away. For the record - the Conservative government gave and the Liberal government took away.


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