The Foolishness of Tax Harmonization

Ontario plans to unveil in it's budget today a proposed plan to harmonize the PST and GST. I've talked about this issue before when Ontario premier Dalton McGuinty originally proposed the ideal. At first I just focused on those shopping out of province but the fact that many staple items would now be subject to sales tax did not occur to me at first. I make the food, I don't buy it. I guess I'd better start doing the grocery shopping to. The harmonized tax is now threatening to raise the price of staple items over $4. This would include things such as feminine products, housing, diapers, and many food products that were not subject to the provincial sales tax before. The prices of these basic items would essentially jump 8% overnight. To counter this, the government is proposing a $1000 grant to all families making under $160,000 combined income. Then why raise the tax if you're just going to givethe money back? I seriously doubt that most people are going to see this money.

It is incredably foolish for any government to be raising taxes during a recession, especially sales taxes. Large businesses argue that harmonizing the tax will save them money but ultimately it harms consumers in the long run. Lower income earners will now suddenly be forking out more and will likely get hurt the most. I can't help but feel that's a little bit ironic when Liberal governments repeatedly say they are out to help these people. A tax increase at this time makes little economic sense as it will discourage people from purchasing certain things, particularly housing which will now be taxed. For example, the price of an average house would increase $28,000, putting it beyond the reach of people who may have been able to afford it before. You cannot seriously expect people who are tightening their belts during a recession will keep buying things that suddenly cost a significant amount more.

Is anybody really surprised by how dumb this is? This is the same government that levied the largest tax increase in Ontario history when it slapped a $900 "Health Care Premium" on residents in 2004; after promising in writing not to raise taxes during the election. Spending has gone up to $18 billion per year and yet Ontarians have seen vary little improvement in services. Most of it goes to lucrative pay hikes for teachers and civil servants. Back in 2005, it was agreed that Ontarians are rapidly reaching their taxation limits. Cities are asking for more, the province is asking for more, and we have no more money to give them. Ontarians need an election sooner than later. Hopefully the Conservatives will elect someone with half a brain as their leader this time. Going up against the worst premier in history and his long record of destruction sould be a cake walk.