Chalk this up to a “shoulda been” election promise.
Yesterday, Ontario NDP leader Howard Hampton called on Premier Dalton McGuinty to raise PST by the single point that the federal government cut in GST this week. The NDP request would see Queen’s Park turn over the $2 billion in new funds to cash-starved municipalities. Though the PST and GST are not identical in terms of what they tax (PST doesn’t cover services), one has to wonder why Hampton and the NDP didn’t chuck this policy into their election platform.
Although the NDP promise on the municipal front was better than the Grits and Tories by a long shot, adding in a line about taking up the tax room created by a potential (and likely) GST cut would have been the recipe to fill the entire shortfall municipalities face across the province and then some. Not only that, the NDP would have also stood out in a very distinct way because when it comes to who is promising to upload what, it all sounds overwhelming to the average voter. Plus, they would have a mandate to press the issue in the legislature.
The Liberals should have also put this issue on the table during the election. Knowing that a GST cut was likely coming, McGuinty should have been looking to include sales tax harmonization in his mandate (let’s face it, he wasn’t going to risk being the only provincial leader to increase PST after the GST cut.) Instead, federal Minister of Finance Jim Flaherty has pooh-poohed the Ontario Liberals’ preferred GST redirection strategy by moving on the tax cut without working out a multilateral deal on harmonization. If the Liberals had had the forethought to seek a mandate on harmonization they could at least push back at Ottawa with some authority but without that this looks like another wasted opportunity to free municipalities from their fiscal straitjacket.
For his part, the ridingless John Tory seems to have conveniently swallowed his voice on this issue.
While it’s good to see Hampton and McGuinty come out on this issue now, the weak position we’re in now is another demonstration of shortsightedness on the part of Ontario politicians on all sides.
Photos edited together. Originals courtesy (in order) OKSU.com, Wilfred Laurier Student Publications and firefleitz.
2 comments
If PST and GST were harmonised the service sector would go crazy. The increased applicability and reduced cost of collection would probably mean a larger net for Ontario before a rate increase, even factoring in that businesses could then reclaim the provincial portion of the HST which they can’t at present with PST.
I read the letter from the restaurant owners in the Star saying the sub-$4 exemption from PST on “meals” would go away. Well, if the extra PST from services went into improving Ontario Works, ending clawback of federal benefits and raising the starting point of the OHIP Tax and provincial income tax maybe people could afford to eat for more than what costs $4 at McDonalds and Tim Hortons.
As mentioned in the post and in commnents on this and other forums there is a difference in the application of the GST and the PST. (The PST doesn’t apply to services and certain products are exempt.)
It is time for some creativity from the province. Let’s introduce a new municipal GST of 1%. then harmonize this with the federal GST.
The province could keep its existing 8% PST for the while. (They could decide to harmonize in the future and possible lower the overall rate since it would be applied to a broader base.)