Tuesday, November 24, 2009

On zombie numbers

Apparently Andrew Steele was right about one thing, as Jack Mintz' inflated and misleading job number has been parroted nonstop by HST backers from the moment it was first released (even by those who should know better). So let's quickly recap the main problems with Mintz' report, as well as pointing out how it's completely incompatible with one of the main pro-HST talking points.

The much-bandied-about "591,000 jobs" number:
- incorporates other tax changes along with the HST. On this ground alone, anybody saying "the HST will create 591,000 jobs" can be dismissed as either not knowing what they're talking about or lying through their teeth;
- doesn't take into account negative job impacts from the increased taxes on individuals;
- relies on assumptions about marginal tax rates which completely ignore the reality that reductions in one jurisdiction such as Ontario may simply result in a corporation paying more tax elsewhere;
- ignores existing policies such as research tax incentives and municipal tax benefits which affect the amount of investment made by the private sector; and
- ignores the fact that a focus on capital investment may actually reduce employment in some cases (by encouraging the relative use of capital as opposed to labour).

But let's add another major problem to the mix. Mintz' numbers assume that all of the benefit of tax harmonization will flow directly to businesses, counting every dollar of PST elimination as applying to a reduction in corporate marginal effective tax rates. That would appear to be completely incompatible with the oft-cited claim that businesses will in fact pass along any amount of their PST savings to consumers, as money which doesn't stay in corporate hands surely wouldn't figure to alter investment decisions.

In sum, there's no reason to let pro-HST voices double-count the supposed benefits of harmonization. If they want to claim that any corporate tax reductions will be passed along to consumers, then that has to be taken into account in any wishcasting as to how much money corporations will have at their disposal to invest; or conversely, anybody trumpeting Mintz' jobs number can be assumed to believe that not a red cent of any tax savings will actually be passed along to consumers. And the fact that the pro-HST side has thus far been based on so many utterly inconsistent claims would tend to signal that they'll be reluctant to face up to the realities once that choice is put in front of them.

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