Paying more, getting less

Months after pushing the change through Queen's Park in the absence of full information, the Ontario government has finally bothered to release its own numbers on the effect of the HST. And even in a study which itself looks to make some problematic assumptions to paper over the harmful effects of harmonization, the results plainly don't match the McGuinty government's spin. Here's Erin's summary:

When combined with $2.4 billion of personal income tax cuts and credits, $1.9 billion of pass-through still does not offset $4.7 billion of additional sales-tax costs to Ontario consumers (page 6). Even as the provincial government gives up billions of dollars of revenue, households will pay more tax.
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Perhaps there is a case to be made that Ontario residents should pay more tax and lose some public services in order to enhance the competitiveness of Ontario-based businesses. The Statistics Canada and Finance studies have forced the provincial government to start making that case, rather than simply claiming its tax changes will deliver financial benefits for everyone.

The real debate is about using public money, whether taken from consumers (the HST) or from general revenues (corporate tax cuts), to support business. We should ask whether across-the-board tax cuts on business inputs and profits are the best way to promote investment and employment in Ontario. As I have suggested elsewhere, more targeted measures could prompt more investment and employment at less cost to consumers and the provincial treasury.