Sunday, April 19, 2009

Some PC leadership candidates have picked the wrong time to grow a pair

HstIt's no secret that the Ontario PCs have been largely useless since they were ousted from government in 2003. Despite the disaster that has been Dalton McGuinty as Premier of Ontario, the PCs have feebly disagreed with the most egregious of the Liberal government's policies (at best) and endorsed them (at worst) for five and a half years. So...

... what happens when McGuinty, after 5½ long years of unopposed incompetence, finally gets one right—and not just right, but spectacularly, gloriously right, right on a matter of huge importance to the province’s future, right in substance, right in timing, and right in a way that conservatives, if not Conservatives, ought to be cheering to the skies? Ah, that’s the point where the Conservatives decide to stand and fight.

That's what Andrew Coyne has to say, and I've got to agree with him, about the McGuinty government's decision to harmonize Ontario's sales tax and the Ontario PC's vehement opposition to the first good policy to come from the Premier.

So what do leadership candidates think of harmonization?

Disappointingly, Tim Hudak, the perceived frontrunner, has come out very strongly against this policy, even giving it a cheeky name: the "DST" - Dalton Sales Tax. You see what he did there? (Note- this is actually a policy position on Hudak's part that's displayed on his website and easy for PC members to find. Good for him for at least getting involved, even if he's picked the wrong side.)

Christine Elliott has also come out against the HST . This is confusing to some since she is Jim Flaherty's wife. Watching her try to distance herself from his position on this issue has been amusing. To me, anyway.

Frank Klees hasn't said much, so I can't figure out where he stands. I think he's against the HST without exemptions. I think. This Frank Klees supporter seems to think that this particular instance of Frank Klees not saying anything is illuminating - maybe readers will get more out of it than I did.

Randy Hiller doesn't appear to have taken a position on harmonization, but hasn't slammed it. Instead he has come out against bribing Ontarians with their own money and in favour of shaving down the provincial share of the sales tax.

When I first blogged about the Ontario budget I didn't feel strongly about the harmonization of the sales tax, though I acknowledged that economists seem to be in favour of it. Since then I've been convinced, and Coyne does a great job of explaining why you ought to be, too:

It isn’t as if there’s much division among expert opinion on this. Economists are as unanimous as they can be, not only on the merits of consumption taxes over income tax, but of value-added taxes like the GST over retail sales taxes. Ontario’s current sales tax, because it applies to many (though not all) of the inputs that businesses use, cascades through the various stages of production. Some of this eventually falls upon the consumer, haphazardly. But much of it amounts to a tax on investment: you know, the stuff that makes economies grow.

By eliminating this tax on inputs, via the GST’s familiar system of input credits, the [C.D.] Howe analysts estimate that harmonization alone would cut nearly 11 points off Ontario’s effective tax rate on new investment by 2012. It’s the single most positive thing the province could do to improve its competitive position. But what is that, compared to the delights of shouting “tax grab”?

Read the rest of Coyne's article here. I hope that we can count on Ontario's PC membership to give their leadership candidates a figurative slap upside the head on this one.

Cross-posted to The Shotgun.

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