Les Bonnes Choses

I was reading through London's local rag yesterday when I came across one of several stories about the HST, which came into effect in Ontario on July 1. Mostly I just wanted to comment on the math. First off, I'll go on the record as being ambivalent, or mildly supportive of the tax, which, unlike the provincial sales tax it obsoletes, is a value-added-tax. First off, it's a consumption tax -- a tax on buying crap. And frankly, I think we could stand to buy less crap. What that also means is that businesses can recover tax on materials, which they could not do with the PST. If I built furniture prior to July 1 with $50 of lumber, I'd pay 8%, or $4 at the lumber store. Unless I want to pay for the tax for you, I'd then have to price the end product as though the materials were worth $54, with the additional $4 being taxed yet again when I sold you the furniture. The effective tax rate on the materials is over 16% when the materials change hands just once, meaning that the $50 of lumber costs $58.32, even if my labour was free. With the HST, I can claim the tax I paid on the lumber, and, in theory, not tack on that extra $4 tax that I had to pay. Where it gets dodgy is that, well, people are jerks, and if all my customers are used to paying $230.52 for a chair ($50 materials + $4 PST + $150 labour + $26.52 GST/PST) why drop the price when I can just leave it as-is, or increase it and blame the greedy government and their blasted HST?

Oh, and the article to which I linked? As you can see, I had my calculator handy because knowing what you're talking about in this case involves some basic math skills. Unfortunately, the LFP, their affiliates, and rednecks at gas stations need to revisit 5th grade:

He was admittedly in no hurry to fill up at 104.4 cents per litre. A day earlier, he could have done so for about $75, but thanks to the HST, he estimated a tank of gas would easily cost him upwards of $100.

For a tank of gas to cost $75 one day, and "upwards of $100" the next, the price of gas would have had to increase by 33% (75 * 1.33 = 100) overnight. The HST in Ontario is 13%. Even if gasoline was not subject to any tax on June 30 (it was subject to 5% GST), that still leaves Mr. Mouthpiece with 20% of his bitching to explain. So yeah, McGuinty is a bit of a tool. But if you're finding yourself paying more for everything, you're barking up the wrong tree.

Also for the record, I do think the coverage on the taxable items has a few holes: I don't think necessities should be taxed, and the arbitrary $400K cutoff for "luxury" homes is total crap because that kind of cash will go pretty far in St. Thomas, where you get 25% more life (and vagrants), but get you a shack in some parts of Toronto.