Many looking at the HST – trumpeted in last week’s Ontario budget – call it a tax grab, but among fans of smart public policy it’s considered a dumb tax.[rssbreak]
If modern taxes are expected to shape the marketplace to support socially constructive behaviour, the new HST is a flop.
I’m not going to enter into the debate over whether it’s largely a gift to business, or whether tax rebates will properly offset increased consumer costs, or whether it will hurt or help small businesses and social agencies.
What’s really at stake here is that the province has put itself in lockstep with a federal tax – and failed to use its taxing power to honour any kind of health or green mandate. By tying our tax fate to a tax the feds control, the Liberals have walked away from the possibility of using the levy for a broader social purpose than revenue generation.
To get the gist of the health and ecological stupidity of the HST – a value-added tax blending Ontario’s 8 per cent PST with the federal 5 per cent GST – you have only to look at the food industry. The federal government, with which most provinces will soon harmonize, already collects at least $2 billion a year in GST levied on groceries, not to mention the billions more collected from restaurants and takeouts.
To get a sense of the impact, I go shopping at a downtown supermarket to survey which foods incur the GST, the tax with which the provinces will soon harmonize. In truth, I can’t find any logic, consistency or public benefit in the way the tax is either levied or not levied.
My first stop is the fresh produce section, for the obvious reason that this is front and centre in all supermarkets, presumably because its placement gives the impression that we’re entering a bright, colourful and healthy place. The junk stuff is offstage. The absence of food taxes on most fresh produce gives another false impression – that taxes have been forgiven because the things sold here are basic necessities of life and health.
But harmony does not reign, even in the produce section. I walk the aisles with Brian Cook, a healthy-food expert, who barks out prices and taxes while I carry a just-purchased fresh fruit salad.
But cut fruit packaged by a supermarket is hit by the GST, and soon by the HST if it’s over $4, increasing the cost of a low-cal body-friendly snack, something smart tax policy should be trying to avoid. But even if you stick to a small portion, there’s no financial incentive to choose this healthy snack over, for example, an individual piece of pizza, which, like any heat-and-eat item under $4, will be untaxed.
White bread, which has been stripped of most natural nutrients found in grains, will be tax-free, as it is now. That puts producers of whole-grain breads, which are more expensive because real ingredients are more challenging to mass-produce and preserve, at a competitive price disadvantage. The healthier, fibre-rich edible gets no tax benefit.
Nor is there any sales tax punishment for overpackaging. Besides the disposal problem, packaging is one of the most resource- and pollutionintensive aspects of the food system.
The same tax indifference to sugar, fibre, nutrient content and packaging applies to the gigantic cereal aisle, which might more truthfully be labelled the children’s morning dessert aisle. There’s no tax benefit for unprocessed cereal grains like oatmeal, which are usually in simple packages. Consumers of sugar-based cereals like Froot Loops or Chocolate Lucky Charms eat forbidden treats with forgiven taxes.
The same goes for peanut butter. No break for people who buy pure peanut butter instead of smashed peanuts adulterated with low-cost sweet nothings.
The Canadian Medical Association and the Centre for Science in the Public Interest lobby for tax policies that favour food manufacturers and shoppers who opt for healthful foods. They argue that such taxes, as in the case of tobacco, can influence people to make wise choices that could save the $6 billion-plus a year spent in the treatment of chronic diet-related diseases. By harmonizing taxes on a wholesale basis, the province has surrendered this policy tool.
Interestingly, there’s been almost no public debate on this aspect of the HST, from conservative tax-haters or the left-tilting Canadian Centre for Policy Alternatives, which writes favourably on the HST.
The HST debate was the door-opener to tell the feds we have broader social, environmental and public health objectives than just raising tax revenues. That door has been slammed shut and bolted.
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