At this point, the taxpayer experience is a bit like that of a seagull being thrown fries in the McDonald’s parking lot. The Liberals behind the wheel get to throw delicious chunks of potato out the window, delight at the sound of the masses squawking in thanks and drive off when the urge to be generous has been satisfied. They’re out of money for more combo meals but it doesn’t matter — they can just put it on the credit card, anyway.
Today, they want us to squawk about the GST “holiday” that Canadians will supposedly embark upon on Dec. 14 for two months, plus the $250 cheque that will be going out to sub-$150,000 income earners.
Essentially, it’s a bribe. It won’t go far and it won’t amount to much, but boy will it be a pain to administer.
GST is suspended only for certain kinds of items: restaurant meals, prepared foods, packaged snacks, low-alcohol-content alcohol (such as beer), children’s clothing, toys, books and Christmas trees (nevermind that most people have bought their trees by mid-December). So, in less than a month, businesses large and small will have to figure out how to code this patchwork of tax exemptions into their systems, only for them to undo these changes by February. Oh, and it’s going to cost the government $1.6 billion in lost revenue.
And for what? To achieve savings akin to the perks of a Costco membership: decent, but not life-changing, especially in the short-term. It’s estimated that $2,000 of spending in the GST-suspended categories over two months will amount to about $100 in savings. In any province where HST is in the picture, it’ll be even more because the feds are proposing to exempt the entire HST (whether they plan to reimburse provinces for the lost revenue, the feds haven’t said).
The other handful of crumbs, the $250 “Working Canadians Rebate,” will go out to about 18.7 million Canadians, which equals out to a cost of $4.7 billion dollars. For very little gain, I add. It might win a few votes — if people haven’t forgotten about this stocking stuffer by the next election — but for most, a couple hundred bucks is gas money. It’s not going to make a difference in the lives of those earning, say, $120,000, and even for those in need, that one-time cheque doesn’t go a long way. And remember, this is on top of the carbon tax rebate, which evidently hasn’t won over enough Liberal support for the party to ease up on the cash handouts.
Meanwhile, do you recall the deficit? Atrocious levels of federal spending have delivered us an annual interest bill of $54 billion. But sure, keep adding to that debt.
The same could be said for the Conservatives in 2021, when they proposed a similar GST “holiday.” However, because it was the Conservatives doing the dumb thing and not the Liberals, one could expect a little more blunt criticism of the move. Back then, the CBC was fast to find sources who could label the move a “gimmick.” Critics aren’t so easily found on the broadcaster’s site this time around.
Actual economists, at least, aren’t jazzed about the Liberal proposal. As University of Calgary economist Trevor Tombe wrote on X Thursday, “The GST is a relatively efficient way to raise revenue. The government could have instead used the same fiscal room to adopt pro-growth tax changes that boost growth, productivity, incomes, etc.”
A head-shake was also given by University of Toronto’s Rob Gillezeau: “A seasonal GST holiday is actually a dramatically worse idea than the NDP’s proposal to pull the GST off of items like diapers & children’s clothing. We’ve got plenty of high quality evidence showing this kind of measure accomplishes very little while draining fiscal resources.”
It’s all very silly. If the government didn’t need the money in the first place, it could cut income taxes, leave the cash where it came from and save small businesses the costs of complying with the temporary tax rules. But efficiency wasn’t the point. The purpose of the tax suspension plus rebate cheque is to dangle a seasonally themed shiny announcement over people as they worry about finances during a time when the purchase of unnecessary products is expected. It’s about emotions, not financial sense.
It also might be about politics: the prospect of an allowance might stoke anger at Conservatives for their Parliamentary filibuster. For weeks, the Conservatives have been trying to make the government hand over documents pertaining to the Liberals’ now-imploded “green slush fund,” but the government won’t play ball which has ground proceedings to a halt. Most Canadians probably don’t know or care about the impasse, but it’s been a thorn in the side of Liberals who haven’t been able to accomplish anything in that time.
With Christmas bribes in need of legislative approval, the Liberals might be able to frame Conservatives as the selfish Scrooge-like figure. Or at least, they’re going to try. But considering how they’re sprinkling tax relief with one hand and firehosing inflationary policies and new charges with the other, it’s probably not going to work.
National Post