Wednesday, September 23, 2009

The HST: The Great Divider

Political tensions over HST have intriguing implications

One benefit Canada's recently-averted election holds for Liberal leader Michael Ignatieff is the freedom to flip-flop on his own rhetoric without any serious consequences.

Take, for example, a recent Ignatieff flip-flop on the issue of the Harmonized Sales Tax.

For those not in the know, a Harmonized Sales Tax is a fusion of Provincial Sales Taxes (PST) the federal government's Goods and Services Tax (GST). The argument being raised in favour of these taxes is that they're good for business, making it easier and less costly for business to remit these taxes to the government.

The argument against these taxes -- and a very persuasive argument at that -- is that these taxes are bad for consumers, and would apply sales taxes to transactions to which they hadn't previously applied, such as grocery and housing bills.

Needless to say, the matter has been very controversial in provinces that are planning to implement the HST -- chiefly British Columbia and Ontario. There's been an intriguing federal-provincial political dynamic at play in the affair, in which both major provincial and federal parties seem to be at odds with one another over the issue.

The Stephen Harper government in Ottawa has been instrumental in decisions to implement the HST, offering billions of dollars in short-term help to provinces that decide to implement the tax.

Ignatieff has publicly derided the HST, referring to it as the "Harper Sales Tax".

Finance Minister Jim Flaherty admits that the HST would be bad for Canadians in the short term, but it insists it would be good for the country in the long run.

"It's good longterm economic policy for the people of Canada," Flaherty insisted, noting that this is a provincial matter. "The decision to harmonize is always up to the individual province whether they choose to do it or not."

When pressed on whether or not he was "picking a fight" with Ontario Premier Dalton McGuinty (or BC Premier Gordon Campbell for that matter, also a Liberal), Ignatieff seemed to shift his position away from using it to score cheap political points and closer to the position being taken by the government.

"Our position from the beginning has been that this is a matter between the Harper government and the provincial governments concerned. Period," Ignatieff insisted. "I'm the leader of the Opposition. I've got no position to clarify. It's between those two governments. And when I become Prime Minister I'll have other decisions to take."

Ignatieff has apparently moved to reassure McGuinty that his party's federal cousins wouldn't kill the HST deal just to maintain their own rhetoric.

"I assured him that the Liberal Party of Canada is a party of government," Ignatieff said. "We don't rip up agreements that have been duly negotiated by previous administrations, and I made that clear to him and I think we're on the same page on this issue."

That's an obvious shot across Harper's bow in regards to various issues such as the Kelowna Accord and the national daycare program. (Unfortuantely for Ignatieff, the Canadian public at least seems to be largely comfortable with these particular decisions.)

However, Ignatieff and McGuinty aren't the only ones to be at odds over the HST.

Ontario Progressive Conservative leader Tim Hudak has been vocal in his opposition to the HST, paying little mind to the governing federal party's effective sponsorship of the tax. Although Hudak has a different name for it than Ignatieff's -- he calls it the Dalton Sales Tax.

"[Toronto Dominion] Economics shows the 'Dalton Sales Tax' is just that - a permanent tax grab that will result in higher prices on the things we buy with no immediate benefit to consumers despite the premier's promises," Hudak publicly fumed. "[Premier] Dalton McGuinty has taken the idea of reducing red tape for business and turned it into a massive tax grab on Ontario's families in the midst of a recession."

Any direct tensions between Hudak and Stephen Harper on the matter must certainly be minimal -- Harper has had very little to say about the HST, and simply allowed his Finance Minister to carry that particular football.

But Hudak's deputy leader, Christine Elliott, is married to Jim Flaherty. Whatever political tensions subsist between the two over the matter are likely being contested -- perhaps silently -- over the dinner table.

"As Christine said to me on the weekend ... we'll remain married of course, and the children are very happy with that, but we're non-harmonized," Flaherty recently joked.

So if the Flaherty-Elliott marriage isn't at risk over the issue, the Liberal party faces a much more serious dilemma.

One way or another the HST is an issue that may harm the Liberal party significantly. Liberal MPs are worried that they'll be the ones to suffer the political consequences for the HST should they have to face a federal election before the Campbell Liberals face a provincial vote.

That particular dilemma for the Liberals could be as immediate as Jack Layton and Gilles Duceppe decide it should be.

However this federal-provincial political dynamic plays out -- with the actions of provincial parties harming the prospects of federal parties, and vice versa -- the HST could be a largely-peripheral issue that could interest Canadian political scholars for years.

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