We Need a Goods and Services Tax - Like Canada

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Fri, Dec 28, 2012, 12:33 pm  //  John Lesow

"I don't even know what street Canada's on...."

--- Al Capone, 1929

Mr. Capone did not let geographical challenges impede his success in business. An ardent capitalist, he gave the public what they wanted. He also qualified as a liberal redistributionist long before FDR. Capone set up soup kitchens for the poor during the Great Depression. What a guy.

And he certainly had no hesitation about admitting his lack of knowledge about Canada. Even today, a lot of Americans don't know much about Canada. And could care less.

As a Canadian citizen and taxpayer, I was interested in a reference to Canada on Jean Melious' blog, Get Whatcom Planning. Jean has recently posted several articles on "Agenda 21. "

Apparently, references to Canada and the United Nations are made in Glenn Beck's latest book of the same title.

I certainly don't want my tax dollars funnelled into support of some silly new world order, so I checked out Jean's links.

Fortunately, the commentary about Canada's purported endorsement of One World Government centered around some stale statements by Jean Chretien, our former Prime Minister (1993-2003). In politics, 9 years is an eternity. I doubt if Chretien's vague support of the UN/Agenda 21 program carries much weight in Canada today. There are more important matters to attend to.

As we teeter towards the "fiscal cliff" in the U.S. we would do well to consider some tax policies of our neighbor to the north. Specifically, the Goods and Services Tax, now applied to just about everything one purchases in Canada, with the exception of groceries and medical services.

Introduced by the Conservatives in 1991, supporters of the GST claimed it was necessary to maintain the high level of government services to which Canadians have become accustomed.

As with most new taxes, the GST was reviled by most. Particularly because most Canadian provinces, with the exception of Alberta, already had their own sales tax .

In Canada, the average provincial sales tax is about 6% (like Washington). Still, adding an additional 7% federal tax on top of an existing provincial tax was a pretty good whack. Particularly on big ticket items like cars, boats, homes and RVs.

Instituting the Goods and Services Tax was a tough political sell. Dubbed by opponents as the "Gouge and Screw" Tax, the defeat of Brian Mulroney's Conservative party in the 1993 election was largely attributed to public outrage over the GST.

Although the UN loving, Agenda 21-promoting Jean Chretien campaigned against the GST in the 1993 election, he kept the tax in place after the Liberals won. Who expects politicians to keep their promises?

Besides, the GST provided a reliable revenue stream for all those great government programs that Canadians like to crow about.

Chretien's successor, Liberal Paul Martin, vowed to reduce the GST but wisely retained it during the stormy economic period in the late 90's, when the value of the Canadian dollar slumped to 62 cents U.S. and Canada was, proportionately, nearly as debt ridden as the U.S. is now.

Due to unsupportable unemployment insurance benefits, out of control transfer payments for education and health and a host of other extravagances the country could no longer afford, Canada was facing it's own "fiscal cliff."

Or, as Liberal Prime Minister Paul Martin put it, "Canada hadn't reached debt Armageddon, but we could see it from there."

Fast forward to 2012.

The Canadian dollar is over par with the U.S. buck and will likely stay that way for years.

Due to prudent regulation, Canada's banks avoided the fiscal meltdown experienced by most American institutions in 2008. Fluctuations in the Canadian real estate market have been minimal. Even in these tough economic times, it is still difficult to find a shotgun shack in the Vancouver area for less than half a million. Canadians are flocking to Whatcom County and scooping up our distressed real estate at fire sale prices. A mixed blessing, for sure.

Internationally, Canada was recently ranked 9th on the list of the Top 10 Countries in the World. The U.S. came in 16th.

The reliable revenue stream provided by the GST can't claim all the credit for Canada's economic good fortune, but it has certainly helped. As well as the fact that Steven Harper's Conservative government has held sway for 8 years and counting.

As we lurch toward a possible recession in 2013, it would be a good idea if Democrats and Republicans could agree to institute a national sales tax, similar to Canada's GST.

Stop arguing about the definition of "rich." Whether you pull down $250,000 or a million a year, raising the rate to 39% on these folks is not going to pull the United States out of the fiscal mess created by current and past administrations. Even Harry Reid would (or should) admit that.

But pols have been surprisingly silent about introducing a national sales tax similar to Canada's GST. Even if you are a class warrior and hate the rich, it could be argued that a Goods and Services Tax is, in fact, an indirect tax on the rich. Most of the rich people I know like to buy expensive stuff.

Moreover, consumption taxes give all citizens "skin in the game" as our president likes to say. More than half of Americans pay no income tax at all. Compared to most industrialized countries, we are undertaxed.

Given the results of the last presidential election, plus previous judicial endorsement, it's a pretty good bet that the Affordable Care Act is here to stay. Why not earmark the revenues from a national sales tax to pay for it?

Prices and taxes are higher in Canada, but with a steady stream of funding from the GST, income taxes have been held in check over the past few years and recently the Harper government was able to lower the GST rate by two percentage points to 5%

Canada's universal health care system remains relatively intact, we still have a functioning government pension program and a stable banking system.

Canadians can thank the Liberal and Conservative governments for putting aside their ideological arguments 20 years ago and supporting the GST.

The Democrats and the GOP could take an economic history lesson from Canada as we approach the "fiscal cliff."

hotpickle  //  Sat, Dec 29, 2012, 12:38 pm


Rob Stratton  //  Sun, Jan 06, 2013, 9:37 am

Heavens no we don’t need to give the government more money, they can’t even manage what they take now.

I am fairly certain Capone, was very well aware of where Canada was since much of his product outlawed by progressive government, was obtained from there.

And labeling someone who voluntarily gives to charity or commits charitable acts as a “redistributionist” is just not correct. He didn’t advocate taking other peoples money by force and redistributing it. Let’s not forget that his actions were also a Machiavellian one, in gaining favor and support for himself against government thugs.

If the Canadian tax is so great why are Canadians flocking down here to buy goods? Don’t they know they are being taxed for their own good?

Here in the United States where individuals are not subjects of a Monarchy, we strive for individual responsibility and should not be asking for services from government.

The major reason Canadian dollar is on par with U.S. is not because it is doing good but that ours is doing that poor. Thanks to the governments continual devaluation of our currency.

I don’t like more government intrusion with such unconstitutional bills as the health care act, so why would I want to endorse more taxes to pay for it?

We should take a “history lesson” from Canada? Please tell me you are joking? One of the only reasons Canada, has been able to sustain it’s socialist programs, is it’s large sparsely occupied land mass full of rich resources and the amount of resources the U.S. and other countries buy from them.

Canada has created a bubble economy that will pop fairly soon. They are repeating many of the same mistakes U.S. government thrust upon it’s people by ignoring economic basics and free market rules.

 

 


John Lesow  //  Sun, Jan 06, 2013, 9:51 pm

Thanks, Rob

The first few paragraphs of post were tongue in cheek—as were yours; I think

Canadians are flocking to Whatcom County to liberate our groceries from milk, cheese and butter with their par dollars and avaricious appetites. 

Particularly in Point Roberts.  If you are a grocer, what to do?

Do you put a limit of 5 gallons of milk per customer?  No.  The last thing a grocer wants is an inventory of milk that is past it’s sell date.  Besides, you can’t tell a Canadian shopper from an American.  I know—I’m both and you could never catch the distinction. 

Still, the U.S. shopping habits of the Canadian consumer are causing mild to serious discomfort with American customers that find the shelves occasionally bare of dairy products.

Fortunately, we still have lots of cheap gas for Canadian motorists.  In fact, chances are the petroleum came from Canada in the first place;  oil,  oil shale, etc.  And don’t forget that clean-burning natural gas that Canada sends down to the Pacific Northwest to keep our homes warm in winter.

Canadians did not suffer from the economic downturn to the extent the Americans did.  Particularly in real estate.  You can’t blame Canadians for snatching up distressed real estate in Whatcom County.  And Americans are just as willing to sell their birthright (coal, intellectual property, timber, land) as Canadians are.

Nearly every industrialized country has some form of consumption tax.  The VAT in England is much more onerous than Canada’s GST.  An 11-12% tax on nearly everything we consume is not going to throw the U.S. economy into a tizzy.  Particularly if you can cut back on the Alternative Minimum Tax and/or the payroll tax.
Mortgage interest deductibility?  Canada got rid of that benefit long ago.  However, I think it would be a big mistake to close that “loophole” in the U.S. tax code, as some have suggested.  Our housing market is still too soft and the recovery too fragile to deprive homeowners, and potential homeowners, of that tax break.

Besides, half of Canadians own their homes free and clear.  So do a lot of Americans, not just the millionaires. 

I think the “unconstitutional” Affordable Care Act is, like it or not, here to stay.  However, one way to prevent it from bankrupting the U.S. (which it most certainly will) is to finance it with the nearly guaranteed revenue stream provided by a consumption tax, or GST.  Think of it.  Every time you, as a patriotic consumer, buy a candy bar or a fancy car you will be contributing to the health of those 330 million citizens among us.  Even non-citizens. 

Bubble economy?  I doubt it.  As you correctly point out, Canada is a vast country with resources the world wants and a population of just 30 million.  A whole country with less population than California.  Which has an 8% sales tax, last time I checked.

Plus, Canada has a good, responsible and boring Conservative government in power. Something I think we both appreciate.

Our Quiet Neighbor to the North should do just fine in the years ahead.

 


Dick Conoboy  //  Wed, Jan 09, 2013, 8:08 am

GST is just a fancy name for another regressive tax.  What we should be looking for in Washington State is a progressive income tax.


Rob Stratton  //  Tue, Jan 22, 2013, 6:05 am

I have no problem with Canadians flocking here to buy our goods, I think we should have free world wide markets. I drink lot’s of milk and never had a problem purchasing milk or cheese.

If I am a grocer and my product is in high demand I raise prices. Simple economics. I used to buy milk at Costco I now buy at Fred Meyers.

If you are in Point Roberts and run out of goods you order more goods the next time, you adjust to the market.

Yep love all that nice fossil fuel, the reasons Canada comes down here is to avoid paying their ridiculous taxes on it. You would think the country that produces it would have it cheaper.

The reason Canada didn’t suffer like we did was they didn’t create the same government bubble with the same moral hazards our government had, yet now they seem to be following course. The other reason is their population is 1/10th ours with a lot larger country.

I don’t care what other socialistic countries do, if your friends jumped off a bridge would you? I say close all the loopholes, but lower the whole tax burden, people know better what to do with their money than an ever increasing government bureaucracy.

I know you think it is here to stay and unfortunately you may be right because the government will continue to steal funds from those who don’t want it to pay for it. It is humorous to think that it is “patriotic” to pay taxes. The colonies rebelled and formed this union against minor taxes. Thomas Jefferson said the best form of patriotism is dissent. It is also humorous to think that paying these taxes contributes to the health of the other 330 million citizens among us. I can’t change someone’s obesity, smoking, or damaging lifestyle, but these taxes help create a moral hazard for more people not to take care of themselves.

Yes study economics, Canada is starting to repeat some of the same mistakes U.S. has made, hopefully their resources will help pull them out. Like I pointed out their dollar isn’t doing better ours is doing that much poorer. And stealing money more money from our citizenry will not change that but will have the opposite effect.

I say we do all we can to nullify government acts and taxes we don’t agree with.

 


John Lesow  //  Thu, Jan 31, 2013, 11:12 am

Hi Rob,

Sorry I missed your last post;  I have been out of the country and otherwise occupied. A couple of things…...

First of all, I am likely a lot more conservative than you and I take exception that my adopted country is “socialistic”.  Canada is not perfect, but you would find it difficult to argue that a government that has provided fiscal responsibility, balanced budgets, reasonable public services an an overall higher standard of living is a socialist backwater. 

Sorry, but consumption taxes are here to stay, both in the United States and Canada.  Since I am not a conspicuous consumer, Washington State sales taxes do not take an inordinate bite out of my disposable income.  I do favor that everyone pay taxes, not just the “rich”.  We are all stakeholders in this democracy.  As I previously pointed out, a GST or Value Added Tax should be coupled with tax reduction in other areas, specifically income taxes and property taxes.

Personally, I have jumped off a bridge before and suffered no ill effects.  What my friends do is their business, as long as it does not bother me.

Sometimes it helps to personify one’s own situation when rebutting armchair economic theory.  My example of a run on Point Roberts gasoline and dairy products should have been accompanied by a discussion of the loss of personal freedom—in this case travel across international borders—that has been occasioned by the long lineups at border crossings, particular Point Roberts. 

It is now routine to have to wait 30 minutes to an hour just to get in and out of Point Roberts.  The same is true at the Peace Arch and Douglas crossings.  In fact, the congestion was the subject of a headline in yesterday’s Province newspaper.  As a working person, I place a lot of value on my time, and not being able to access my home in Point Roberts and my workplace in Canada due to long border lineups has become more than inconvenient.  Just imagine yourself having to wait for 30 minutes to get into, or out of, your own driveway.

I suggest that a consumption tax for health care would provide the incentive you suggest.  If we all paid for the consequences of bad health decisions, we may be more likely to exercise responsible choices.  Right now, most U.S. citizens are all for more comprehensive health care—as long as someone else picks up the tab.


Rob Stratton  //  Sun, Feb 03, 2013, 5:19 pm

No worries, I am a working man and don’t have much time for rebuttals myself.

The reality of the matter is it is socialistic, and so is U.S. united states is a very fascist nation. They didn’t do it quickly like the Marxist or Socialist of Germany, Russia, and Italy, China, etc. We had this inconvenient thing called the constitution that has slowed the tide of socialism even though it has taken major leaps, when the government doesn’t let a “crisis” go to waste. Lincoln, Theodore Roosevelt, Wilson, Franklin Roosevelt, Bush, Obama. But mostly they have used the incremental approach. Canada has taken a few fiscally responsible moves, but they are far from from fiscally responsible, they wouldn’t need the massive amounts of taxes they have if that was remotely true, and I never said they were “backwater”. Their current housing bubble and government programs will eventually collapse, Like Margaret thatcher said the problem with socialism is you run out of other peoples money.

I would say a consumption tax is the least of the evils, but government won’t stop there they never have. An income tax is immoral and contrary to SCOTUS rulings.

Your answer is to pay for the services, my answer is to get rid of these “services”. Government should be limited to protecting rights, property and arbitrating disputes, especially since this is what our constitution basically limits to them. I find most “conservatives” have just as little regard for constitutional restraints as most misnamed “liberals”. Our governments were not instituted to provide social services.

Although your bridge reply is humorous, it is missing the point, not sure if that is intentional or not. I say don’t adopt policies because some other country has done so don’t sacrifice liberty for artificial safety.

I too find it helpful to personify situations to fit my self, but what is needed is to also look at what is not seen. And all the potential problems “government fixes” create. In the larger picture the residents of Point Roberts know about their isolation from the rest of the state, I should not be made to subsidize your lifestyle and where you choose to live. I would also notice what is happening and adjust my lifestyle accordingly, buy more, take less trips, make trips on a boat etc. The increased traffic isn’t sole responsibility for your wasted time. Unconstitutional drug war, increased policing action government protectionism, etc….contribute greatly.

Your suggestion for the consumption tax providing the incentive I suggest is way off base. Because it will lead to even more liberty destructive laws treating everybody as machines that need to be regulated on their maintenance.

“Right now, most U.S. citizens are all for more comprehensive health careā€”as long as someone else picks up the tab.” Than why was the health bill opposed? And only passed by graft and bribery to hold out congress and senators? And even if this was true, it is a perfect example why “democracy” doesn’t work, and why we need to even be ever more vigilant to fight against popular notions of the majority that suppress the minority who don’t agree.

May I ask what economics you have studied? I have studied the field quite a bit the last few years.

 

 


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The Slaughterhouse Referendum - Citizens Opposing Widespread Slaughter (COWS)

Mon, Oct 28, 2013, 10:19 pm  //  Tip Johnson

Wherein we discover why we exert our rights - and grab some more petitions before it's too late

3 comments; last on Nov 06, 2013

Dick’s Picks for City Council - Burr and Petree

Mon, Oct 28, 2013, 12:00 am  //  Dick Conoboy

Independent voters are for independent thinkers on the city council. Vote for Burr and Petree.

0 comments

Boulevard Park Reopens

Sat, Oct 26, 2013, 7:36 pm  //  John Servais

Beach reconstruction is done at Boulevard Park on the Bellingham waterfront. Paths along shore are again open - and it looks good.

6 comments; last on Nov 01, 2013

Ken Bell and Renata for Port

Sun, Oct 20, 2013, 7:07 pm  //  John Servais

Ken Bell has my vote over Mike McAuley for port commissioner. And Renata Kowalczyk has it over Dan Robbins.

8 comments; last on Oct 30, 2013

 

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