Report: Ontario's HST Not A Tax Grab

by Mike Godfrey, Tax-News.com, Washington

15 December 2009

The majority of taxpayers from Ontario will not be worse off when the proposed Harmonized Sales Tax (HST) is implemented, says an in-depth analysis released by the Canadian Centre for Policy Alternatives.

The report, titled "Not A Tax Grab After All: A Second Look at Ontario’s HST," concludes the Ontario government’s HST plan is virtually revenue neutral when viewed as part of a total tax package that includes increased sales and property tax credits and a significant decrease in personal income tax rates.

“No group is significantly worse off or better off as a result of the province’s HST plan,” says the study’s co-author, University of Toronto professor Ernie Lightman. “Assertions that this is a tax grab have no foundation in reality.”

Among the study’s key findings:

  • Increased sales and property tax credits combined with reduced personal income taxes negate the regressive potential of the new HST;
  • The net combined effect of all the changes – new HST plus sales/property tax credits plus personal income tax reductions – is very close to neutral, a CAD37 annual loss in income when averaged over all families in Ontario;
  • Ontario families with the lowest incomes (below CAD20,000) will be better off by around CAD90 on average; those with incomes below the Low Income Cut Off (after-tax), come out ahead by around CAD140;
  • Non-poor families will lose about CAD60 per year on average;
  • The richest families – with incomes above CAD100,000 – will be worse off by nearly CAD390 annually (approximately 0.2% of family income).

“The biggest concern is to ensure Ontario’s poor aren’t hit hard by the introduction of a new sales tax,” says co-author Andy Mitchell. “After looking at the numbers we find the interests of the poor are relatively well protected.”

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