Voters in British Columbia delivered a slap in the face to big business interests by rejecting a consumption tax that would shift billions of dollars of taxes from corporations onto consumers. Fifty-four per cent of voters, 881,200, said “no” in a mail-in referendum ballot. The result was announced on Aug. 26.
The Harmonized Sales Tax provoked much protest after it morphed from a secretive federal/provincial government plan in 2008/09 into law on July 1, 2010. In the lead-up to the May 12, 2009 provincial election, the incumbent Liberal Party denied rumours that an HST was in the offing. Within weeks of its election victory, it announced a sudden and unforeseen change of heart.
Protests began immediately and never went away. By Aug. 2010, a petition campaign under the province’s unique, referendum law successfully obtained the required number of signatures to oblige the Liberals to convene a vote.
Big business and its ideologues in university faculties and right-wing think tanks were dismayed about the precedent this set for deciding government policy, including Premier Gordon Campbell bowing to popular pressure that a 50 per cent-plus-one outcome would rule. (Their dismay was ironic in that it was their right-wing, Social Credit government that introduced the referendum law, in 1991).
The fiasco soon cost the Liberals their leader. Campbell was obliged to resign in late 2010 when his standing in polls dropped into the single digits.
The prime instigator of harmonized sales taxes in Canada has been successive Conservative and Liberal federal governments. The tax regime harmonizes the five per cent federal Goods and Services Tax (GST) with provincial sales taxes (PST’s). Five of the 10 Canadian provinces (not including B.C.) have adopted an HST.
The GST was created in 1991 to replace a federal manufacturing sales tax. It faced considerable opposition. In the spirit of the GST, HSTs eliminate provincial sales taxes on production inputs of manufacturers. To compensate government revenues, consumption taxes paid by retail and service consumers are significantly expanded.
When the Conservative government assisted the province of Ontario in making the tax switch on July 1, 2010 (the same date as British Columbia), Finance Minister Jim Flaherty explained, “This is a massive tax cut, a $5 billion tax cut, for businesses in the province of Ontario…”
In the case of British Columbia, it is estimated that the switch from a combined GST/PST regime to an HST would cost consumers some $1.5 to $2 billion per year.
The federal and provincial governments and the business interests they serve were deeply disappointed with the referendum outcome. Jock Finlayson of the Business Council of B.C. said, “This is a very, very big setback for the business community and for building a competitive and productive B.C. economy.”
Ben Chalmers of the Mining Association of B.C. worries about the competitive standing of his member companies, including against other jurisdictions in Canada. “We know we are competing with places like Ontario, which has a much more efficient consumptive tax.”
The federal government provided a one-time, $1.6 billion cash transfer to B.C. government coffers as an incentive for introducing the tax. It now says the money must be repaid, though it’s not clear if all of that transfer has actually been received and banked.
A class vote for class reasons
An examination of the referendum result shows that the vote was divided along class lines. The wealthiest electoral districts voted to keep the tax. The four districts along Vancouver’s North Shore, for example, voted by 60 per cent or higher to keep it. Three of the most working-class districts in the Vancouver metropolitan region, including the one represented by the new leader of the provincial New Democratic Party, Adrian Dix, voted 72 to76 per cent to scrap it. Every district that voted for the NDP in the 2009 election rejected the tax.
Three factors caused the defeat of the tax. One, the authoritarian manner in which it was imposed provoked strong and sustained opposition. Two, it was perceived as a tax grab in the interests of the wealthy in a province that has seen a dramatic drop in the living standards of many working-class people over the past 10 years of Liberal government. Three, opponents of the tax refused to let up their campaign, even when Christy Clark, the new Liberal leader, proposed a modest lowering of the rate of the tax.
The refusal of anti-tax campaigners to be bribed or otherwise let up the campaign is a good lesson to the working class that determined fights can win gains.
Vancouver Sun columnist Pete McMartin pointed out the obvious when he headlined a post-referendum column, “Revolt against HST reflects province’s growing class struggle”.
McMartin wrote there is little evidence that residents in the province want to dismantle the tax structure that finances the social safety net a la the “Tea Party” movement in the U.S. Rather, people voted against a further rise in income disparity:
“…that’s what the HST vote was — not political payback, and not the short-sighted spitefulness of a moronic public. It was an SOS.”
McMartin’s argument is backed by the fact that a new right-wing political project around which some leaders and activists of the anti-HST campaign have gravitated, the B.C. Conservative Party, has not registered a significant lift since the defeat of the tax. It is the NDP that has gained in electoral polling.
The anti-HST campaign, FIGHT HST, was largely spearheaded by right-wing populists, notwithstanding the presence of Bill Tieleman, former communications director of the Glen Clarke NDP government, as a co-director. The NDP and its trade union affiliates only joined the campaign in a significant way once the referendum balloting got underway in June of this year.
Even then, they ceded much of the ideological terrain of the anti-tax campaign to the right by focusing on the tax’s antidemocratic character and not enough on its class character. They should have argued that more taxes on the wealthy are required, which could then be used to create employment, improve social services, take aggressive measures to tackle the looming climate calamity, and so on.
B.C. Federation of Labour President Jim Sinclair pointed out in a Sept. 2, 2011 Vancouver Sun commentary that voters implicitly rejected the argument that lower taxes for businesses means more jobs for workers. Businesses have received tax cuts worth billions of dollars over the past 10 years, he wrote, while, “Well paid manufacturing jobs have disappeared. Any growth has been in low paying jobs or government-funded construction jobs.”
Over the past 10 years, B.C. government revenue from personal and corporate income taxes has declined sharply thanks to tax cuts. These have especially benefitted the wealthy. Much of the revenue shortfall has been met by new or increased fees and taxes on every manner of government service. B.C. is now the only province in Canada that charges a monthly healthcare premium ($110 for a family of two). Tuition fees for post-secondary education have tripled. The minimum wage has dropped to the lowest in Canada. Not coincidentally, B.C. now has the highest child poverty rate of all the provinces.
Wait for an election or build on the momentum of the HST’s defeat?
The defeat of the HST is a blow to the pocketbooks of business interests. It also threatens them with losing their provincial government, for it was Christy Clark that suffered this defeat, not the departed Gordon Campbell. (The latter is doing just fine — on August 15, the federal government confirmed that the former premier has been appointed as Canada’s new ambassador to the United Kingdom.)
As a result of the defeat of the HST, the chances for unseating the hated Liberals in the next election are significantly improved. However, that vote could take place as late as May 2013. The working class should not wait around for an unseating to happen by remote control. For one, a fight is needed today to block the Clark government’s declaration that the cost of taking the province back to the GST/PST regime (including the $1.6 billion payback to the federal government) will be paid by cuts to public services, including the salaries of workers.
For another, only an active and mobilized labour movement can successfully defend working-class interests, whether it is the Liberals or the NDP in office.
The current, province-wide dispute in B.C. between teachers and the Christy Clark government is an excellent place for B.C. workers to flex some muscle. Teachers are fighting to defend their work conditions and repair the damage to public education by the Liberals over the past 10 years. Last April, they won a court victory that declared education legislation imposed by then-Education Minister Christy Clark (!) in 2002 to be illegal. Among other measures, the legislation restricted the right of teachers to negotiate teaching conditions, including classroom sizes.
Teachers deserve the widest solidarity possible. Let’s build on the HST victory.
Roger Annis is a retired aerospace worker in Vancouver, B.C. He can be reached at [email protected]