Tag Archives: taxes

British Columbia, Christy Clark, Consumerism, Democracy, NDP, Neo-Conservatism, Neoliberal Economics

I, for one, would like an HST job – and it might sway my vote.

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If you’re registered to vote in BC, and provided that Elections BC hasn’t completely screwed up your voter registration (I have, at times, received three voter information cards for variations on my name), you’ve probably by now received a ballot in the mail for the mail-in referendum on the HST in BC.

(If you haven’t received a ballot, contact Elections BC ASAP!)

There’s been a lot of discussion about the HST. Is it bad for families, is it good for business, is it the spawn of evil reptilian kitten eaters from outer space, on and on and on.  But strangely, thanks to British Columbia’s unique citizen-driven initiative legislation, we now have the opportunity to vote yes or no to say no or yes to the HST.

And my vote is up for grabs.

The rhetoric around the HST has confounded many.  There was an argument that some said the government claimed the HST would be revenue neutral, though I’m not sure of any public proclamations that support this thesis.  There was the argument advanced that prices would magically drop by the savings that businesses managed to get in HST – a neoclassical economic argument if ever there was one.  And no one has noticed that the costs in grocery stores have gone down 12% – if anything, a lot of them have gone up by a comparable number, and then more and more through inflation.

But now we find that the rhetoric has shifted even more – the business coalition / BC Liberal support squad that is supporting the HST is claiming that the HST creates jobs.  Jobs! they scream.  Jobs! Jobs! Jobs!  This group’s twitter username is even @hstjobs – which shows you how intensely they’re investing in the narrative that the HST will magically create jobs.

So here we come to the crux of the issue – I need a job, in BC.  And I’m willing to take one that’s been created by the HST. But I can’t find any.  And I have experience – five years of progressively senior administrative roles in a nonprofit, two years of Board-level experience on a $350 million+ per year public institution charged with a public trust, and on and on and on.

Find me an HST-created job that matches my experience and education, and I’ll vote for the HST.

But I don’t think you will.  Because the myths that surround the HST are so intense that even this idea that the HST creates jobs is bunk, too.  The economic theory behind the HST is relatively sound – the old system put taxes on a lot of business ‘inputs,’ the things that businesses buy then process or use to sell to you – and the HST claims to remove these, saving business huge amounts of taxes.

It’s a sound theory if you’re fine with the tax burden being transferred – what businesses used to pay, people like you and me now have to.  The theory isn’t so sound when the claim that prices should have dropped 12% is evaluated, as that definitely didn’t happen.  But let’s get back to this idea that changing input taxes will create jobs.  Because I still need an HST job, and I’m willing to vote for the HST if someone can find me one.

But how could the HST create jobs?  Imagine you’re a business, and you spend roughly $600,000 a year in business input costs.  I believe GST was always exempted on business inputs, but I’m willing to be corrected on that fact.  With the idea of $600k in input costs, we can hypothesize the following figures:

  • $42,000 in PST input taxes paid by company
  • If the inputs were not GST exempt, up to $72,000 in input taxes.

So, by removing the input taxes for businesses, our hypothetical company that pays $600k in input costs (meaning, without labour and assuming a 200% markup, the business could see as much as $1.2 million in annual gross sales, alone generating a possible $144,000 in taxes) could save between $42,000 and $72,000.

There’s definitely enough in there to hire someone, maybe two people at relatively good salaries.  So perhaps there are jobs to be found in the HST?

Nope. The reasoning is flawed – first, a huge amount of business inputs were already tax exempt, either fully or partly.  I worked in retail in a business supply store – we were used to people presenting PST and GST numbers and we had to deduct taxes at the till.

Second, there’s a quirk with the HST, that I discovered when I handled HST implementation for the nonprofit I worked with.  While in the past a tax number might have meant that taxes were deducted at source for business inputs – imagine a box of paper for a print shop – the HST doesn’t allow this.  Businesses have to pay the HST up front, and receive deduction or reimbursement for it later.

So, instead of saving that $42k – $72k, our hypothetical $1.2m grossing company has to pay it, and apply for reimbursement later.  If our hypothetical company is running on a shoe string, the actual increased costs of HST compliance might mean that they’re paying more than they used to.

I came across a letter from a small-business owner, one that might fit the parameters of our hypothetical business, that shows what’s happening in the real world. The business owner says:

On top of our lease we were horrified, to say the least, that when the HST kicked in, our overhead on our lease was driven up $795.00 per month over night. This has put us in such a bad position we have had to let go one of our staff members that works the afternoons here, which has caused her a lot of distress as she quite loved working here.

And:

Personally myself, I feel my staff of 13 and all 50 of our clients haven’t seen the benefit to the HST. The HST may end up being a deduction for me come tax time, but it doesn’t help me intermittently and that’s when I need that money. The $795 could come in handy now, especially for our laid off staff member.

So, let’s get this straight.  In the hypothetical, neoclassical economics fantasy world where prices go down if inputs go down, the HST might allow businesses to save money on their inputs enough to create jobs.

However, the input prices don’t go down with the HST, not at first.  In fact, many – if not most – go up. So businesses are paying more now but get it back later.  And unless they have a lot of capital floating about, they won’t be able to afford to hire someone based on unrealized gains in the future.

That being said, I’m still willing to vote to keep the HST if someone offers me a job commensurate with my experience and my education. So, if you’re reading this, and you’re looking to hire an MA grad with five years of nonprofit admin experience, two years of board-level experience with a major public institution, and excellent communication skills, leave a comment below.  Offer me a job that pays well, and if it’s the direct result of your business saving money through the HST, I’ll vote to keep the tax.

Because that’s the argument, isn’t it?  Vote for the HST, that was promised not to happen but then foisted on us, that was the brainchild of Gordon Campbell and his band of BC Liberal buccaneers, or you’ll not have any jobs.  Vote for the HST and you might be lucky enough to get one.

I have a feeling I’ll be voting “yes” in the end… but, my vote is up for grabs. I, for one, would like an HST job. 😉

Activism, British Columbia, Class War, Consumerism, Corporations, Democracy, Neoliberal Economics

Ringing in the New Year with a Cactus Club Boycott

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Truly, it’s hard to figure out who to boycott among the supporters of BC’s ugly, regressive HST listed at SupportHST.ca. Most of the supporters are with businesses I’ve never heard of as a consumer, so I’m ignoring them. Nurse Next Door I oppose because I like my public healthcare delivered publicly and I’m currently not in need of home care nursing. But Cactus Club, that’s something worth boycotting for several reasons.

I know a number of people who wouldn’t eat there because of how they package their female employees. I know a number of people who refuse to embrace their style and prices. But if you would like a further reason to not contribute to their profits, it’s their vacant support of the HST.

Firstly, just a few things wrong with the HST:

  1. It’s a regressive tax as it punishes lower income earners by dinging them for a larger percentage of their take home income than higher income earners.
  2. It’s designed to be revenue-neutral, meaning it is a new tax designed to bring in no new revenue to the provincial government. Combine that with the removal of the PST and you get a $2b tax cut for corporations. But going back to revenue neutrality means that $2b will have to come from someone’s pockets. And while the government’s literature is happy with how businesses can pass on their process tax savings to customers, there is no law requiring that and if you know the goal of corporations, maximizing shareholder wealth, you can guess where that savings will end up.
  3. The government lied about bringing in the tax.

Now let’s watch the short video presentation by the Chief Operating Officer of Cactus Club Restaurants describing why he likes the HST, despite the fact that the Cactus Club is a…restaurant, a kind of business that is hurting because of this new bottom line tax: Support HST : Andrew Latchford : COO : Cactus Club Restaurants.

A few things about the argument-free talking points blindly supporting the HST in this video clip:

  1. What are the alternatives Latchford looked at? The HST replaced the PST which taxed business inputs, thereby reducing profits. With those taxes gone, the HST increases profitability. What other alternatives did he explore, and why were they less effective than the HST, and what are the criteria he used to evaluate the alternatives? No answers there.
  2. Why doesn’t he actually mention the added benefits that come with the HST? Failing to do so means I’m left to conclude that it’s just a tax shift from his business to his customers.
  3. It would be nice that upon coming to the conclusion that the HST is good, he would actually share that rationale, beyond just more money in his pockets.
  4. It is already improving the economic outlook of global shareholders investing in businesses in the province because businesses have a lower tax bill, which the government is recouping from citizens. Many of those now more profitable businesses [like all the global corporations operating in BC] will send their increased profits out of the province to these foreign shareholders. How is this wealth sucking out of our province good for the province? It’s not. It’s good for the global corporations and their compradors the BC Liberal government works for.
  5. An improved outlook as a province is a truly vague statement with no defined statement of the economic good being pursued or the means for measuring that. How that [whatever that is] will magically translate into more people eating at Cactus Club is another argument he doesn’t bother to explain. All I know now is that many citizens with a higher tax bill are eating in restaurants less and along the way tipping their servers less. Ask around.
  6. Sadly, his goal is to reduce confusion about the HST. He’s quite failed at that, sending out further talking points with no meat to back them up.
  7. Being finance minister for a day, oh how I wish. The finance minister of the BC Liberal government is tasked with privatizing all public services, reducing all burdens on corporations and marketizing as much as possible as fast as possible. One way to do that is to collect little or no tax from corporations, increase taxes and user fees on citizens and reduce public services as much as possible. This is a massive failure of a finance minister would is actually accountable to the citizens of the province. It is not surprising that the Cactus Club management likes this model so much.
  8. Sadly, his advice to understand the alternatives is pretty empty. He hasn’t demonstrated he understands any of the alternatives, rationales or consequences of this regressive tax.

But if I were finance minister for a day, my goal would be to encourage people to be happy paying taxes because they are how we buy things together as a society, like high quality, universal education and healthcare, water, sewage, transportation, social services, sexual abuse hotlines, elder care, hospice care for people to die with dignity, hot lunches for school kids living in poverty, environmental protection, an environmentally sustainable transition economy that puts our citizens and the planet first, treatment for people with addictions, reclaiming toxic soils, pursuing bioregional food security, cleaning our polluted waters, protecting endangered species and enhancing biodiversity, settling generations-long land claims with victimized citizens, pursuing justice for victims of residential schools, encouraging scientific and artistic and philosophical exploration, and a few hundred other things.

These things we cannot do if we defund our government of a revenue base and impoverish our vulnerable citizenry while allowing global corporations to embark on a new era of operations in BC, the world’s newest tax haven!

Seriously, those who truly support the HST, I challenge you to explain just how this magical HST will accomplish any of these good things and explain why all my criticisms are incorrect.

Class War, Neoliberal Economics, Poverty, Privatization, Society

Tax Cuts Are To Blame for Cities’ Bankruptcy Risks

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Just days before Christmas, there are warnings that dozens of large cities and states in the industrialized world may be going broke next year. But it’s not just a ripple from the Great Recession. It comes from three decades of neoliberal tax cuts that have defunded public services and institutions.

Three days ago, the Guardian ran a short but damning piece about the civic vulnerabilities in North America and Europe: $2tn debt crisis threatens to bring down 100 US cities | Business | The Guardian.

Below are a number of descriptions of the conditions our public bodies are in. I would argue that the neoliberal motivations of the rich since the socio-economic purges beginning with Reagan/Thatcher/Mulroney have caused or largely contributed to each of these. We’re not talking complex logarithmic supply-demand curves here; we’re talking the basic arithmetic of collecting enough income to match expenses, something households do every day…or don’t, since so many of us are addicted to consumer debt to keep our unsustainable economy afloat.

But as you read what 2011 will look like for many sub-national governments, beware the neoliberal solution from the Citigroup zombie below: austerity and more spending cuts, not increasing taxes for necessary services; this will all pad the privatization agenda:

  1. New Jersey governor Chris Christie summarised the problem succinctly: “We spent too much on everything. We spent money we didn’t have. We borrowed money just crazily. The credit card’s maxed out, and it’s over. We now have to get to the business of climbing out of the hole. We’ve been digging it for a decade or more. We’ve got to climb now, and a climb is harder.”
  2. American cities and states have debts in total of as much as $2tn. In Europe, local and regional government borrowing is expected to reach a historical peak of nearly €1.3tn (£1.1tn) this year.
  3. Detroit is cutting police, lighting, road repairs and cleaning services affecting as much as 20% of the population.
  4. Illinois has spent twice as much money as it has collected and is about six months behind on creditor payments.
  5. California has raised state university tuition fees by 32%.
  6. Arizona has sold its state capitol and supreme court buildings to investors, and leases them back.
  7. Public sector indebtedness needs to be cut, it needs a lot of austerity, and it hit the central governments first, and now is hitting local bodies,” said Philip Brown, managing director at Citigroup in London.

Activism, Class War, Colonialism, Consumerism, Corporations, Democracy, Ireland, Justice, Neoliberal Economics, Poverty

Of Fenians and Financiers: James Connolly and the Irish Meltdown

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A spectre is haunting Ireland—the spectre of James Connolly.

Connolly was shot to death by a British firing squad for his role in Ireland’s 1916 rising for home rule. Celebrated as a hero of Irish independence by Irish political parties of both left and right, his socialism is all too conveniently overlooked. It is vital, however, for the Irish struggle is one that speaks to the challenges of independence, sovereignty and democratic freedom, both then and now, for people of all countries. What value is formal political independence if it is not backed up by economic control; if the real decisions of public policy are made in boardrooms and backrooms rather than main streets and parliaments? For Connolly:

If you remove the English army tomorrow and hoist the green flag over Dublin Castle, unless you set about the organisation of the socialist Republic your efforts would be in vain. England would still rule you. She would rule you through her capitalists, through her landlords, through her financiers, through the whole army of commercial and individual institutions she has planted in this country and watered with the tears of our mothers and the blood of our martyrs. (Socialism and Nationalism, p. 25)

A who’s who of global finance descended upon Dublin in November to ‘hoist their flags’, from the International Monetary Fund (IMF) and the European Central Bank (ECB), to the Rothschild investment bank, Merrill, Barclays, JP Morgan and Goldman Sachs. These power brokers arrived to prevent ‘contagion’ from the financial crisis in the small country of 4.5 million people by lending the Irish state billions of Euros to recapitalize insolvent banks and shore up the country’s finances.

Unfortunately for the Irish, these actors came armed with the same ideological and policy tools that caused the crisis: a commitment to neoliberal growth models, open markets and the primacy of financial interests over those of labour, sovereignty or independence. Moreover, alternative ideas and paths are lacking from elites in Ireland’s two major parties, Fianna Fáil and Fine Gael, as both are devotees of free-market fundamentalism. Indeed, it was their desire, proclaimed loudly through the 1990s and 2000s, to be ‘closer to Boston than Berlin’ in regulation and finance.

Debt: To Infinity, and Beyond

The reasons for Ireland’s economic collapse were well covered by the global press in recent weeks. These include: an unsustainable growth model built on extremely low corporate taxes (12.5%) and multinational investment, a property bubble fueled by cheap international credit, and politicians far too cozy with domestic banks and developers to regulate sufficiently.

What is rarely highlighted in the press is the fact that Irish public spending was the casualty—not the cause—of the crisis. When Lehman Brothers collapsed in 2008 and credit markets seized up, Ireland’s property bubble burst. As a result, a significant portion of bank assets became worthless and the country’s construction and property sectors came to a standstill. The Irish government recapitalized banks with government bonds (totaling more than 176% of GDP in 2009) in return for worthless property assets.

Dublin announced the deepest spending cuts in the history of the Republic to meet the conditions of the November 28 €85 billion IMF and European Central Bank (ECB) loan. The state plans to raise income and sales taxes by €5 billion and cut spending by €10 billion by: reducing welfare payments by €3 billion, eliminating 25,000 public sector jobs and raising sales taxes by 2% (to 23%) by 2014.

According to economists Simon Johnson and Peter Boone “each Irish family of four will be liable for €200,000 in public debt by 2015.” In all, €20.7 billion from this public pension fund was funneled to the banks over the last year and a half. Perhaps most significantly the November 24 budget plan outlined no change in the corporate tax rate of 12.5% (one of the lowest corporate tax rates in Europe) “under any circumstances”.

There were alternatives. The government could have required creditors to bear a share of the costs by allowing defaults and some bank failures. They could also have required the companies who have benefitted for years from the corporate tax policy to pay an equal share. Google, for example, reportedly saved $3.1 billion in taxes over the last three years by setting up in Ireland. More recently, calls to withdraw from the European Monetary Union (EMU) have emerged in order to follow Iceland’s lead of currency devaluation (an option denied Ireland). They chose to draw from the public purse instead.

While the IMF asserts that its work pushing austerity in Ireland is ‘technical not political’ the Irish public disagrees, and so do I. What could be more political than the socialization of bank debts and transfers of public wealth into private hands?

Popular Backlash

As the costs of propping up corrupt officials, developers and international bankers becomes increasingly unpalatable, politics in the Republic is shifting left; according to a December 2 poll, Sinn Fein—‘we ourselves’ in Irish— was two points higher than ruling party Fianna Fáil. They won a historically unprecedented by-election seat in Donegal November 25 and their support in the south has doubled in the past month, from 8% to 16%. Political heavyweight Gerry Adams is giving up his seat in Westminster to run in the Republic’s early 2011 election. These gains have opened up the possibility of a coalition with Labour in the New Year. This represents a colossal swing in post-independence Irish politics dominated by 60-years of Fianna Fáil and Fine Gael.

Political opposition to the status quo also transcends electoral politics. On November 27, 2010 close to one hundred thousand people (the equivalent of 785,000 in Canada) marched through the streets of Dublin. The banners and placards quoted James Connolly and other heroes of Irish independence. These protests have been growing in size and frequency over the past year.

These political developments may be short lived. Free-market party Fine Gael is also gaining politically as more conservative voters swap one establishment party for another. Furthermore, nearly one in three Irish youth are predicted to leave the country in coming years, to make ends meet in countries like Canada and Australia, thus eroding some momentum for change. Finally the Congress of Irish Trade Unions (CITU)—the organizer of the largest and most recent rally—is seen as tainted by years of “social partnership” with ruling parties. Taken together, these factors may undermine the development of a cohesive and coherent political countermovement.

The Coming Storm

What has transpired to date is just the beginning. Despite the guarantees and billions of dollars of austerity measures disproportionately targeting the poor and weak in the Irish population, the financial markets remain unconvinced of Dublin’s ability balance the books. Standard & Poor’s downgraded Irish sovereign debt by two grades on November 24. The government is poised to topple, and the banks are still far from solvent. Credit default swap markets are now betting that Ireland will default on its debt within five years.

The markets are right in their assessment. With an interest rate of 5.8% on the ECB-IMF bailout package, interest payments alone on state debt will be more than 20% of tax revenues in 2014.

Put simply, austerity measures are not working. The “green shoots” in Irish GDP for the first quarter of 2010 were entirely due to multinational exports. In Ireland, wages are dropping, prices are dropping (except in health and education), and demand is dropping. This is disastrous for the Irish economy since, as John Maynard Keynes pointed out in the 1930s, business cycles are not self-correcting. Currently, there is no climate for investment, for a real economy based on jobs, taxes and spending to take root.

At the household level, a mortgage crisis is poised to send another wave of shocks through Ireland. To date, people have been borrowing from friends and family to make payments. The state extended the mortgage relief in 2010 by 6 months (to 12 months) to stave off a rash of repossessions. Continued mortgage lending by banks has artificially held up the price floor on the housing market. These factors are all set to change as money (and time) runs out. As economist Morgan Kelly points out, the impending mortgage crisis in Ireland may further strengthen politicization:

If one family defaults on its mortgage, they are pariahs: if 200,000 default they are a powerful political constituency…The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War.

The struggle today is just as much about independence and democracy in Ireland as it was a century ago. Connolly urged his people to beware the trappings of political independence while ceding the economic control of the country. His warning is haunting the Irish people today. Sovereignty means very little without power to change course, to make a choice about what costs are reasonable, are just and are justified.

The strength of today’s Irish opposition, in terms of its longevity and depth, remains to be seen, but the stage is set for yet another contest over the competing visions of what, and who, Ireland is for.

Canada, Class War, Conservative Party of Canada, Corporations, Economics, Justice, Labour Theory of Value, Neoliberal Economics, Unions, Work

Cruel EI Premium Hikes Deflect From Progressive Taxes

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Despite our patently unfair tax system in Canada that continues to favour the rich and punish the destitute and those who are barely solvent, Harper has decreed a tax increase.

Sadly, it will be levied on EI premiums: 0.15% and 0.21% for workers and employers respectively for each of the next three or four years.

Not surprisingly the National Post printed a commentary from Dan Kelly, of the Canadian Federation of Independent Business opposing this tax hike because of its burden on entrepreneurs, but oh yes, on workers too.

He correctly notes that this will lead to a pay cut for anyone not in line for a raise over the next four years, like public sector workers in BC who will get 0% raises each year while there is a provincial government deficit budget.

The CFIB is encouraging its members to push back on Harper to reverse this decision. They recently issued a report claiming that 0.36% increase in EI premiums will lead to 170,000 lost jobs.

Not surprisingly, the CFIB reports 10,000 business owners have joined their lobbying campaign, while only a few thousand workers have joined. This is likely because they do not have the organizing mindset to reach workers, since their focus is generally the corporations that continue to nickel and dime their employees.

The CFIB is also correct to criticize the Con-Lib coalition for sucking EI surpluses into general revenue, but likely not because it impairs worker protection.

A progressive tax system is needed to effectively redistribute wealth in society, to protect workers from the psychotic corruption and mismanagement of global capitalism.

Corporations, particularly transnational ones increasingly seek to operate in countries with lower tax rates. That creates a race to the bottom for countries to cut taxes on corporations and the wealthy more than other nations competing for corporate investment. In BC, small business taxes are set to plummet to a mind-boggling 0% in 2012.

Who is steering the ship here?

In arguing that it is wrong for workers and businesses to repay federal stimulus packages through the EI premium increase, the CFIB is right, but not for entirely the correct reasons.

A reversal of tax cuts for corporations and the wealthy are the more just way to fund the stimulus.

In the end, the CFIB is promoting its Facebook page called “Stop the Tax Grab.” Sadly, that’s the wrong message.

We cannot frame taxes as “grabs”. Taxes are how we buy things together, as a society: education, healthcare, electricity, transportation, human services, etc.

While EI premium increases punish workers, we need to return to a more fair tax system. To do this, we need to call out irresponsible, corrupt global corporate capitalism for its neglect of the social good.

Corporations are not designed to make society better. They’re out to extract profit from anything they can, wherever they can.

It is society’s job to regulate corporations to ensure we all don’t suffer from their excesses. We are not doing this since the capitalist class has dominated our political power.

This simply must stop.