Saturday, May 29, 2010

Everything I always wanted to know about SEX

According to a recently released study, Canada's teen birth rate has decreased 38 percent, while the teen abortion rate declined 35.7% The reasons? Teenage women are not more or less likely to have sex than they were 10 or 15 years ago. According to Alexander McKay, research coordinator at the Sex Information and Education Council of Canada, the reasons for the decline are (1) better access to contraception, (2) higher quality sex education (including the internet and planned parenthood clinics) and (3) "Canada's relaxed attitude toward toward adolescent sexual health  allows teens to be better educated on the subject."

Pro-Life activists should be happy. But I wonder if they really are.

Thursday, May 13, 2010

I Have a strange Confession

It occurs to me that I may have been the first politician in the history of the B.C. Legislature to have advocated a Harmonized Sales Tax. Way back in 1980, I was in the Universities Model Parliament, and decided I would stump the government ministers by recommending the Value Added Tax. This naturally had them scrambling, since none of them had ever heard of the V.A.T., even though it was already commonly used in Europe.

Should I be ashamed?  Efficiency pays. Harmonization streamlines the administration of the tax, and  is more efficient than a straight sales tax, as it allows businesses to get credit for the tax they pay on inputs (as a deduction off the tax they collect). Exporters can reduce their prices by the amount of the tax they pay in imports that previously would have to be covered in the price. I would probably prefer a  broader tax (i.e. with fewer exemptions) at a lower rate and more targetted help for low-income consumers. But, in principle,
I am not opposed to the HST.

Consider this startling passage from the Mintz Report.  It suggests that 82% of the increase in capital stock  and 80% of the job creation resulting from proposed changes to BC's tax regime will result from sales tax harmonization--i.e. only 18% and 20% from corporate tax cuts.  Thus, if one is really concerned about the equity of shifting tax burdens onto ordinary consumers, I suggest ditching the corporate tax cuts, not the sales tax harmonization.

By 2018, when federal and B.C. corporate tax reductions and sales tax harmonization will be
fully implemented, British Columbia will have a tax regime that is more attractive to capital
than that of either Alberta or Ontario. While corporate tax reductions will have been helpful in
achieving this aim, the largest aid to British Columbia’s tax competitiveness will have been sales tax harmonization (emphasis added). With the elimination of the existing retail sales tax on capital inputs, British Columbia’s effective tax rate on new capital investments will decline by 9.1 percentage points, which will represent almost 60% of the drop in the cost of capital for businesses in British Columbia over the next four years.
By 2020, the combined effect of the corporate tax cuts and sales tax harmonization will be to
increase the capital stock by more than $14 billion, which is expected to translate into an
increase of 141,000 jobs. Sales tax harmonization alone will be responsible for an $11.5 billion
increase in the capital stock and an increase of 113,000 jobs by the end of the coming decade.

Monday, May 03, 2010

Campbell's Supply-Side Follies--and a Face-Saving Proposal

If there has been one serious flaw in the record of the Campbell government, it is that it will not give up on supply-side economics. From its very first move–the 2001 20% tax cut that was supposed to pay for itself, but which wound up creating the largest deficit in history–to the carbon tax (which benefits the affluent Vancouverite rather more than other groups)to the HST tax shift, they have refused to heed either public opinion or the economic evidence. They have been loyal to their core constituency, however: the business and professional elite fo Greater Vancouver, who by and large feel that their private gains have outweighed the public’s losses.

Now that the NDP is pulling ahead in the polls, and even former Finance minister Carole Taylor has had the good sense to distance herself from these large tax increases on ordinary consumers, it is time for the Campbell Liberals to consider how they might soften the regressive nature of their policies, while still hanging on to the conceptual virtues of both the HST and the carbon tax. I have two specific suggestions:

1. Lower the HST 1%-2%---with the lost revenue made up by corporate and personal income taxes.

2. Adopt the Canadian Centre for Policy Alternatives proposal to modify the incidence of the Carbon tax, viz. the low-income credit, at minimum, should be increased in line with carbon tax revenues, and ideally its share should be increased to half of revenues. The remaining half of carbon tax revenues should provide funds for other climate actions.

Even if the loss of revenue from reducing the HST (and the corresponding hike in income taxes) is too great to permit the adoption this prescription, one could always narrow some exemptions in order to lower the overall rate or broaden some other exemptions at the current rate, or target subsidies to the poor, etc.  My general point is, I think still valid: that there a number of ways of dealing with the equity issues raised by the HST and the Carbon tax, short of  abolishing these taxes altogether.