One tax, three parties

Adam Radwanski, today at 8:41 AM EDT

As our editorial earlier this week argued, there's a good economic case for the harmonized sales tax that Dalton McGuinty's government is believed to be considering. But considering that this issue has helped bring down provincial governments elsewhere, there's also the potential for some major fireworks at Queen's Park if the Liberals go through with it.

Just how big those fireworks are could be the first major indication of what sort of opposition Ontario has in the post-John Tory era.

There's not much doubt how the provincial NDP would play it, new leader or not. Although studies have suggested that it's ultimately a wash for consumers, with savings eventually passed down to them, the HST is tailor-made for a left-of-centre party eager to position itself as a defender of the little guy. It reduces the tax load for the dreaded Big Business, while adding tax to stuff like books, children's clothing and women's hygiene products. The province may succeed in getting federal exemptions for some of those items, but probably not all of them - so it should be a major boon to Andrea Horwath as she tries to prove she can get more traction than Howard Hampton did.

For the provincial Tories, though, it's more complicated. With the exception of the health care levy in McGuinty's first year - and even that didn't have a huge impact - they've had a hard time getting Ontarians riled up about much the generally innocuous Liberals have done. If the HST offers potential for some good, old-fashioned populism, it's going to be hard to resist.

On the other hand, it wouldn't make a whole lot of logical sense for the Conservatives to oppose it. Their federal cousins - not least Jim Flaherty, husband of prominent MPP and potential leadership candidate Christine Elliott - have been pushing for merged sales taxes for years. And particularly if they're going back toward small-c conservatism, it would be pretty odd for them to oppose a policy that would reduce taxes for businesses.

As of a month ago, at least, it's something that Tim Hudak - then his party's finance critic, and now its leadership frontrunner - was clearly grappling with, as evidenced by this letter he apparently sent supporters:

Dear Friends,
Since its election in 2003, the McGuinty Government has opposed a harmonized sales tax (HST) in Ontario. However comments recently made by Premier Dalton McGuinty indicate that harmonizing the PST with the GST is under serious consideration by the provincial government at this point in time.

There are a number of models for harmonizing the PST and GST, ranging from full harmonization – where all goods and services are taxed at the full combined 13 percent sales tax rate – to various "made in Ontario" models that allow for certain products to remain exempt from the PST portion of the harmonized tax. Other models suggest a lower combined tax rate across a broader base of goods and services.

As Finance Critic, I will be briefing John Tory and the PC Caucus on how an HST would affect various sectors of the economy. I would greatly appreciate hearing your views on this potential and significant change in tax policy. Kindly email me at this address or give me a call at 416-325-8454.

In closing, please accept my best wishes.

No word if that number has recently been lit up by provincial Liberals, offering their best wishes in return if Hudak will lay off this issue.