Friday, March 18, 2011

HST "First Look" Study Paid For By Ontario Ministry of Finance is Flawed...

The Ontario Ministry of Finance (obviously on Premier Dalton McGuinty's request given the up-coming election) cleverly requested a Study to be conducted now (barely months after the HST's introduction in Ontario), in order to measure the financial impact of the HST on Ontario families.

The results of this Study appear to show that prices increased slightly in Ontario by 0.9% in July 2010, and 0.6% in December 2010, compared to what would have happened had the HST not been implemented.

To see the study for yourself (and I encourage you to read it through, it's not too bad), please visit:

University of Calgary - The School of Public Policy website at: The School of Public Policy - Latest Papers, and the actual study pdf can be downloaded at: THE IMPACT OF SALES TAX REFORM ON ONTARIO CONSUMERS: A First Look at the Evidence.

Now, aside from the fact that Dalton McGuinty continuously said that prices would decrease given that the HST was passing the tax burden on from Businesses to the Consumers, and therefore the tax savings from the Businesses would result in lower prices for Consumers (as well as new jobs and higher wages for employees of the businesses), unfortunately right off the bat we are still seeing price increases (as per the Study), and as far as I've seen and heard, still there haven't been any mass availabilities of new jobs and no mass wage increases for business employees after the implementation of the HST. Of course these 2 latter points are of my own opinion, but with that said, prove me wrong!

So that's already 3 points against the HST, and 3 points that were not noted in this Study. And if I guess correctly, the author of the Study will blame the fact that it's still too early to expect changes in those areas, yet here we are performing the Study at this early point anyway. It's funny how when it works to the benefit of the HST, it is fine to perform a short term study. But when it works against it, it's not factual, right? Right...

In my intro, you probably noticed that I said that McGuinty "cleverly" requested the study now. The reason I said "cleverly", is because by performing the study now, as opposed to performing the study a year from now or two years from now, that means that the Ontario one-time $1,000 transitional payments will be incorporated into this Study's determined financial impact on Ontario families, and Dalton McGuinty knew this full well when requesting this study at this time. Had this study been performed in 2012 or 2013 (post-election), it would no longer include these one-time payments, and therefore a far less biased study (which currently favours Dalton McGuinty) and a far more factual study (showing the HSTs true costs on Ontario families) would have been performed. The author of the study constantly notes that this study is a "first look" at the tax, pretty much in the same way that when you light a fire in a room that has a sprinkler system, at first look it appears to be contained, and therefore you would assume that it's not so bad. But when you allow the fire to grow over time and also shut off that sprinkler system, next thing you know, not only is the entire house on fire, but so is the entire forest where the house resides. The fact that this study was performed so short-term after the HST's implementation and includes these one-time transition payments -meant to disguise the true HST-driven financial burden on Ontario families just long enough for the October Provincial Election- is a definite flaw.

Other flaws that can be found in the study are as follows:

- The Study compares Ontario with Quebec when looking at the changes in prices based on the HST's introduction. Though Ontario and Quebec are close in proximity, and may seem to be closely tied economically, at the end of the day, the study is comparing Ontario with Quebec instead of Ontario with Ontario, essentially comparing Apples with Oranges. To assume that if the prices rise in Ontario they will definitely rise in Quebec by the exact same amount, is a huge leap of faith. Definitely the same type of leap of faith that the McGuinty Government took in hoping Ontarians would believe this flawed and biased study. The only way this Study works is if Ontario and Quebec have the exact same price fluctuations on everything all the time, and this is just not a logical assumption.

- The Study shows that Travel Services prices didn't increase as much in Ontario compared to Quebec after the implementation of the HST, but as the Study notes, there was a 3% Price Levy on Ontario Hotel Rooms used to finance local tourism that was removed at the same time as the HST was introduced (not related). Therefore, this 3% reduction in price should have been taken into account in this study, but the author chose not to include that in his metrics, and instead just made a quick side note that this reduction could "reflect in part seller's conscious decision to absorb the new tax in the form of lower industry funding for tourism promotion". This was yet another purposeful oversight used to ensure the Study's results were skewed in its financier's (the Dalton McGuinty Ministry of Finance) favour.

- The Study doesn't include the impact of the HST on New House purchases, while New House purchases falls into the category (Owned Accommodation) that has the second highest CPI of 17.3 (out of 100, with the highest being Private Transportation which includes Gasoline and Taxis and is a 17.9 out of 100). The author even notes that due to the HST being applied on New Homes, this also causes the price of the Non-New Homes (Resale Homes) to increase as well due to the market for similarly located, aged and sized homes. With the impact of the HST on New Home Prices and Resale Home Prices being applied on such high amounts (with home prices costing hundreds of thousands of dollars compared to a haircut which costs $20), though the end percentage applied for the tax may be low, the overall dollar price impact is huge at the end of the day. Yet, the author chose to exclude New Home Price increases from his metrics? Now, the author does state some reasons as to why it would be hard to pinpoint exactly how much New Home Prices account for the overall Owned Accommodation category, and this is another reason why he's excluded it from his metrics, but, given the he said that Resale homes were also indirectly impacted by the HST being applied on New Homes, really, the impact of the HST on Owned Accommodation should have been meaningful enough to include it in the calculations. If it's not possible to calculate it, then this study should not have been performed. Performing this study while excluding a critical price-increasing category in the calculation, is a yet another flaw of this Study, with this one being pretty much fatal.

Given all of these flaws -and I'm sure there are many more that a person who is more educated in this area would be able to point out as well- this study truly should be taken with a grain of salt, and should be categorized as yet another pathetic attempt by Dalton McGuinty to manipulate the public just in time for the October Provincial Election.

Please keep these flaws in mind when the McGuinty HST Manipulation Campaign heads your way this Election.


(Image: by Bobolink on flickr

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