For months, Liberals have recoiled at any talk of raising the GST. But a senior Liberal MP says the idea needs to be on the table as the party crafts its long-term plan to balance the country's books.
Toronto MP Gerard Kennedy, the party's infrastructure critic, says he's speaking for himself - the Liberal leadership want nothing to do with his remarks.
A quiet debate is playing out among some Liberals who think supporting a GST increase just might win the party some credibility in a future campaign focused on how best to erase the deficit.
Leading economists, former Finance officials and Parliamentary Budget Officer Kevin Page have all said sales tax increases are required to balance the books. It has not gone unnoticed among some Liberals that in Britain, the Conservative opposition is leading the polls and winning praise for "authenticity" after proposing specific deficit-fighting measures that include some tax increases.
"I think we do need to talk about it," Mr. Kennedy said yesterday in an interview with The Globe and Mail.
"I do think we need to talk about a fiscal plan. That debate is internal to the Liberal Party now and I'm not pronouncing on it."
Conservatives attacked Mr. Kennedy this week when he referred during a press conference to a poll showing public support for a GST increase if the money went to infrastructure.
The Liberal leadership quickly distanced itself from the GST remarks, but Mr. Kennedy isn't backing down.
"I wasn't afraid to raise it," he said. "I think we're very prepared to put things on the table. I'm not the economic lead on the tax discussion. I'm not unilaterally trying to launch that into the public. I do think we need to have the debate."
He said tax increases shouldn't happen now while the economy is struggling, but should be considered as part of a longer-term deficit plan.
The Liberals' finance critic, John McCallum, insists the official party line is no GST increase now - or ever.
"I think virtually every economist would agree that was the stupidest tax to cut that one could choose - and as an economist, I agree with that - but the deed has been done and as I said several times, we're committed not to raise taxes, including the GST," he said. "It's an unequivocal commitment that we won't raise taxes."
Mr. McCallum said his party's top priority is to push proposals that create jobs. He said new Statscan payroll data showing job losses in November - a finding that contradicted earlier estimates - shows employment is the right focus for now.
The challenge for Liberal Leader Michael Ignatieff is that his position on the issue has not been unequivocal. In a December, 2008, interview, he said tax increases cannot be excluded as on option to deal with a continuing deep deficit.
"So I'm not going to take a GST hike off the table later. I just think it'd be a bad idea now in a recession," he said at the time.
Not all economists are dismissive of the GST cut. Carl Sonnen, the president of Infometrica, said his firm's economic modelling shows a two-point cut in the GST translates roughly into about 162,000 new jobs. Conversely, reversing the Conservatives' cut would mean losing those jobs.
"You can't argue that raising the GST rate won't hurt jobs. It will," said Mr. Sonnen, who said the Conservative GST cut likely softened the recession's blow. "In our analysis, we got some positives out of that [cut] for GDP in the second quarter of last year. Otherwise we might have been in recession much earlier."
