Frances Woolley is an associate dean and professor of economics at Carleton University.
Feminine hygiene products are becoming GST-free on Wednesday, just months before a federal election. It's yet more evidence that taxes are political, and everyone fights for their corner. So why have women won this round, and what does their victory signal for the future of Canada's fiscal system?
Some economists wish taxation was simple, progressive, and politics-free. Put GST on everything, including necessities such as food, medicine, and feminine hygiene products. Use the revenues raised to cut inefficient taxes that hamper economic growth, or to increase the refundable tax credits received by low-income Canadians, or both. Everybody – rich and poor alike – benefits.
Just keeping basic groceries GST-free costs the federal government $4-billion in revenue every year. This is sold as a pro-poor measure, but it actually delivers greater dollar benefits, on average, to rich families than poor ones. A person who buys a $20 steak saves $1 by not paying GST on their purchase; a person who buys $5 in hamburger meat saves just 25 cents.
But even in countries like New Zealand, which charge GST on food, there are ongoing campaigns to exempt basic groceries from tax. Why are people so readily convinced that tax breaks serve the greater good?
I suspect some believe that it is inefficient and wasteful to collect GST and then return part of the revenue in tax credits. Nothing could be further from the truth. Governments dispense cash quickly and efficiently. Paying out the GST/HST credit has minimal administrative costs.
Exempting necessities from GST, on the other hand, is complex and cumbersome. There is GST on salted nuts, but not unsalted ones. "Puffs" and "crisps" are taxable, except for Cocoa Puffs and Honey Crisps, because they're breakfast cereals. Baby diapers are taxable; adult diapers are not. It would be simpler just to tax everything, and achieve equity goals by depositing some extra cash into every low-income Canadian's bank account.
This reasoning is why University of Victoria economist Lindsay Tedds supports the tampon tax: "I am a women with a regular menstrual cycle who is a high-income earner in a high-income household," she writes. "I support the tax on the tampons, sanitary pads, and other menstrual products I buy and by doing so I am helping fund the GST/HST tax credit that helps low and middle income women buy theirs." Professor Tedds's argument is shocking. People who earn high incomes are not supposed to admit it, even to themselves. In countries around the world, most people see themselves as middle-class. Affluent Canadians see themselves as ordinary folk who deserve a tax break; lower-income Canadians do not realize how much they stand to gain from taxation of necessities coupled with expanded GST/HST credits.
Yet even if, in a perfect world, everything would be taxed and the revenue raised used to help the poor, this world isn't perfect. Over the past 10 years, billions of dollars have gone into tax measures that predominantly benefit better off Canadians, and have dubious (at best) efficiency benefits, like pension income splitting, the Family Tax Cut, expanded TFSAs, and the Children's Fitness Tax Credit. In this context, eliminating the tampon tax is money (relatively) well spent.
I cannot think of any good reason for taxing feminine hygiene products when so many frivolous items are GST-free: k-cups of coffee; sugary junk breakfast cereal; packages of six or more Timbits. A woman can go to work hungry; she cannot leave her home without feminine hygiene protection.
Yet this has been true – and women have been campaigning against tampon taxes – for years. Why have their arguments suddenly found resonance?
The GST on feminine hygiene products is being lifted precisely as the last of the baby boomers hit menopause. Women of menstrual age now make up a smaller fraction of the Canadian population than they have at any other time in the past 25 – possibly even the last 50 – years. Demographics, combined with technologies such as the Mirena IUD, mean that giving menstruating women a tax break is cheaper than ever before.
For years, seniors have occupied a political sweet spot; a constituency large enough to be worth courting, and small enough to buy off relatively cheaply, with things like tax-free Attends. But as the baby boomers age, tax breaks directed to seniors en masse start becoming expensive. The political calculus of targeting other constituencies, like menstruating women, begins to make sense.
But if we couldn't afford to make feminine hygiene products tax-free when baby boomers were young, how can we afford to keep incontinence products tax-free now that the baby boomers are getting older?
Frances Woolley