B.C.'s harmonized sales tax coupled with income tax cuts will leave most low- and middle-income households in the province better off, a new study says.
"There is a lot of misinformation out there about this being a major tax grab," said Niels Veldhuis of the Fraser Institute, which produced the report.
According to the report, B.C. families will pay between $72 and $403 a year in additional sales taxes, depending on income level. However, for households making less than $80,000, income tax cuts and HST credits will more than cover the additional costs.
A family earning up to $40,000 should expect a $411 savings in their total tax bill. A family earning up to $60,000 will save $159, while a household bringing in $80,000 will save $34, according to the report. Households with higher earnings will see a slight increase in their total tax bill.
The total tax bill of the average family will increase by $44, Mr. Veldhuis said. "Compare that to the $37,000 or so in taxes they are already paying, and it's a wash for the average Canadian family," he said.
The report said that past experience in the Atlantic provinces demonstrates that consumer prices will fall as businesses pass on tax savings from the HST.
B.C. consumers should expect businesses to pass on 90 per cent of their tax savings by 2011, said Mr. Veldhuis.
Earlier this month, the government of Ontario made a more conservative prediction for when it harmonizes its sales tax with the federal goods and services tax on July 1. Ontario expects only 20 per cent of the savings passed through in the first year, increasing to 90 per cent by the third year.
Mr. Veldhuis called Ontario's estimate "extremely conservative." He attributed the difference to the fact that the Fraser Institute analysis starts in 2011 instead of 2010.
Mr. Veldhuis said he hopes the report will cut through "misleading" information from HST critics.
"People are emotional, and their emotions are getting fed by the anti-HSTers. When you are already paying $37,000 in taxes, as the average family does, anytime someone talks about an increase, you get upset," he said.
The Fight HST campaign has more than 653,000 signatures on its petition. A successful petition, approved by Elections BC, would allow the campaigners to put proposed legislation to revoke the HST before the legislature.Report Typo/Error
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