Conservative Leader Stephen Harper tapped into the national contempt for the GST yesterday, promising to reduce the tax to 5 per cent if his party is given a chance at power.
It is a major plank in the party's fiscal plan and one that is widely acknowledged to have enormous popular support. Mr. Harper announced that a Conservative government would cut the goods and services tax to 6 per cent immediately, with an additional drop of one percentage point over five years.
"This tax cut is one you will see every time you shop," Mr. Harper said, adding that it is the cut that has the largest impact on ordinary consumers. "It is a tax cut you will experience, a tax cut that no politician will be able to take away without you noticing."
Senior Conservatives say the intention was to deliver the GST announcement next week but it was advanced by several days. It appeared to have the desired effect, reverberating through other campaigns during the course of the day and prompting responses from all the other party leaders.
The day-to-day impact of the cut to the GST seems relatively minuscule -- four cents on a $4 hamburger or $1 on a $100 camera. But in fact, a one-percentage-point drop means $4.5-billion less a year for the federal government coffers
When asked where he will get the money to finance the cut to the GST, Mr. Harper pointed out that the Liberal government has registered a surplus of $63-billion in the past eight years and is planning on a surplus of at least $55-billion more.
"Government has money to waste, government has money to steal, government has money to spend on benefits for a few," Mr. Harper said. "It's time for benefits for mainstream Canadians."
It was a Conservative government that introduced the GST in 1991. But Mr. Harper, an economist by trade, said he opposed the consumption tax then and he opposes it still. He said he recognizes that slashing the GST will not improve productivity; he plans other announcements to tackle that problem.
"These are tax cuts for consumption," Mr. Harper said. "This cut is more broadly based. It is fair and it is more effective in stimulating consumption than anything the government is doing."
He said that "for an average family of four with an income of $60,000 this would mean about $400 less in taxes -- savings they will see every time they go to the gas station, the shopping mall or a restaurant.
"When the GST cut is fully implemented, the total benefit will, of course, be much greater."
In fact, Statistics Canada suggests a family earning $60,000 spends about $25,000 a year on purchases which are subject to the GST. That would mean their initial annual savings would be about $250, not $400.
That point was stressed by Ralph Goodale, the Liberal government's Finance Minister, when he denounced the pledge for a cut in the GST.
Mr. Harper's handlers said later in the day that their leader had misspoken.
Mr. Goodale said that cuts to the GST benefit "big spenders" without providing much value to low-income earners. "The biggest gain will go to the most wealthy and it will do nothing for productivity."
Slashing the federal consumption tax is an idea that even Liberal Leader Paul Martin, who was campaigning in Montreal yesterday, could not dismiss as unworkable.
Mr. Martin said he will not lower the GST and will concentrate on personal income-tax reductions if there is any extra money for tax cuts. But he conceded that a consumption-tax cut, as proposed by the Conservatives, might be affordable.
"It may well be," he said, "depending on what other plans they may happen to have."
The Liberal government took office in 1993 after Jean Chrétien campaigned with a call to "axe the tax." And Mr. Martin once called it a "regressive and unfair tax on living."
But, as finance minister from 1993 to 2002, he pushed the government to keep the GST, which now brings more than $30-billion into federal coffers each year.
In last year's election campaign, Mr. Martin argued that the Conservatives' total $40-billion tax-cutting proposals would create an "American-style" black hole in the nation's finances, forcing the government to slash spending on social programs such as health care.
He has since put forward tax cuts totalling about $40-billion, including $30-billion in personal income-tax reductions announced in his government's November mini-budget.
Daniel Drache, a professor of political science at York University in Toronto, said there are other types of tax relief that more directly target low-income earners. And the sales tax is a huge source of revenue for the federal government.
But "people have never liked the GST and it is a kind of in-your-face add-on that people would like to pay less of," he said.
"This is vote-buying and vote-getting and eye-popping."
NDP Leader Jack Layton criticized Mr. Harper's proposal.
"What is clear is that reducing our financial capacity to address the real issues and challenges that are in front of Canada right now, like tuition fees that have tripled, like smog that is starting in February, like thousands of jobs that are lost in the industrial heartland of our country," Mr. Layton said. "These are the kinds of investments that our economy needs for the future."
Speaking in Laval, Que., Bloc Québécois Leader Gilles Duceppe said he will oppose a GST reduction. The Bloc argues that GST revenues could be sent to the provinces as part of a permanent solution to the fiscal imbalance, but that unilateral cuts are simply too fickle.