Winnipeg Free Press - PRINT EDITION

Will Doer opt for tax on death, fun?

Hopping on board with HST may become political anvil

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Will he or won't he get on board with the HST? Only Premier Gary Doer knows for sure and he's not telling.

At least not yet. But it's becoming more and more clear that the premier is going to have to make a decision sooner rather than later.

Last week, word got out that Manitoba was considering a request by the federal government to harmonize the provincial sales tax with the Goods and Services Tax, creating a Harmonized Sales Tax (HST). It's a controversial issue because it requires provinces to expand their PST base to match the broader GST base. And that means more sales taxes on more things.

Doer has been extremely cautious about discussing the HST proposal. However, in an interview Thursday, Doer made it clear that the province is seriously considering the federal proposal although the two sides have not started formal negotiations.

"The federal government said the door is open to Manitoba and we'd be irresponsible not to take a look at what's on the other side," Doer said. "But we don't go through every door."

That does not mean Manitoba is going to jump on the HST bandwagon, joining a majority of Canadian provinces. But it does mean Doer has to make a decision this fall.

Doer noted that if Manitoba got on board, it would want to implement the HST at the same time as Ontario and British Columbia. Both provinces have accepted Ottawa's offer of financial compensation and are scheduled to unleash an HST next July.

To meet that timetable, Manitoba would have to make adjustments in the 2010-2011 budget, which is delivered in late winter. Planning for that budget is underway now, leaving little time to complete negotiations with Ottawa and massage the tax system in Manitoba to mitigate the impact of the HST.

Offsetting tax cuts or rebates are generally part of implementing an HST because in essence, it is a shift in tax burden from business to consumers.

Collecting and remitting one sales tax instead of two and enhanced tax input rebates on a broader base of goods and services make the HST extremely attractive for businesses. Some believe not having an HST will discourage businesses from investing here.

It is for these reasons that Manitoba business lobbyists have pushed hard for sales tax harmonization. Not all businesses mind you; those that produce PST-exempt goods and services aren't happy with the development.

And what of consumers who pay more tax on a broader range of goods and services? After a decade in power during which the NDP government has introduced a number of tax cuts, Doer is under a lot of pressure to ensure he does not do any fundamental damage to the NDP brand.

Doer likes to call the HST a "tax on death and fun" because it would add sales tax to things as varied as funerals and gym memberships. As a result, Doer said he would not contemplate an expansion of the sales tax base without bringing in offsetting tax cuts in other areas. And the most logical choice would be income tax cuts, he added.

"If you're going to tax death and fun, you better bloody well have a way to soften the blow of that," Doer said.

But at a time when the economy is unstable, it will be a difficult balancing act to estimate the increased tax burden from the HST and then calculate the income tax cuts needed to re-balance the playing field. Even with countervailing tax cuts, there is a very good chance Doer will wear the HST around his neck like a political anvil.

Doer has done backflips during the last 10 years to avoid provoking the business lobby. Although he's never going to win a formal endorsement from a chamber of commerce or a business federation, Doer has avoided an all-out holy war .

That would make the adoption of the HST a no-brainer. Except for the fact that Doer has also tried to disown the old knock against the "tax and spend" NDP. There is no getting around the fact the HST is a tax hike and it does not take a genius to realize this is going to be ammunition for the premier's political enemies.

Doer related a story about conversation he had with a former U.S. governor who recalled that during his time in office, he lowered nearly two dozen taxes and only raised one. Despite that impressive record, the former governor noted that all anyone remembers of his time in office was the one tax hike.

At this stage of his career, Doer probably has to worry if this is the issue that voters will remember him by.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition August 21, 2009 A8

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