Sales taxes make the inflation fire worse
It’s time for Premier Doug Ford to be bold. The cost of living is soaring for Ontario families.
To deliver relief to every Ontarian across the province, Ford should cut the provincial sales tax.
Ford owes Ontarians relief. He promised to cut income taxes for the middle class four years ago and families should now be saving up to $800 a year. But Ford hasn’t delivered.
Now that the provincial budget is balanced, Ford has no more excuses.
Inflation is out of control, and Ontarians desperately need help making ends meet.
To help counter inflationary pressures on families, Ford should cut the HST.
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Sales taxes make the inflation fire worse. Because sales taxes are collected as a percentage of the cost of the goods consumers purchase, higher prices mean more sales tax revenue for the government and an even bigger crunch on taxpayers’ wallets.
Consider this example. If a taxpayer went out and bought a new Honda Civic last year, the price of the car might have been $25,000. New car inflation this year has been roughly 12 percent, which means a $25,000 Civic last year would cost $28,000 this year.
Between the feds and Queen’s Park, Ontario taxpayers are forced to pay 13 percent sales tax on virtually everything other than food and shelter. If the taxpayer bought the Civic last year, they would have paid $3,250 in sales tax. But if the taxpayer bought the car this year, they would be on the hook for $3,640 in sales taxes. That’s an increase of almost $400.
Consider some other numbers.
Statistics Canada tracks how much the typical household spends in any given year. In 2019, the average household spent $48,821 on expenses that get hit by sales taxes. That means the average household paid $6,347 in HST in 2019.
If the Ford government decided to cut the provincial portion of the HST from eight percent to six percent, the typical Ontario household would save nearly $1,000 a year.
With food prices up $1,000 this year over last, those savings could make the difference between making and breaking the family budget.
The Ford government can more than afford to cut the HST. In the government’s 2021 budget, then-finance minister Rod Phillips projected the province would bring in roughly $26.5 billion from the provincial sales tax. Instead, thanks mainly to inflation, the government brought in $30.4 billion.
That’s an extra $3.9 billion out of taxpayers’ wallets and into government coffers.
The government is profiting from inflation. Higher prices mean higher sales tax revenue.
Cutting the provincial share of the HST from eight percent to six percent would leave roughly $7.6 billion in taxpayers’ wallets. The government already brought in $3.9 billion more than expected from the sales tax last year, so savings of roughly $3.7 billion would have to be found.
If Ford stopped handing out corporate welfare like candy, that gap could easily be closed. This summer, Ford handed over $500 million to Stellantis, a Fortune 500 company, to build electric car batteries.
Ford could also cut government spending by just two percent across the board to make up the difference.
Finally, the HST hurts the most vulnerable the hardest. Sales tax relief would help those with the tightest budgets make ends meet. And current HST rebates simply aren’t cutting it.
Thanks to soaring government revenue, the Ford government managed to balance the books last year and run a surplus of $2.1 billion. With the province back in the black, now is the time for Ford to be bold and deliver relief.
Cutting the sales tax is both realistic and affordable.
The government should slash the HST, and it should do it today.
Jay Goldberg is the Ontario & Interim Atlantic Director for the Canadian Taxpayers Federation.
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