HST will hit some hard: Analysis

The average B.C. household could take a hit of $521 next year as a result of the harmonized sales tax, according to a model prepared for the Canwest News Service by Statistics Canada.

The change could range anywhere from $78 for households with single parents and one child to $801 for a married couple with no children, the figures show.

"There are certainly individuals and households that will feel the impact of this tax," said Dr. Herbert Schuetze, economics professor at the University of Victoria.

At the request of the Canwest News Service, Statistics Canada analyzed 15 different household types and 15 different income classifications using its social policy simulation database and model.

The model is used by the federal government and other organizations to analyze financial interactions between government and individuals.

For the Canwest HST analysis, it synthesized four databases -- the Survey of Household Spending, Survey of Labour and Income Dynamics, EI claimant history and personal income tax returns -- to establish a sample of B.C. households.

The figures suggest the more money households bring in, the more they will pay.

For example, a household with an annual income of $40,000 to $50,000 will pay $253 more because of the HST, while households in the $80,000 to $90,000 range will pay $1,128 more annually.

"It looks like families get hit pretty hard," Schuetze said.

The budget documents showed a family of four with $30,000 of income coming out ahead $535 annually, while a family of four with an income of $60,000 would spend an extra $107 a year and a family of four with an income of $90,000 would spend $178 more.

According to the province, single individuals with an income of $80,000 faced a $314 increase in spending, while single people with $25,000 incomes would end up $2 ahead and a senior couple with an income of $30,000 up $1 annually.

The Fraser Institute delivered a different perspective on the impact of the HST, saying the total tax bill will decrease for low and middle-income B.C. families. That's because even though these families will pay slightly more in sales tax, those increases will be more than made up for by income tax reductions, as well as the HST credit, said Niels Veldhuis, senior economist for the Fraser Institute.

Under the Fraser Institute's model, families with incomes of between $20,000 and $40,000 in 2011 can expect an average tax decrease of $411.

The Fraser Institute used different criteria than Canwest to describe a family, stating it was made up of two or more persons.

Families with incomes of between $40,000 and $60,000 will see their taxes reduced by an average of $159, the institute said. The tax break would shrink further, to an average $34 for families with an income of between $60,000 and $80,000, it said.

Perhaps the largest unknown is behavioural change caused by the new tax.

Schuetze said that is a significant caveat.

"It may be an overestimation of the impact in part because there's no change in consumption assumed here," he said.

Many Victoria residents said they would be cutting back on expenditures after July 1.

"I may have to make some cutbacks, like eating out, and I will have to think more before I spend," said Jeff McKay, a 33-year-old executive with Oak Bay Marine Group.

(The analysis is based on Statistics Canada's social policy simulation database and model. The assumptions and calculations underlying the simulation results were specified by Canwest and the responsibility for the use and interpretation of these data is entirely that of the Canwest News Service.)

Source: canada.com