Strategy

Taxing times on the West Coast

Does the HST referendum suggest there’s such a thing as too much democracy?

B.C. Premier Christy Clark speaks at the B.C. Liberal Party Convention in Penticton, B.C. (Photo: Daniel Hayduk/CP)

Barring a prolonged postal strike, British Columbians will decide by mail-in ballot between June 13 and July 22 whether to reverse the government’s decision to adopt a harmonized sales tax a year ago. Just how many will actually vote, though, is anybody’s guess. The last time the province held a mail-in referendum, over treaty negotiations in 2002, just 36% responded. And then it was authorizing Victoria to cede rights to natives, relatively straightforward stuff. This one will directly determine economic policy so complex, one columnist quipped, the arguments for and against “make my eyes cross.” Which leads many observers to ponder whether the limits of participatory democracy have been reached in matters of economic policy.

Advertisements by the pro-HST side, for example, offer up accountants testifying to the job-creating benefits of the harmonized federal-provincial levy over the alternative specified in the referendum question, a reintroduction of the 7% provincial sales tax—hardly the sort of stirring campaign rhetoric likely to rally a silent majority to its side. “I think most people have no idea of the economic implications of the HST,” economist Roslyn Kunin said in a television interview. It’s too much to expect ordinary citizens to micro-manage economic policy at this level, and the pendulum must now swing back. “I like the idea of having referendums on new taxes brought in,” says Canada West Foundation director Roger Gibbins, “but an adjustment to the tax system—which is what I see this as being—is not the best thing to put before the public.”

The leader of the anti-HST forces, Bill Vander Zalm, sees that as the elites unwilling to confront the public will. “When 90% of the people are wrong, they’re actually right,” he said. He has allies on the other end of the political spectrum. “It’s not Goldilocks and the three bears,” wrote Canadian Union of Public Employees national research representative Keith Reynolds. “There is no such thing as just the right amount of democracy. You either get too little or too much. Personally, I’ll take too much.”

B.C.’s referendum can be seen as a more civil version of populist incursions into economic policy going on around the world. In Portugal, voters rejected a bailout plan from the European Union that leaves its government without the means to raise money to pay for existing programs. In several American states, deficit-control laws have painted governments into a corner.

“It’s seriously uncomfortable for policy wonks to experience this kind of debate,” says Gregory Thomas, B.C. director for the Canadian Taxpayers’ Federation. As with social media, democracy is vulnerable to ill-informed “opinion bubbles.” But in B.C.’s case, he says, it could have been averted had the previous government paid more attention to the public all along. “Gordon Campbell had a year and a half to do what Christy Clark did today,” he says, referring to the new premier’s pledge, should voters keep the HST in place, to cut it to 10% (from 12% now) by 2014, offset by corporate tax hikes. Even the corporate sector indicates this is a compromise it can live with. But it may not be what the province gets. Though the referendum law sets the bar for passage impossibly high, the government has promised to respect the wishes of a simple majority.

“If we end up with the social services tax of 1949 [the original name of the PST] again, no, we will not have come away with good policy,” Thomas says.