In British Columbia there is a hot debate going on about the government’s plan to adopt the Harmonized Sales Tax, so that taxation rules will be the same as those for the Federal Government’s Goods and Services Tax. All the debate has been about the way the measure has been introduced and about the effect of this measure on business and consumers. Not a word about the environment.
Taxes can be evaluated in a number of ways — their revenue-generating potential, their effect on macroeconomics, fairness, wealth redistribution, ease of collection, etc. They can also be evaluated in terms of their effect on people’s behaviour. I would like to focus on just this behavioural aspect.
With a sales tax such as the GST or HST, it is fairly simple. The tax makes things cost more, so people will divert some of their spending to untaxed items. British Columbia has instituted a “carbon tax” which will have the effect of reducing consumption of fuel. The GST/HST, being a tax on almost everything, won’t change much in BC. If it has any effect, it will be to divert shoppers to the US, Alberta, or online merchants. It will also encourage the informal, undocumented underground retail economy.
This is a shame, because sales taxes (like the carbon tax) have the potential to reduce our impact on the environment, simply because some kinds of spending have more environmental impact than others. For example, human services have virtually no negative environmental consequences. Small durable goods have a small environmental impact, while large objects and objects with a short lifespan have relatively large environmental effects.
So maybe we should have a sales tax system that reduces our ecological footprint:
- Zero tax on human services
- A tax on durable goods based on their weight
- A higher tax on disposable goods, based on their weight.
- Surtaxes on goods which are toxic or otherwise very bad.
Make them revenue-neutral, or use them for improved government services, but let’s have taxes that make it easier and cheaper to do the right thing for the planet.