When Canadians were considering the Mulroney government’s proposal to replace the old manufacturers’ sales tax — yes, a country with historic insecurities about its undersized manufacturing sector levied a special tax on that sector — the Financial Post published an eight-page insert, written by Andrew Coyne and one W. Watson, saying that the proposed GST was a “Generally Sensible Tax.” In that assessment, your authors reflected the opinion of most of the country’s economists.

If we were to write a new and updated insert about the Harmonized Sales Tax, which folds provincial retail sales taxes into the federal GST, thus extending their bases and at least in theory making possible lower tax rates, the verdict might not go as far as “Highly Sensible Tax,” but would certainly reach at least “Halfway Sensible Tax.” You reduce two tax-collection bureaucracies to one. You tax essentially all consumption, both services and manufacturing, at the same rate, thus contributing to tax neutrality. You provide input tax credits so there’s no “tax on tax” as intermediate goods work their way through production. And you make the tax an add-on charge at checkout so people never forget it’s there and notice right away when it goes up. (It’s no accident that in almost 20 years the GST rate has only been lowered, never raised. By contrast, the hidden manufacturer’s sales tax, which most Canadians probably were unaware of, was raised several times during its 75-year life.)

In sum, if you must have a consumption tax, the GST/HST isn’t a bad tax to have.

But now, 500,000 British Columbians having signed a petition requesting such, their province is going to have a binding referendum on whether to keep the HST that Premier Gordon Campbell’s government introduced not three months ago. What’s going on here?

It’s possible that some people who signed the petition don’t actually oppose the HST. Maybe they just wanted the signature-seekers to go away. Or they like the idea of referenda in principle. Or they think that on an important question of taxation voters should have a say, whether yea or nay. (As Tony Blair writes in his new autobiography: “As people become better educated and more prosperous, they don’t necessarily want someone else, anyone else, making their choices for them.”) Or maybe they’re mainly annoyed that the government didn’t mention its HST plans in the 2009 provincial election — a no-doubt calculated oversight the province’s Finance Minister has now apologized for, hoping thereby to re-focus the upcoming referendum debate on the merits of the tax itself.

It would be wrong, though, to write off the 500,000 signatures as all being sour grapes or procedural objections. Despite expert opinion, or maybe because of it, hundreds of thousands of British Columbians seem mad as hell about the HST and would clearly prefer not to have to take it anymore.

We hear a lot about the U.S. Tea Party movement. The usual view among Canadian elites, especially in the media, is that it is simply one more manifestation of American primitivism: Republicans are bad enough, but now there’s something to the right of that!

It turns out lots of Canadians are also pretty angry about government. Maybe some British Columbians just want to go back to the old provincial sales tax, while others have various technical quibbles about the HST. But most evidently just don’t like taxation — a very un-Canadian position to take — and will vote against taxes anytime they’re given a chance to, in good part, presumably, because taxes finance government activities they don’t approve of. There is a time-honoured legislative tradition that if you want to cut spending, cut taxes first and a debt-averse legislature eventually will have no choice but to take the axe to expenditure.

Is it just B.C. and the well-known nuttiness of politics on the Pacific slope of the Rockies? Probably not. Ontario Premier Dalton McGuinty has also been feeling the sting of taxpayer displeasure following his province’s initiation of an HST on July 1. Ontario doesn’t have the same referendum rules as B.C., but if it did there might well be a voter uprising in central Canada, too.

There are obvious dangers in what amounts to B.C.’s HST-party movement. Many supporters of the HST, economists and business people included, share the same pro-market, smaller-government values as the HST’s opponents. They are, in many respects, natural allies. Just as in the United States the war between Tea Partiers and Republicans may end up electing Democrats, there’s a danger that too vigorous a debate between HST supporters and opponents will alienate two groups whose world view is more alike than different. It’s therefore important as the debate proceeds that both sides take care to avoid what might devolve into a civil war on the country’s right.

Artical compliments Finincial Post