The harmonized sales tax will increase the sales taxes that British Columbians pay, but most low and middle-income families in the province will see their total tax bill decrease, according to new research by the Fraser Institute, Canada’s leading public policy think tank.

In response to widespread public resistance to the new HST in B.C., the Fraser Institute released a report called The Impact of the HST on British Columbian Families.

The report finds that for the average British Columbian family, the total provincial sales taxes paid will be $249 higher under the HST in 2011, at $3,382 in HST, compared to $3,133 in PST.

The total tax bill for the average family will increase by $44, from $37,562 under the PST, to $37,606 under the HST. This increase represents 0.12% of the average family’s tax bill, according to the Fraser Institute.

But the Fraser Institute points out that when the B.C. government introduced its HST legislation, it also increased the basic personal income tax exemption to $11,000, which reduces the amount of tax individuals pay, and introduced an HST credit for low and modest income families.

As a result, even though low and mid-income families will pay slightly more in sales taxes, the increases are more than offset by income tax reductions and the HST credit, leaving most low and middle-income families in B.C. with a smaller total tax bill in 2011 under the HST than under the PST.

“Under the HST, B.C.’s tax system becomes slightly more progressive, due to the reductions in provincial income taxes and the new HST credit,” said Niels Veldhuis, Fraser Institute senior economist and co-author of the report. “This means most families with lower incomes will end up paying less tax overall, while most families with high incomes will pay slightly more.”

Added Veldhuis: “The truth is, low income families will be better off under the HST.”

Overall, families with incomes between $20,000 and $40,000 in 2011 will see an average tax reduction of $411; families with incomes between $40,000 and $60,000 will see their total tax bill decrease by an average of $159; while families with income between $60,000 and $80,000 will see an average tax reduction of $34.

Families in upper income groups will see a slight increase in their total tax bill. The average increase will be $65 for families with incomes between $80,000 and $100,000; $117 for families with income between $100,000 and $120,000; and $167 for families with income between $120,000 and $140,000.

The report calls these increases “negligible” given the total taxes paid by families in these income groups. For example, the $167 average increase in the total tax bill for families with income between $120,000 and $140,000 represents an increase of just 0.3%, the think tank points out.

The report says there is widespread misconception about the way the HST will impact families.

“While many British Columbians have been led to believe that the HST is a significant ‘tax grab,’ the reality is that it is not,” the report says. “The HST will have a negligible impact on the average family’s total tax bill.”

IE