HST and Income Tax Causing Fall of Empires
History repeating again. Mighty rulers of empires have fallen many times over this.
Your subjects do not like to be taxed.
Yesterday, it was Obama, got a dose or reality. America’s infatuation over change has faced the new reality, that nothing changed for over two years.
Today it’s British Columbia. The Premier could not stop the tide of discontent of Province’s people by giving a soothing lecture last week and cutting income tax.
In BC, people do not like HST to being with, and more than that, how it was implemented and imposed on BC.
Simply put, it has blind sided every common people in BC.
There were no public input, no advance sign and no discussion about the benefits of HST on overall economy.
The Liberals have failed massively to get any support for HST.
The Premier in his resignation speech mentioned about personal attack, and the cause of stepping down as BC Premier.
Well, it was his personal decision to implement the HST as the way it got implemented.
He must take responsibility.
Cheers for the people of British Columbia. More power to you.
U.S. Tax Revenue To Take A Dive With This Election Result
After largely getting rejected by the US voters on midterm election, the U.S. President came out with the first compromise on Income Tax for middle class families.
In his after election defeat press conference, He said that he will work with the Republican controlled Congress to keep the tax increase at a minimum for middle class families. There is still the issue of Tax Increase of upper-income families.
The President was ready to let expire the Bush tax cut on Upper-income families
With the Congress now under the republican control, it will be next to impossible without some major compromise on other issues for the Democrat President to expire the Bush tax cut.
What it mean on the macro level for U.S. economy?
It is already being called scary. The current U.S. deficit is on a rising trend and is at US$200 trillion. If U.S. was a corporation, it would have been declared bankrupt.
Since the Tax increase is going to be rejected and blocked by the Congress, there is no way U.S. will be able to reduce the deficit to a more manageable level. Instead it will keep ballooning.
As soon as other countries will realize the dire situation the U.S. economy is in, they will refuse to do business with U.S.
Would you like to give credit to a Bankrupt company? Do the Banks give credit to a Bankrupt person?
How would you like to do business with a Bankrupt U.S.?
U.S. will bear the burden of this midterm election for a long long time.
Tax Incentive to Start US Economic Engine
GDP growth
The recession was over a year ago, but the economy has not shown enough steam to move ahead to stimulate job and spending growth.
GDP data is showing a continued existence of unemployment, spending contraction, poor business environment and housing market, which will continue to inflict pain of recession on the US economy.
This brings us to the inevitable tax changes on the personal and business income in 2011. It is pretty much confirmed, in US people making over $250,000 will bear a higher tax burden in 2011.
With the GDP results, US President Obama, tried to gain support for his proposal for accelerated tax write-offs for business investments for equipment.
Reason being, businesses will invest in new equipments, hire skilled workers and increase productivity and save on income tax.
But smart businesses will look at the GDP data and the future outlook is not rosy enough for them to beef up productivity and start hiring, just to increase stored inventory.
This time, sustained economic recovery’s main catalyst is real recovery in the labor market. Until people have jobs and businesses gets confidence to hire new employees, US is faced with a continued slow or negative growth in the economic recovery from recession.
After spending increase in this holiday season, the first quarter of 2011 GDP is expected to contract and nose dive confirming, US businesses does not have confidence in published economic recovery news in the media or by the politicians.
Why BC Provincial Income Tax Rate Cut to Can’t Save HST
On October 29, 2010 BC Premier Gordon Campbell in a Television Advertisement announced 15% Provincial Income Tax Rate cut on an income up to $72,000, starting January 1, 2011.
Underlying assumption is this income tax rate cut will give people more money in hand to cover the cost of HST.
How much money people will be saving?
“Immediate savings of $354 for people making $50,000/year and up to $616 for those making $72,293 or more.”
Let’s do the math here. If you are making $50,000 this tax cut will save you 0.7% of your income and if you are making $72,293 you will be saving 0.85% of your income. As far as I am concerned, this tax savings is insignificant. People making over $50,000 do not care about saving 354/year.
People who would benefit from this will still pay 100% of HST. Over 80% of BC residents make less than $30,000 per year. How much savings are they going to get with this income tax rate cut? Is this tax savings going to cover the HST impact on their expenses?
Bottom line, HST is good for business and the province and Income Tax Rate Cut is a welcome relief. But HST is still going to hurt consumers. Now its time for businesses to stand up and announce the savings they are transferring to consumers.
Home Buyers Are Ignorant about HST in British Columbia and Ontario
I wrote about this myths about HST is causing a havoc in real estate market where HST was introduced in July 2009.
Home buyers are ignorant about HST and also real estate experts have failed to send the message about the net effect of HST to the prospective home buyers.
A recent study confirms my conclusion about HST and Real Estate market.