Referendum Questions: How much will the sales tax increase cost?

The Yes campaign says a typical family will pay $125 per year from the transit tax. The No side says it's $258. Who is right?

The Yes and No sides use very different estimates of what the extra 0.5 per cent Congestion Improvement Tax will cost the typical family.

The Mayors’ Council pegs the per household cost of the sales tax hike at an average of $125 per year based on statistics on spending patterns and how much the province now collects in PST from the region.

It says the increase works out to 35 cents a day, and the extra tax would be $3 on a $600 new sofa or $150 on a $30,000 car.

The No side’s Jordan Bateman rejects the $125 figure and estimates a real household cost of $258 a year.

His estimate – from simply dividing the $250 million to be raised each year by the number of households in the region – assumes every new tax dollar paid by businesses would be downloaded to their customers through higher prices.

That’s flawed, because some of the sales tax paid by Metro Vancouver businesses is on products exported elsewhere to be bought by customers who don’t live in the region.

Some is charged on business-to-business transactions.

A movie production company filming in the region, for example, will pay sales tax on what its crews buy, but it doesn’t have direct customers here who it can force to pay more.

Some retailers may even absorb the tax so their customers don’t pay more – car dealers say they may do that to ensure buyers don’t go to Fraser Valley dealers instead.

Businesses pay an estimated 45 per cent of the sales tax collected in Metro Vancouver and visitors pay another five per cent, leaving residents picking up the other half of the direct costs of the new tax.

Robin Lindsey, a transportation and logistics professor at UBC’s Sauder School of Business, said it’s likely some businesses will pass along the tax hike to residents through higher prices, increasing their indirect cost from the tax.

But he said it’s difficult to say which side’s estimate is the most accurate.

Another issue is how fairly the sales tax hike treats the rich and poor.

The mayors council estimates the poorest 20 per cent of households would pay less than $50 a year from the increase. That’s because a higher share of low-income household spending goes to necessities such as food, children’s clothes and medicine that are PST exempt.

All of the existing PST exemptions would apply to the Congestion Improvement Tax.

But, the No campaign says the poor would pay a much larger relative share of their income than wealthy households, making it a regressive tax compared to income tax, which low income earners typically do not pay at all.

“It is judged to be mildly regressive,” Lindsey said.

But he said that knock against the tax fails to take into account what the money would fund.

“It will go mainly to public transit, which is disproportionately used by lower income individuals and households,” Lindsey said. “That would be considered progressive.”

Referendum Questions is a Black Press series exploring issues related to the Metro Vancouver transit and transportation referendum. Voters must mail in ballots by May 29 on whether they support the addition of a 0.5 per cent sales tax in the region, called the Congestion Improvement Tax, to fund billions of dollars worth of upgrades. Follow the links below to read more in this series.

Just Posted

Flames lose at home, win in Mission

Host Kodiaks on Friday night

Weavers and spinners to kick off holiday shopping

The Whonnock Weavers and Spinners’ 38th annual exhibit and sale takes place Nov. 25

Strong support for Pitt Meadows transportation projects

Overpass/underpass projects get majority support

Police aim to prevent retaliation after Hells Angel found dead in Maple Ridge

IHIT confirms Chad Wilson, 43, was the victim of a ‘targeted’ homicide

Ridge Meadows Hospital parking is still pay, but streets free

Surrey has removed meters on streets, asking Fraser Health for free parking at the hospital

UPDATE: IHIT confirms identity of Hells Angels homicide victim

Chad John Wilson was one of four men arrested in Spain in 2013 on allegations of smuggling cocaine.

Former NHL player and coach Dan Maloney dies at 68

Maloney coached the Toronto Maple Leafs and Winnipeg Jets

Ex-MSU president charged with lying to police about Nassar

Lou Anna Simon was charged Tuesday with lying to police during an investigation

Otter makes a snack out of koi fish in Vancouver Chinese garden

Staff say the otter has eaten at least five fish

Police looking into two more incidents at private Toronto all-boys’ school

Police and the school have said two of the prior incidents involved an alleged sexual assault

B.C. lumber mills struggle with shortage of logs, price slump

Signs of recovery after U.S. market swings, industry executive says

25% of Canadians still won’t say they use pot, survey says

Statistics Canada poll says Canadians on average were 18.9 years old when they first tried pot.

Canucks’ 50/50 jackpot expected to surpass $1 million

The guaranteed prize for one lucky winner will be $500,000 minimum when Vancouver hosts LA Nov 27

The latest advent calendar trend: Holiday cannabis

A Canadian company is giving people from coast to coast a new way to celebrate the Christmas countdown.

Most Read