At last, a federal demand

More good news. Apparently the Tories are serious about using the coming "fiscal imbalance" beard-pull to push the provinces to harmonize their sales taxes with the federal GST, as this piece and this piece suggest. The feds cut the GST, leaving fiscal room for the provinces to take up -- but only if they harmonize. Why is this great news? Because provincial sales taxes are a mess -- almost as much of a mess as the old Manufacturers' Sales Tax the GST replaced. On the one hand, they don't apply to services, artificially skewing consumption and production in their favour. On the other hand, they do apply to business inputs, compounding the tax burden. On both scores, they are inferior to the GST. And since the two taxes apply to different bases, they give rise to four different tax regimes: GST/no-PST, PST/no-GST, GST & PST, no-GST & no-PST. The Taxpayers Federation is steaming about this, claiming that an offsetting rise in provincial tax would rob taxpayers of the cut to which they're entitled. But if the Tories can use the GST cut to put the fiscal imbalance issue to rest, and remove a major source of complication and distortion in the tax system, then the cost -- $5-billion in forgone revenue for each percentage point, money that might have been used to cut income taxes -- will have been well worth it.