NDP Policy Proposal Hurts Working Families

The provincial NDP has introduced a private member’s bill into the legislature calling for the elimination of the 8% provincial share of HST on home heating fuels. This will help create jobs in other provinces, while reducing them in Ontario. Here is why.

The NDP proposal calls for removal of the tax on natural gas, heating oil, and propane, but not electricity. When a product is cheaper, people consume more of it. In the case of this tax shift, consumers will shift away from electricity, to fossil fuels. Virtually all of Ontario’s electricity is made in Ontario, by Ontarion’s. But Ontario produces almost no natural gas, propane, or heating oil. We are setting up an incentive to shift jobs out of the province. I am not the only one in the province with a choice of fuels (in my case, wood, electricity, or oil).

Even worse, the incentive to invest in energy efficiency is also reduced. Today, if you invest in conservation, such as a low flow shower head, or a compact fluorescent or LED light, or insulation, or an energy efficient furnace, you pay the full HST. Removing the HST on the fuel, but not on the fuel saving technologies, will cause a shift to consuming more (imported) fuel, and less investment in energy efficiency. This is the exact opposite of what government tax policy should encourage. Interestingly, investments in energy efficiency has some of the highest local content of any type of investment. And certainly more than “investing” in buying more fuel from outside the province.

Also bad, removing the tax on fuel penalizes those who try to be frugal with their use of fuel, and provides a bigger tax break to fuel wasters. Someone who uses a nighttime setback thermostat, or who takes short showers, or who wears a sweater in the winter and shorts in the summer receives less tax reduction that someone who keeps their windows open all year, sets the thermostat at 23 degrees year round, and fills a bathtub every day.

If the NDP wants to help working families, they should suggest another way to do that. The proposed tax reduction would save the “average” Ontario family $100/year. A $100 income tax credit would put the same number of dollars in people’s pockets as the proposed fuel tax exemption. But it wouldn’t distort people’s behaviour in a way that reduces jobs in Ontario by encouraging fuel switching, reducing conservation investments, and rewarding fuel waste.

Tax policy matters. The NDP needs to get it right.

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