Economics

From the government point of view, providing public services like public transportation, electricity, and highway require huge amount of fund. The countrys government collects the money from citizen. This mechanism of collecting money from the public is called taxation. Since the general objectives of taxation is to raise revenue to enable government to provide many kind of public services and sometimes it becomes a subsidy for particular services, the type of taxes are vary depending on the object of taxation (individuals, organizations, or businesses), the percentage of collected taxes, and also government agency that collect it.

Since a government has two concerns that potentially in contrast one another between raising the collection and running the economy, the decision of determining percentage of taxes, known as tax rate is carefully planned.

Talking about tax rate impact on the economy, we should flash back to the several decades ago when the theory of Supply Side Economics grew in 1970s. During the period, there was a believe that the lower tax rates would favor business since it improved private sector incentives that led to higher employment, productivity, and output in the US economy. The theory also explains that a cut in tax rates aimed at increasing tax revenue, and thus not increase the government deficit.

Concerning the tax issues, this paper will discuss about the Harmonized Sales Tax (HST), which already implemented in several provinces in Canada, and soon will be implemented by other provinces the Ontario and British Columbia. The discussion include the background selection of an article discussing HST implementation in Ontario, analysis of pros or cons tones in the article,  pros and cons, and also article critiques.

Implementation of Harmonized Sales Tax (HST) in Ontario
The selected article is Harmonized Sales Tax Becomes Law In Ontario, which is written by Laura Stainer. The article is post online at  HYPERLINK httpcanadianaffairs.suite101.comarticle.cfmharmonized_sales_tax_becomes_law_in_ontario in December 9 httpcanadianaffairs.suite101.comarticle.cfmharmonized_sales_tax_becomes_law_in_ontario in December 9, 2009. The underlying reason of choosing this article is that it highlights both benefits and story behind the rule out of HST in Ontario. The benefits are from the supporter of HST, the Liberal government, which asserts that the rule out of HST will create over 600,000 new jobs in Ontario (Steiner, 2009).

In contrast, this article also reveals that the rule out HST in fact will cause unfavorable impact to Ontario. This opposition to the implementation of HST comes from Ontarios New Democratic Party (NDP), which is also backed by federal counterpart. In addition, this article also reveals the counter argument from First Nations that counter the government argument regarding the HST. In general, this article provides both pros and cons views that make this article interesting and noteworthy (Steiner, 2009).

Analysis of Steiners Article Pros and Cons

Pros
As the harmonization of taxes in Ontario is support by the province liberal government, the pros of this legislation come from the province official. The article quotes Dalton McGuinty, the leader of Ontarios Liberal government in which the most part of government support the rule out of Harmonized Sales Tax (HST). The impact of Harmonized Sales Tax is customers will have to pay tax at 13, combining the previously federal Goods Service Tax (GST) at 5 and provincial sales tax (PST) at 8. By implementing the HST, the liberal government sees more revenue will come to Canadian Revenue Agency that acts as the collectors of the tax since the number of items in HST increases compared to the previous tax scheme (Steiner, 2009).

Cons
The cons of this article come from Lisa MacLeod revealing that the implementation of Harmonized Sales Tax (HST) in Ontario would add burden to citizen where she said, We did everything we could to stop the 3 billion tax grab on families and the middle class (Steiner, 2009).

This is due to the taxes influence many aspects in an economy. The two most important aspects are probably that taxes tend to discourage work since they lower the amount of after tax income that workers brings to home. The high tax rate also discourages saving and investment since they lower after tax returns. In addition, the high tax rate also distorts workers decision to invest since it is taxing different types of capital unequally (Roubini 1997).

In contrast, a change in the tax rate (lower tax rate) will likely to achieve the desired increase in output. This is because lower tax rate on wage, for instance, will increase the labor supply, thus lowering unemployment. It means that lower tax rate will favor business since this increase the employment, reduce the pre-tax real wage and increase the post-tax real wage (Roubini 1997).

This situation also applies to savings. When there is a lower tax rate on interest and capital gains, we would expect that there would be an increase in savings including IRAs and 401(k) plans since savings become more attractive. Moreover, in equilibrium, this situation will cause the decreasing lower real rates of interest, which in turn increase saving flows to capital markets, and raise investment (Roubini 1997). In short, the increasing investment will favor the economy since it leads to higher capital, increasing labor productivity, and higher output and wages.

Critique of the Steiners Article
Support arguments of HST Implementation
The article from Laura Steiner equally describes about the pros and cons to the issue of Harmonized Sales Tax (HST) implementation in Ontario. Mostly the pros side in the article is taken from the countrys federal government that supports the implementation of HST.

One issue that federal government believes to be the benefits of implementing HST in Ontario is the creation of new jobs up to 600,000 jobs. Based on their own analysis on the HST implementation, The Liberals fiercely defend their stances to rule out the tax scheme, which is still becoming a intense public debate prior to the data of implementation on July 2010 (Steiner, 2009).

Commenting to the implementation plan on July 1, 2010, Premier Dalton McGuinty asserted that HST is considerably the modernized tax system that designed to cope with the future government challenge in the province development. He also says, I think people understand, in their heart of hearts that our world has changed, and the old world is not coming back (Steiner, 2009).

Counter arguments of HST Implementation
Tax is a national economy mechanism to collect money from taxpayers or citizens. Although, the HST is the combination of Goods Service Tax (GST) at 5 and provincial sales tax (PST) at 8, several parties counter the implementation for some reasons.

One party that fiercely against the HST implementation is The First Nations, which held several protests, which shut down streets outside the provincial legislature, and Sault St. Marie Ontario. One underlying factor that drives First Nations to carry out massive protest is because in Canada, First Nations are excused from any tax and the implementation of HST will cause violation to their rights (Steiner, 2009).

In the National Post, they argue that the implementation of HST violates their autonomy. To show their counter actions, First Nations reveals that they launch a campaign against the controversial tax measure, which they say could include more roadblocks as well as legal action (Steiner, 2009).

Moreover, this article also reveals that the rule out HST in fact will cause unfavorable impact to Ontario. This opposition to the implementation of HST comes from Ontarios New Democratic Party (NDP), which is also backed by federal counterpart. In addition, this article also reveals the counter argument from First Nations that counter the government argument regarding the HST. In general, this article provides both pros and cons views that make this article interesting and noteworthy (Steiner, 2009).