TAX NEWS - June 2010

Canada Tax: As HST discontent grows, Liberals must trudge onunder Campbell

One could probably raise a lot of money among disenchanted B.C. Liberals by auctioning off posters, mugs and T-shirts emblazoned with a photograph taken at motorcycle awareness day at the legislature three years ago.

There's Blair Lekstrom, MLA for Peace River South, decked out in shades, leathers and skid lid, decisively gripping a set of handlebars on a cruising bike.

There behind him in the biker gal position, clutching him tightly and beaming for the camera, is Carole Taylor, the province's then minister of finance.

The original anti-harmonized sales tax Liberal, Carole "not on my watch" Taylor, paired with harmonization's newest critic, Blair "put the brakes on it" Lekstrom.

An unlikely pairing. But maybe the combination to reunite the fractured governing coalition in its current troubles.

Lekstrom, independent-minded enough to publicly oppose his own government on matters of principle and hailing from one of the hinterland ex-Social Credit ridings where the anti-HST backlash is strongest.

Taylor, the urban Liberal, who balked at harmonizing the provincial sales tax because it would 1) hurt consumers and 2)mean the sacrifice of provincial control over tax exemptions.

Taylor, the one name among putative Liberal leadership hopefuls that gives pause to the New Democratic Party.

"She won't come back from retirement -- will she?" New Democrats say in the hope-filled tone you hear from Liberals on the subject of their leader's future plans: "He'll quit soon -- won't he?"

But there's the problem with the above-mentioned dream team -- emphasis on the "dream" -- or any other scenarios predicated on a change in the Liberal leadership any time soon.

First of all, the job is occupied. Second, if the current occupant were to go now, he would be leaving behind some enormously messy unfinished business.

For all the speculation that Premier Gordon Campbell could/should/would step down soon, his departure would blight the leadership succession so long as the HST is on the front burner.

Most likely, the dominant issue in the race would be a bitter debate about the tax, whether it was a mistake in the first place, how to get out of it, whether it is even possible to get out of it, and what it would cost to do so.

Any candidate suggesting the government should back off would have to address the concern identified by Lekstrom in his parting comments Friday. Namely how to replace the $1.6 billion in federal transition funding, which is already booked into the three-year budget and fiscal plan and would have to be made up somehow. More debt? Other taxes? Spending cuts?

For the government (as opposed to its many critics) the days of easily reversing course on the tax are long gone. Moreover, the Liberals actually believe it is a good policy change for the economy in the long run. Just in case you thought they undertook it as a vote-getter.

Turning back now would shatter their credibility with investors while gaining them little with an already alienated electorate. They've concluded the only hope, however remote, is to stick with the tax long enough for the economy to turn around and for the anger to fade.

But having decided to soldier on with the tax, the Liberals face a series of showdowns with the anti-HST forces. The initiative process, extending to hearings before a committee of the legislature in the fall. A referendum vote, likely in the fall of 2011. The threat of recall. Trouble enough to survive all those challenges. Harder still to weather them while trying to manage leadership succession at the same time.

Alternatively, the governing party could continue on the course it has charted for itself under the current leader. Campbell leads them through the initiative, recall and referendum processes. If he manages to beat back the anti-HST forces, he announces his departure in late 2011 on his own terms.

The party schedules a leadership convention for early 2012. The new leader takes advantage of a clause in the five-year tax agreement with Ottawa to trim the provincial share of the HST by a point or two effective July 1, 2012. The government then moves up to the election date to the fall of 2012 and the Liberals, under a new leader, go for a fourth term.

Granted any one of the multiple "ifs" in that scenario could go the other way. Granted the electorate may figure it is time for a change never mind who leads the Liberals. Granted if Campbell somehow survives all those tests, he may decide to go for a fourth term himself.

My only point is this: I don't see the Liberals being able to work leadership change as long as the party is embroiled in the public uprising over the HST. Having decided to fight on with Campbell's tax, they have no practical option but to do so under the leadership of the guy who inflicted it on them.