Donald Savoie is right, the government can’t win a referendum on an HST increase, if “winning” is defined as getting approval to do it. Of course, the government doesn’t want to win a referendum on raising the HST, they want to win the next election. The way to do that is by not breaking promises. Raising the HST or failing to balance the budget would break promises. So, they need a third way. Enter the bait and switch. It is a tried and true political tactic.

Need to balance the budget but don’t want to take the heat for hard decisions? Easy, scare taxpayers. Give them a series of unpalatable choices – doing nothing and passing the debt on to their kids, a dramatic rise in consumption taxes, drastic cuts in the services they cherish most – then offer them a more modest alternative: raising corporate taxes and taxing the rich. What would you choose, what would anyone choose? After all it is always easier to ask someone else to pay.

Here’s the rub. You, the average taxpayer of New Brunswick, pay either way. On corporate taxes, the math is relatively simple. When “their” taxes go up, three things happen: prices rise, wages stagnate and investment returns (the money that funds many of your pensions) fall. You pay, because there is no “them.” A corporation is a shell made up of the people who invest in it and the people who work together to create whatever product or service it sells. It is funded by the people who buy those goods.

Now you know why business lobby groups never seem too fussed by corporate tax increases. They don’t pay the taxes, so why should they worry if taxes go up?

Fine then, let’s just tax the rich directly. Don’t worry, we will. It is great political cover and plays well on TV. The problem there is that there are not enough truly “rich”people to make a difference. Well if we had usurious rates of taxation, say 60-70-80 per cent of all types of income and wealth, maybe there are enough of them. Of course, people and money can move, so rates four or five times what others charge will end up being counterproductive. The targets of our taxes will flee, money in hand, taking the government’s cash cow and, by the way, likely your job with them.

OK, redefine rich. Introduce a new tax bracket, say at somewhere between $100,000 to $150,000. Lowering the rate and broadening the base is sound tax policy after all. Let’s get all those doctors, university professors and fat public servants to pay their fair share. You see the problem right? A large number of those making over $100,000, maybe even the majority of them in New Brunswick, work for you, the taxpayer, so you get to pay again. Out one hand, into another and then right back out again in wage demands next year to restore take home pay to previous levels.

Now you know why public sector unions love to push for higher personal taxes on their members. They don’t pay the taxes, so why should they worry if taxes go up?

Voters are not stupid, they have figured most if not all of this out already. That likely explains the findings of some Harvard economists who looked at the electoral success of governments facing structural deficits. It turns out voters punished the tax and spenders and rewarded those who actually cut spending, even when the spending cuts saw a real reduction in programs offered.

The Canadian examples to support this conclusion are not that hard to find. Consider the relative popularity of the Chr├ętien Liberals. They cut transfers, reduced programs and shrank the public sector in real terms. Yet they were reelected to three consecutive majority governments. Of course, they didn’t need to cut as deep, or for as long as they might have because they had been given a rich legacy from the equally unpopular Mulroney Conservatives.

That government had increased debt and raised taxes instead of cutting spending, actions that ultimately contributed to its spectacular fall from grace. But it had also pushed for free trade and focused on consumption over income taxes, actions that eventually left prime minister Jean Chr├ętien’s government awash in cash. Had Premier David Alward’s predecessors followed the advice they were given by experts: lower income taxes, raise consumption taxes, increase transfers to individuals and knock down barriers to trade with western Canada, the situation in New Brunswick would be far different than it is today.

That advice is still solid economically, but recall the issue today is politics not economics. If Premier Alward is a smart politician, he will keep cutting. If he isn’t, hang onto your wallets. Charles Cirtwill is president of the Atlantic Institute for Market Studies, an independent economic and social policy think tank based in Atlantic Canada.