The federal government is considering a tax exemption for online purchases from the United States under $200. No doubt, this idea emanates from popular frustration with high taxes. Burdened consumers justifiably want a break.
Unfortunately, this proposal would be bad policy. As more people shop on American retail websites, government revenues will be made up with higher taxes elsewhere. Plus, this policy would disadvantage Canadian retailers, who would be anchored down by the HST, unlike their U.S. competition.
Governments could instead drop the HST rate across the board. This way, consumers would get a needed break, while businesses on both sides of the border could compete fairly for our shopping dollar.