HST/GST Credit. Why do we get it?
Paul Martin is Taxman! Well at least he used to be. Anyhow, This page is dedicated to the GST/HST credit that you might or might not get in the mail. For any low-income money earners (poor people, students, or just financially challenged etc.) you might notice that we get free money four times a year for apparently no reason. Which rocks. But there is actually a very good reason why we get that money. We're getting stiffed by the man and high-income earners everywhere.
Here's how it works. Everyone pays HST in Atlantic Canada, GST to the rest of the Nation. Anyhow, HST is a flat tax, which means that everybody pays the same rate (15%), no matter how much money you make. This tax if you look carefully is actually regressive, which means that as you make more money you pay less tax! How can this be you say? You say it's a flat tax. At face value it is, but let me demonstrate how this works and that the rich pay less tax compared to financially challenged people.
Person A makes $20 000
Person B makes $100 000
For simplicities sake the tax rate is now 10%
Person A is financially challenged and must spend all $20 000 to stay alive in good condition. They must pay $2000 in HST on everything since they need to spend all their money to survive. This works out to be 10% of their income.
Peron B is rich and doesn't need to spend all their money in order to survive. They only need to spend $20 000. They pay a tax of $2000 just like person A. However, $2000 is only 2% of Person B's income!
So as you see as you make more money the amount of money you spend on HST decreases relative to your income. This puts a burden on the financially challenged compared to the rich, as the rich seemingly benefit from flat taxes. Canada is a country with a progressive tax system whereby you pay more money relative to your income, because the rich have the money to spend. This is where the HST credit comes in. The man is giving back a portion of the money he took. In theory this should decrease the amount you spent on HST relative to your income. Is it enough money? I don't know :P , but the man does like his money.