Who is paying the Metro Vancouver CIT?
January 29, 2015
CIT stands for the Congestion Improvement tax submitted to a plebiscite
According to the last Mayors plan iteration, it is now like below:
the CIT is expected to raise $250M/year
Is the CIT tax 0.34c a day or 258$/year per household?
In the Transit plebiscite campaign, people quote 2 different numbers:
- 0.34c a day (that is 124$ a year) if one counts only the direct CIT paid by metro Vancouver households
- $258 if one counts the CIT tax burden per household (direct and indirect)
The last number suggests people will support indirectly the businesses tax burden. Many on the “yes” side seem to argue that is wrong. For example, Brad Cavanagh at canspice.org, wants to believe that the gas price witnessed at the region border (Langley and Abbotsford) is proof of it:
- The total tax rate is 32.17c in Langley (including a 17c Translink tax).
- The total tax rate is 21.17c in Abbotsford (no Translink tax but a higher provincial tax).
The 11c  tax difference is fully passed to the consumer ( The Brad Cavanagh’s error is to consider the Translink tax as the only difference between Langley and Abbotsford)
Do businesses pay taxes?
As economists know, businesses don’t pay taxes, people do. Businesses are an abstraction, people, be either the consumer, the shareholder, or the worker, are the ones paying the businesses’ taxes.
If that was not true, we would have transferred all of our tax burden on the businesses abstraction! In the meantime, studies tend to demonstrate more often than not, the workers support the businesses’ taxes burden (in the form of lower wages).
It is possible that the investments allowed by the CIT will allow productivity gains or a greater economic activity, making the real cost per household lower than assessed by the most pessimistic views. In the meantime a $258 CIT cost per household is no more wrong than 0.34c per household.
PS: We plan to write a post “debunking” the various claims done in the plebiscite campaign. As a primer, so far we can see, the CTF has provided mainly valid facts. I don’t discuss their significance and they could need to be replaced in a proper context (what Brad Cavanagh did in a previous post), but usually trying to dispute them is a losing proposition.