Ontario Drivers Would Pay Almost $2.50 per litre Under Horwath's NDP?

{NOTE: There is an important update to this post, which follows the post, below.}

For those still reeling from, and disgusted by, PC leader Tim Hudak’s attempt to offer up an election platform promising to maintain the status quo on the very taxes and measures for which he is simultaneously condemning Liberal premier Dalton McGuinty (e.g., HST, health tax, out of control health and education spending, etc.), the release today of a gasoline plank by the Ontario NDP of Andrea Horwath is sure to make one wonder if we are living not in Ontario, but in Orwell’s Oceania. Fifteen days ago, the Ontario New Democratic Party of Andrea Horwath announced that an Ontario NDP government, if elected, would regulate gasoline prices at the pump. Today, Horwath promised a phased-in elimination of the HST: 1% per annum over the next four years, leaving Ontario drivers paying a 4% HST on fuel by the election of 2015. Horwath reportedly said that the HST cut would be in the amount of $500M, but that that lost revenue would be made up by taxing businesses (she did not say exactly how).

I submit that, just as Hudak is falsely implying that he is opposed to the taxes for which he condemns McGuinty, Horwath is trying to appear car-and-driver friendly while, in reality, preparing to conduct an all-out-war on the automobile, sufficient to force us all onto Soviet-style, creaky old “red rocket” style mass transit over the next four years. Here’s the deal. Horwath has already made it clear that an NDP government would impose other changes to ensure that her 1% per annum HST cut on gasoline will be revenue neutral. Given the NDP’s openly socialist nature, we can certainly expect an NDP government to be hostile to individual transportation, and to introduce measures to force Ontarians out of their cars and into tax-funded/subsidized mass transit.

The most likely step to be taken by an NDP government: increasing fuel prices (via the regulatory powers the NDP has already promised), such that a reduced HST rate on those fuel prices will be revenue-neutral. There will be no drop in the total price at the pump (including taxes). To the contrary, the per litre price at the pump will increase. Here’s a breakdown:

Year one: Provincial Portion of HST on Gasoline Dropped to 7%

Let us assume a regulated gasoline price, on day one of and NDP mandate, equal to the current price of about $1.29/litre. Of that price:

Ontario’s Portion of the HST = $0.0913272
Federal Portion of the HST = $0.0570795
Provincial Gasoline Tax = $0.147; and
Price of the Gasoline Itself = $0.9945933

To make up for the revenue lost from a 1% drop in HST, fuel prices would probably be increased, in year one, by 13.27367%. Using the current pump price of about $1.29 per liter as an example, the 8% Ontario portion of the HST is $1.29 / 113 x 8 = $0.0913272 per litre. To keep the per litre revenues from a 7% HST at $0.0913272, Horwath could (and probably would) increase the regulated price of gasoline from $1.290 to $/l = $0.0913272 / 7 x 112 = $1.4612304/litre. In other words, the price at the pump would actually jump so as to keep HST revenues from gasoline revenue-neutral despite the 1% HST rate reduction. Of course, there is no way that the NDP would simply hand over the $1.4612304 – $1.29 = $0.1712304 fuel price increase to the gasoline producers or retailers, so expect their taxes to be increased sufficiently to allow the provincial government to snatch the full $0.1712304. No doubt, they’ll say they are earmarking that money for a mass-transit infrastructure fund.

Year 2: Provincial Portion of HST on Gasoline Dropped to 6%

To make up for the revenue lost from a 2% provincial reduction in the HST, Horwath’s NDP government would probably increase fuel prices, in year two, by 15.62537%. Again using the current pump price of about $1.29 per liter as an example, to keep the per litre revenues from a 6% HST at $0.0913272, Horwath could (and probably would) increase the regulated price of gasoline from the year one price of $1.4612304/litre to $/l = $0.0913272 / 6 x 111 = $1.6895532/litre. Expect the year two $1.6895532 – $1.4612304 = $0.2283228 / litre increase to be funneled into the government coffers – probably announced as “increased” transit funding – via an increase in the taxation of gasoline producers and retailers.

Year 3: Provincial Portion of HST on Gasoline Dropped to 5%

To make up for the revenue lost from a 3% provincial reduction in the HST, Horwath’s NDP government would probably increase fuel prices, in year three, by 18.91865%. Again using the current pump price of about $1.29 per liter as an example, to keep the per litre revenues from a 5% HST at $0.0913272, Horwath could (and probably would) increase the regulated price of gasoline from the year two price of $1.6895532/litre to $/l = $0.0913272 / 5 x 110 = $2.009194/litre. Expect the year three $2.009194 – $1.6895532 = $0.3196408 / litre increase to be funneled into the government coffers – probably announced as “increased” transit funding – via an increase in the taxation of gasoline producers and retailers.

Year 4: Provincial Portion of HST on Gasoline Dropped to 4%

To make up for the revenue lost from a 4% provincial reduction in the HST, Horwath’s NDP government would probably increase fuel prices, in year four, by 23.8639%. Again using the current pump price of about $1.29 per liter as an example, to keep the per litre revenues from a 4% HST at $0.0913272, Horwath could (and probably would) increase the regulated price of gasoline from the year three price of $2.009194/litre to $/l = $0.0913272 / 4 * 109 = $2.4886662/litre. Expect the year three $2.4886662 – $2.009194 = $0.4794722 / litre increase to be funneled into the government coffers – probably announced as “increased” transit funding – via an increase in the taxation of gasoline producers and retailers.

The upshot: by the time of the next election, drivers would be paying $2.49 per litre for gasoline (an almost 93% increase in the price at the pump), HST revenues from gasoline sales would remain unchanged. Gasoline producers and retailers would experience no increase in revenues, as the huge increases in the regulated price of gasoline would be funneled into provincial coffers, destined – at least in part – for increasingly universalized transportion costs. Put another way: from each according to his reclining leather bucket, to each according to his stained seat or greasy poll on the TTC.

Addressing the Critics, in Advance

Some will argue that the above analysis is based upon assumptions for which I have no evidence: especially the assumption that a Horwath NDP government would use its promised gasoline price regulatory powers to ensure that HST revenues from gasoline sales remain unchanged. Fine: let Ms Horwath deny it. Let her dispel that notion by promising voters that she will actually decrease HST revenues from gasoline sales, such that drivers will benefit from that decrease, but non-drivers (such as many of her probable supporters) will not. Demand that she promise not to increase the regulated pump price of gasoline above the average pump price in place on October 6th, 2011, so that she can prove she won’t increase prices to maintain or increase tax revenues from gasoline sales. Demand that she promise not to increase government spending on mass transit. Demand that she promise not to increase taxes on gasoline producers and retailers. Demand…and expect no such promises. Then ask yourself why she won’t make them.

And, consider the smell test. In Britain today, gasoline is reportedly selling for about $2.20CAN per litre. We can dislike current gasoline prices (I do) all we like, but the fact of the matter is that a relatively free market for gasoline in Ontario is yielding much lower prices than in Britain. Why the NDP promise to interfere with a market-based system that is yielding lower prices? The most plausible answer: to increase prices to above-market levels. If you do not think it plausible for NDP-regulated Ontario gasoline prices to be hovering around the $2/litre mark in 2014, ask yourself if you are familiar with such concepts as socialism, collectivism, central planning, race-and-sex based hiring quotas, and the Ontario NDP government of 1990-1995 in general.

Dear reader, one thing’s for sure: this is your grandfather’s NDP. In any guise, socialism “ain’t pretty, she just looks that way”. So it is for any tax cut dangled in front of voters by Ms Horwath’s NDP. Consider yourself warned.

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UPDATE: 2011-August-10

Today, the NDP launched a new “anti-smear” website, http://stopthesmears.ca/. The site quotes Ms Horwath as saying: “We’ve set up this website to help you fight back against smears and misinformation.”

The site currently lists six alleged “smears”. The sixth: “The NDP will raise the price of gasoline.” That’s interesting, because, apart from me, I know of nobody else who has been making that speculation. Imaging my interest: “Hmmm”, I thought, “I never thought Horwath would deny that…guess I was wrong”.

Then I read the site’s response to the allegation. Nope, I wasn’t wrong.

Here’s the NDP’s reply to the allegation (my allegation?) that an NDP government would regulate higher prices:

Gas gouging by big oil and gas companies costs consumers in a big way. According to a study by the independent Canadian Centre for Policy Alternatives, gas prices of about $1.30 per litre mean excess profits of 25 cents per litre – or over $9 billion a year!

That’s why Ontario’s New Democrats will task the Ontario Energy Board with setting a weekly cap on gas prices to ensure stability, predictability, and fairness. We can’t affect the international price of oil, but it can prevent the day-to-day spiking that hurts consumers and leads to excess profits.

After all, Ontario makes sure prices for electricity, natural gas, and even beer are predictable and fair. Why not gasoline?

To find out how much you’re being gouged at http://gasgouge.ca/

Notice anything missing from that response? That’s right: there’s no denial of the allegation that the NDP would raise the pump price of gasoline!

Note to Ms Horwath: the correct way to deal with a false allegation is to…deny it. Telling everyone to consider some other point entirely is not an answer, and your non-denial only gives more credibility to the allegation made…the one you’re calling a “smear”.

We’re still waiting for that clear denial: a promise that you will not increase the pump price to above-market prices.