On Wednesday, the BC premier announced a plan to reduce the HST from 12% to 10% in a two-step process.  The HST rate would fall from 12% to 11% on July 1, 2012. The rate would drop to 10% two years later.

Of course, this proposal is contingent on the outcome of two events.  First, the HST has to pass this summer’s mail-in referendum, where BC residents decide if they want to keep the HST under the proposed the changes.  Second, voters also have to re-elect the provincial Liberals to a fourth term in office.

To bridge the HST gap until the first rate cut, the government is offering a $175 cheque for every child under the age of 18, to be paid out later this year. As well, seniors with an income under $40,000 would get the one-time payout of $175.

The B.C. premier also plans to increase corporate taxes to help offset the HST cut.  By Jan. 1, 2012, the province’s corporate tax rate would rise from 10 per cent to 12 per cent.  This would represent a reversal for the Liberals, who have steadily cut corporate taxes in the name of competition and job creation since taking office in 2001. 

 Markets & Rates (as of May 27, 2011)

Markets   This Week Year to Date
TSX 13798 1.07% 2.6%
DOW 12442 -0.56 7.5%
S&P 500 1331 -0.15% 5.8%
CAN$/US$ 1.023 -0.36%  
GIC Rates 1 year  5 year  
Group High 2.10% 3.25%  
Group Average 1.45% 2.79%  
Mortgage Rates 1 year  5 year  
Group High 2.70% 3.71%  
Group Average 3.28% 4.59%  
Can. Prime Rate 3.00%    
US. Prime Rate 3.25%    

Source: Bloomberg Canada; Bank of Canada; Mortgage Alliance; Fiscal Agents; Statistics Canada.