GST Rebate Programme RIP

29 May

As of April 1, 2007, the Canadian Government’s GST rebate program is no more. You can still apply for the rebate on items purchased before that date, but everything bought since then is subject to the Canadian GST of 6%, and the Ontario PST of 8% on most purchases.

Erie County’s 8.75% sales tax is much more palatable than Ontario’s 14%, especially given that the Canadian dollar is almost at par with ours.

This means that it just got a lot better for domestic, local merchants.

The Buffalo News focused on the reasons why it’s difficult to attract big name chains to WNY, and that it has to do with moribund income growth.

On top of that, that weekly wage translates into a job that pays $35,828 a year, nearly $5,000 less than the $40,768 average nationally. That means workers in the Buffalo Niagara region are getting by on paychecks that are almost $100 a week smaller than the national average.

That may be, but those workers in the Buffalo Niagara region tend to have more buying power with that $36k/year than many of their peers. But those statistics become starker when you consider:

Without income growth, new retailers who move into the Buffalo Niagara market have to win their customers by taking sales away from the stores that are already here. Open a new store in a growing market like Phoenix, and a retailer can build a customer base partly from people moving into the area and customers whose per capita personal incomes are growing at close to the national average.

A retailer has to compete by offering better prices, better service, or both? I find it a bit hard to sympathize.

In a growing market, that rising tide puts a stiff breeze at a retailer’s back.

The reality here is that there isn’t much more money in the region now than there was in the mid-1990s. If you added up all the money people here make from their wages, the interest and dividends they receive, the Social Security they get and all other forms of income, it’s less than 1 percent more than it was in 1995 after you adjust for inflation.

In other words, the pie here is just about as big as it was a decade ago, while it’s 30 percent bigger nationally. That’s because we’re losing people, which reduces the overall amount of earnings here, while our wage growth lags behind as well.

Consequently, the pie in the Buffalo Niagara region was the 48th biggest in the country in 2005. Ten years earlier, it was the 41st biggest, according to recently revised statistics on personal income from the Bureau of Economic Analysis.

Indeed, as the region shrinks and its remaining population ages, we’re getting more of our personal income from government- backed programs, ranging from Social Security to a variety of social welfare programs.

That was the fastest-growing component of the region’s personal income over the last decade and those payments accounted for slightly more than 20 percent of the region’s personal income in 2005, up from just over 19 percent in 1995.

According to the Bureau of Labor Statistics, the average annual salary in Buffalo-Niagara is $37,400. In Charlotte, it’s $39,710. In Cleveland, it’s $39,640. In Pittsburgh, it’s $36,700.

Based on that, we’re not horribly out of whack.

The metropolitan area’s cessation in the middle of our international crossings is somewhat artificial when it comes to matters economic. That’s why the DHS’s about-face on shared border management at the Peace Bridge, for example, is so troubling. There’s a market of over 5 million people within the Toronto area and Niagara Region.

So, is that information being conveyed when we sell ourselves to national retailers?

6 Responses to “GST Rebate Programme RIP”

  1. Jeff Brennan May 29, 2007 at 9:33 am #

    Pundit,

    Like you I am a big Buffalo booster. I have written to David Robinson and even spoke with him on the phone about his glass-less-than-half-full approach to business and economics reporting. He is the main reporter for the news of this sort and I complained to him that his tone and selectively negative statistics are not helping at all because he, as one person, has a large influence on attitudes in Buffalo. Reality is one thing, but we all know that any statistics can be deceptive if taken out of context, just like speech. I argue it is easier to deceive with statistics and numerical data than with language.

    So the big point is…Yes we have a demographic problem of shrinking and aging population. But perpetuating the negativity past the point of reality is not going to change the psychology of this area’s population. Economics is a SOCIAL SCIENCE, spending and investment is based on confidence and to the extent that David Robinson reduces confidence more than it should be, he is doing a disservice to our community by not pointing out in every article the very income comparison stats that Pundit so easily referenced. To be fair he does a good job at times. I think he should EVERY TIME. Everybody tell him (and his editor) if you agree or just ask for some better psychology for us beleagered Buffalonians:
    drobinson@buffnews.com
    msullivan@buffnews.com

  2. peter scott May 29, 2007 at 9:55 am #

    so…ikea in burlington just got significantly more expensive…

    is 10 days enough of a waiting period to start up the ikea discussions?

  3. BuffaloPundit May 29, 2007 at 10:38 am #

    My solution to the IKEA problem.

    Yes it’s farther, but it’s a change of scenery.

  4. peter scott May 29, 2007 at 10:59 am #

    you’re right about the change of scenery…

    but the ikea in burlington wasn’t much more of a trip than those in other metros have to go “their” ikea if its on the other side of the metro area…

    example…i used to live in silver spring, md…before an ikea was built in college park, the closest was woodbridge, va (40 miles around the beltway or through downtown dc)…the trip was at least an hour every time…

    so, if ikea considered buffalo and shot it down due to its proximity to the burlington ikea…and the burlington ikea is now off-the-table for larger ticket items…are we back in play?

    a drive to pittsburgh is not gonna happen in a day…its a nice place and all…but i’m not going there to buy a bookcase…

  5. hank kaczmarek May 29, 2007 at 12:05 pm #

    14% Sales tax? OUCH. I guess that’s how Canadians pay for “free” Socialized Medicine.

Trackbacks/Pingbacks

  1. In da Buff (Buffalo, New York) » Oh Canada, we want your business - May 29, 2007

    […] Buffalo Pundito has a post today where he talks about doing business with our almost 5 million nei……it got me thinking…for Buffalo to experience a large scale rebirth, our region’s relationship with Canada has to be seemless… […]

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