It is not often I find myself agreeing with the Fraser Institute.
After all, they are the organization which puts out the fatally flawed "school rankings" each year. But over the past month or so, they posted several articles critiquing B.C.'s carbon tax and I find their arguments worth considering.
As I have said before in these columns, I am opposed to the carbon tax. When I tell people this they usually say something like "But shouldn't we do something about climate change?"
The answer to the latter question is "definitely yes."
I just don't think putting a price on carbon is the way to go. Or maybe a better way of saying that is the present carbon tax does nothing to alter the use of fossil fuels and has little impact on climate change.
If we are going to use taxes as a way of decreasing the consumption of fossil fuels, then make the tax 100 per cent and not $30 per tonne. And apply it uniformly across the board. Everyone pays. Everyone participates. No rebates. No offsets.
All the present system does is take money with one hand and give it back with the other.
Revenue neutrality as applied to the carbon tax means the amount of revenue the government generates through the carbon tax is used to implement reductions in other taxes of equal revenue. The argument for this approach, as expounded by Charles Lammam and Taylor Jackson of the Fraser Institute, is revenue neutrality is important for economic efficiency since cuts to economically damaging taxes, such as personal and corporate income taxes, can help offset the economic costs of a carbon tax.
They go on to point out that when the carbon tax was implemented, the B.C. government introduced a reduction in the bottom two personal income tax rates, a reduction in general corporate income tax and a low income climate action refundable tax credit. These measures gobbled up all of the money the government collected from the carbon tax for the first five years.
However, once the tax reached $30 per tonne, the revenue generated was more than the expenses incurred. The government started to use pre-existing tax reductions in its "revenue neutral calculation," such as the Film Incentive BC Credit and Interactive Digital Media Credit, which have been around for 15 years.
According to Lamman and Jackson, this amounted to a
$226 million net tax increase for British Columbians in 2013-14.
Indeed, from 2013-14 to 2018-19, the cumulative effect of the carbon tax will be an $865 million tax increase. The authors calculate this as $182 per person or $728 for a family of four.
Admittedly, this is spread over five years so the annual costs will not be that high. However, this is effectively taking money out of the pocket of British Columbians who rely on fossil fuels for transportation and home heating and handing it to the film industry. A family of four will be giving $145 per year. The costs of ticket prices, popcorn, and soda pop are bad enough but now we are subsidizing movie production on the backs of a tax meant to reduce carbon emissions.
How does this make sense?
Further, as the population and the economy of the province continue to grow, more revenue will be generated through the carbon tax. What will this additional revenue be used for next? And when will it start to have an effect on our consumption patterns?
The carbon tax, as presently constituted, allows industries to keep consuming fossil fuels at the same rate. Corporate tax cuts offset the additional costs of the carbon tax.
It is a bit like telling a child they can't have a cookie from this jar but they can have a cookie from that one. And it is the same cookie in each case. What difference is this going to make?
In the meantime, middle and upper class earners are pouring money into a system to support corporate tax cuts. Maybe it is just me but why am I putting money directly into corporate profits? I don't mind corporations making a profit when I buy a product or service from them. After all, that is the basis of the free market economy. But when I get nothing in return?
What is the government doing in response? For the previous eight budgets, the carbon tax has had its own special section in the estimates. Revenues and their balancing expenses were laid out in an explicit fashion with the result it was easy to see where the money was going.
This year, the carbon tax is included in the estimates under "taxation revenue" with no corresponding analysis of how the money will be spent. For 2017-18, the carbon tax will just be a $1.218 billion addition to the bottom line.
So much for revenue neutrality.
