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What to do with the carbon tax surplus?

July 13, 2008

Jenny continues her excellent blogging on the Carbon tax debate.

While I am generally supportive of Dion’s ideas about how to use of “green funds” accumulated from his new carbon tax, I did have two quick comments/critiques. Of course, I welcome Jenny and others on here with greater expertise to set me straight, if I get anything wrong. Here goes.

First, while targeted tax credits can and should be used to achieve social or economic aims, I think the $3 billion “universal child tax benefit” is an inefficient use of public funds. Any kind of “universal” tax cut or credit basically subsidizes, through tax amounts returned as credits, wealthy taxpayers who don’t need any help in paying for their children’s care or early childhood education. A better strategy than a universal handout would be to retain the current child care tax benefit (CCTB) “progressive” structure– which uses income levels to determine eligibility and eligible amounts (to use the byzantine language of the Income Tax Act )— and expand it: make it easier for more middle class families to qualify, and increase the benefit received.

Second — and this is more of a green point — my understanding of the carbon tax is that it’s supposed to change behavior. The theory being, is that polluters will invest and innovate and do whatever is necessary to stop polluting in order to avoid greater tax liability resulting from the new carbon tax. In other words, the surplus of funds the government will receive from the carbon tax are not an eternal or sustainable supply (unlike, say, GST… people need goods and services to live; but they would avoid polluting to avoid a pollution tax) and over time “green tax” surplus funds would shrink. If that is the economic reality, what is the best way to get the most out of these funds that won’t last forever?

Now, I understand the political necessity of selling Green Shift as tax neutral and the importance of addressing the other social concerns Dion has outlined, but I still would prefer to see some greener investments, especially as this is supposed to be a “Green shift”.

How about a national highspeed rail strategy? I remain a strong advocate for investment in light, highspeed rail to connect the country from coast to coast… sound crazy? Well wasn’t Sir Sanford Fleming a few bricks short of a load when he proposed to lay a rickety old rail across miles of tundra, prairie or impenetrable Canadian shield? I digress.

It is, in any case, a bit unfair for government to levy a new carbon or pollution tax without correspondingly investing in new infrastructure that will provide more options to people who, for example, need to go places, but would like the option of avoiding those massive gas guzzling climate changing air machines.

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One Comment leave one →
  1. Jay permalink
    July 13, 2008 4:14 pm

    Carbon taxes on consumers are not the only way to price carbon. Carbon taxes are regressive and will hurt low and middle income Canadians who can least afford it. The notion that they will see the benefit of tax rebates is a dubious promise at best. I personally don’t trust the LPC (who also promise massive corporate tax cuts) to follow through with anti-poverty initiatives that would return to the poor and middle class the money given in taxes. If the cheques are quarterly (as opposed to yearly refunds) that still will mean that a considerable number of Canadians will face having to choose between food and heating or rent and transportation because these costs are daily/monthly not quarterly. As someone who has juggled utility bills in order to afford rent or food, I know that it will be harder as prices increase due to inflation PLUS the added costs due to the carbon tax.

    This situation will only be made worse still because the federal government will not have the fiscal capacity to help municipalities increase public transit. There will be no money in the government kitty to increase rail capacity. No funds for rebate programs to retrofit homes and small business for better energy conservation. Essentially the Libs are saying we will tax you to force you to be greener but won’t be able to help you, or other levels of government or industry become greener so that you can reduce your carbon usage.

    The NDP proposes a better way that actually CAPS ghg emissions and provides funding for necessary changes to our lifestyle choices, changes to our transportation systems and changes to carbon-intensive industrial and resource sectors.

    Check out – http://www.ndp.ca/greenagenda

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