What to do with the carbon tax surplus?
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.