Swift-Boating the carbon tax
The bed having been made by the NDP, the Prime Minister not only takes it but moves in and changes the locks. All summer the NDP’s axe-the-tax campaign against the BC carbon tax has played on a classic conservative anti-tax theme (to the dismay of yours truly). The BC election is not until May 2009, and who knows what will happen between now and then. In the meantime, the Tories must be thrilled to walk into BC and harvest the votes.
But with a twist. Stephen Harper is distorting the facts in a big way. He is playing on public opinion research that people think revenue neutrality is silly (that the money should instead be spent on public transit and other climate action) but twisting it by claiming that the BC carbon tax, painfully designed to be revenue neutral in order to be more politically palatable, is not. As reported in the Globe:
“Every politician in history who wants to impose a new tax claims that it’s either revenue neutral or it’s temporary. It’s not true,†he said, adding later: “The reason politicians impose a new tax is they need revenue.â€
… “Everybody knows – especially in British Columbia – that that kind of a carbon tax is not revenue neutral on the average working family,†Mr. Harper said.
… “For British Columbians, there is a double risk that comes from the carbon tax proposal: imposing a made-in-Ottawa carbon tax on [top of] B.C.’s existing carbon tax. Canadians don’t want a new tax and British Columbians don’t want double carbon taxation.â€
The double taxation comment is another example of pure rhetoric. The federal and BC governments would in all likelihood make provisions, and if I recall correctly Campbell and Dion have said as much. But hey, if carbon taxes are bad, “double carbon taxation” is evil incarnate. Another article invoked the Fraser Institute’s tax freedom day, so we are seeing a concerted effort to paint the opposition in sneering terms of “tax-and-spend” (I literally hear Preston Manning’s voice when I say that).
The Harperites are playing a highly cynical and Republican game here. They are playing to emotion without feeling the need to be grounded in reality – the facts are what they say they are. And on this complicated issue, who in the crowd is going to argue with the bully?
As Walkom said today, “Dion’s scheme may help the environment. But by replacing progressive income taxes with a regressive consumption tax, he could help the rich at the expense of the middling classes.
So you support regressive taxation instead of progressive taxation? Wow that’s a switch. Maybe the site name should be shifted to Regressive Economics Forum.
I’m not sure that the preceding comment about Marc’s post actually deserves a response.
The slightest of reviews of the Marc’s blog posts on the issue of carbon taxes would reveal that he has consistently advocated — and actually worked hard — for carbon pricing and revenue recycling policies that would be progressive and benefit and middle income households.
I know it is often short supply during an election period, but a bit more thoughtful consideration and less reactionary commentary would be helpful.
Could we keep two things in mind about BC’s carbon tax? First it is only progressive in its early stages. It then becomes a regressive shift of the tax burden down the income scale. Second, it is not revenue neutral for organizations like school boards who will pay for the carbon tax, imposed carbon neutrality and increased hydro costs with cuts in services to children. In other words, it is exactly the kind of tax shift we have seen before in British Columbia with the wealthiest paying less and the poorest paying the cost.
I’m still waiting for all those people who got on the “axe the tax” bandwagon to join forces with Harper in advancing the cap-and-trade system, which is also expected to increase fuel prices and bring in government revenues. After all, they MUST have read the fine print, so they must SURELY be on the same side of things!
Jan, your quote from Walkom is exactly what I have been thinking all along.
I tried at one point to draw attention to the real purpose behind some people’s wild enthusiasm for a carbon tax, and their insistence that a cap and trade system is somehow an inferior policy. This from many of the same economists who then criticize the NDP (in both BC and Ottawa) on the grounds that cap and trade is in fact economically equivalent and would have the same price impacts on consumers, which it would not. As with any other cost imposed on business, not all of that tax burden can be passed on to consumers, some will be paid out of profits and dividends.
A visit to the SFU website for campus news produces the following bit of truly Freudian wording:
“The Canadian Press, Canwest News Service, CBC Radio and TV, CTV, GlobalTV and La Presse Canadienne covered a new report saying the average Canadian would see a 50-per-cent income tax cut if the federal government phased in a new tax to crack down on activities that contribute to global warming. The authors: environmentalist David Suzuki and SFU’s Mark Jaccard.”
http://www.sfu.ca/sfunews/Stories/sfunews02290801.shtml
Note the emphasis. The big news is an opportunity to cut income taxes IN HALF!!! Impacts on global warming are an add-on.
I believe this is a continuation of a long run trend in tax policy in Canada and the US which is designed, say it’s authors, to tax consumption rather than incomes or savings. That this is really a euphemism for a more regressive tas system seems to escape some people, for reasons I do not understand.
We already have carbon taxes. People pay them at the pump. Consumption taxes are regressive.
The CCPA position on taxation was set out by Neil Brooks at least 15 years ago. It was replace all regressive taxes with increasingly progressive income taxes.
One can A. advocate for carbon taxes. One can B. support revenue neutrality i.e. no additional revenue for government. One can C. endorse the Campbell or Dion packages.
I respect the arguments for A. but prefer macro-measures such as hard caps on polluters because they work much much faster and this is an emergency. I find B. bad public policy. Even Harper has found the weak point. Carbon taxes are not revenue neutral for the poor.
Anyone who confuses position C. with A. is being politically naive. When we argued against the 1988 FTA our opponents traditionally argued we were against trade. Now when the NDP argues against the Campbell income tax cuts and carbon tax, they are accused of being against the environment.
Cameron’s law of social science is that you first must know what is wrong before you can argue for what is right. Generally, unless you have super magical political insight researchers are best at showing what is wrong and laying out alternatives. Siding with a political party on its choices is usually a recipe for misunderstanding on both sides. Parties need to be flexible and change their positions constantly which is good but can leave a supporter confused.
I feel like my position is being misrepresented here by Rob and Jan, both of whom are regular readers and should know better.
I do not support using carbon tax revenues to finance personal or corporate income tax cuts, though I would use a good portion to pay for an expanded tax credit to offset the regressive impacts on households, and the remainder used to finance other climate action programs. I’d also like to see higher personal income taxes at the top of the scale.
What matters for distribution is not only whether a tax is regressive or progressive but how that revenue is used. This is why the Nordic countries are able to have much larger welfare states (better social programs and lower poverty) while relying much more on consumption taxes. In terms of tax policy, that is the model I would want to move towards.
Marc,
If you want the Nordic model, you need to have the Nordic labour market. Canada and the U.S. stand apart with a huge low wage sector, and a frail social safety net.
The tax cut message worked in Ontario with Harris, and the U.S. under Reagan because it was a way to get a hike in disposable income when the labour market would not allow it.
The GST was hated. Why should a carbon tax be loved? A lot of people are on the edge, gas hikes are killing them, fuel costs in the East are soaring. Of course they want someone to speak on there behalf. Carole James to her credit figured this out. Dion by buying into the CD Howe, Jack Mintz package without discussing it with progressives, has put himself, and his party at a serious disadvantage, and has given Harper a great gift.
And on the labour market, the Liberals under Dion refused to back an anti-scab bill. There is no evidence the Liberals want wages to come up, and inequality to come down, which is what is needed if the Nordic model is to be feasible.
A fair point, Duncan. We should be making the labour market do more of the heavy lifting through much higher minimum wages and looser laws on organizing union, particularly in the low wage service sector.
But the problem at the pumps is not the carbon tax, it is price gouging by Big Oil. In spite of the thought given over to regressive impacts of a carbon tax, the same needs to be done for windfall profits, via a tax that can be redistributed to people who are struggling.
The discussion here is useful.
As Toby Sanger has mentioned, election time is a rather stressful period.
Others have pointed out that economic measures of various kinds can be designed very specifically, in the context of other factors within the economy.
And there is the whole political issue of what happens when sound bites are extracted or twisted in the media, especially during an election.
Harper is using this to play to ‘average working families’ and I will say, as a small organic farmer in rural Ontario, that family farmers here lobbied the county last year to postpone paying their property taxes until after the harvest was in.
There is simply no money in the kitty, and people didn’t want to go into further debt at the prescribed interest rate, to pay their taxes.
While I have a moment here, before I go out and dig up some potatoes, I will also say that what is so completely cynical about Harper’s economics is that the ‘market’ -rigged commodity pricing game, in favour of Big Ag/Pharma/Oil is specifically designed to impoverish family farmers so that indeed we are driven off the land, because our tax and insurance bills and input costs can’t be paid with pennies on the bushel.
A made-at-home ‘market’ mechanism that is somewhat less vicious than Stalin’s enforced famine, but with the same effect. The land is cleared for others to take it.
Apparently Dion has now decided to de-emphasize his Green Shift plan, according to the Toronto Star:
http://www.thestar.com/FederalElection/article/502283