Carbon Tax Politics
Although you might think that making a carbon tax revenue neutral would be an effective tactic to neutralize the ‘tax grab’ line of attack, in practice people seem unwilling to buy into the notion of a carbon tax being revenue neutral.
The B.C. Liberal government, first elected in 2001, has done only one thing consistently throughout it’s 8 years in power – cut taxes. They’ve never shown any desire to increase taxes nor, at the time they introduced the carbon tax, did they have any need to do so. They specifically outlined the measures they would take to ensure the tax was revenue neutral including tracking and regular reporting with adjustments to the offsetting tax cuts as necessary to ensure no extra revenue was collected due to the carbon tax. On top of all that, they have a provincial media which is effectively an extension of their party. It's hard to imagine anyone ever making a more convincing case to an electorate that their carbon tax was indeed revenue neutral. And although it is difficult and risky to assume I know how things would have gone in the counterfactual situation where they did not take these measures, I don’t see that they got much of a payoff from all this effort to ensure revenue neutrality.
One of the bigger risks to support for the tax, both in B.C. and federally, was that other levels of government might come out in opposition, where their area would be hit relatively harder by the tax (for example).
Finally, one of the arguments against the tax from rural residents and people in smaller towns was that they had no option to reduce their carbon usage – where city folk had the option of taking transit, they had to drive everywhere.
So here's a suggestion: Future carbon tax proposals should scrap the notion of revenue neutrality and instead guarantee regional neutrality. Mandate that all revenue from the carbon tax will be returned to the region it was collected from, where it will be used exclusively for public transit development.
Note that this effectively downloads the real decision to local governments which can reduce their own transit funding and substitute in the money they get from the new tax - effectively make the tax back into a revenue neutral one for their area - or use the money for increased transit funding as 'intended'.
Of course it goes without saying that it is dumb to *campaign* on bringing in a carbon tax, that is the type of thing you do in your first or second year of being in charge...