Crawl Across the Ocean

Thursday, May 21, 2009

Carbon Tax Politics

For a change, here's a couple of observations on the politics of carbon taxes after watching two elections where it was a fairly significant issue:

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...

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  • Anecdotally, my observation was that people who continued to see the carbon tax as a tax grab were campaigning against Campbell and not against the tax per se, or they thought climate change was hokem.

    I think the revenue neutral point went a long way to selling the proposal -- to the extent it was sold and not just done.

    By Blogger KevinG, at 7:06 AM  

  • I'm not sure how your plan is different than raising the provincial fuel tax and just allocating a portion of it to the GVRD, like we do presently (with the notable exception that a carbon tax would include natural gas, coal, etc.)

    If my memory serves correctly, Translink can raise fuel taxes in the region by another 2 cents before they need a change in legislation to have further hikes.

    Once the "revenue neutral" aspect of the carbon tax is broken, it because just another tax-and-spend revenue generation method. This is mainly why I opposed it, because of this 'slippery slope', and if the function of this tax was just to raise money for Translink, raise the fuel tax and get it over with.

    By Blogger Sacha, at 11:51 AM  

  • Kevin - yeah you may be a right, it's hard to know what would happen with a counterfactual.

    Sacha - It's not really different from a policy point of view - I'm talking about the politics here. Note that you opposed even a revenue neutral tax - since right wing folks like yourself oppose even a revenue neutral carbon tax, a politician might as well at lease appease the left wingers who would support a tax with revenues directed to public transit.

    By Blogger Declan, at 6:28 PM  

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