Let’s Look at the Carbon Tax

“Tax” is such a bad word in the political scene (more on that in another post) and the Carbon Tax certainly has a reputation for a cash grab by the Federal Government. Unfortunately, many people don’t fully understand what the entire financial picture of the “tax” because of that nasty word. Coupled with rising oil prices, the carbon tax makes a great scapegoat for arguing against this reasonably sound policy.

Wait, What?

The Green Party is saying the Liberals have a reasonably solid policy?

Well, yes. This is important from two perspectives.

First, Greens are committed to a spirit of cooperation. That means working with all political parties, and all stakeholders – provinces, First Nations, experts, public opinion (more on that on another day, too) to build solutions that work for everyone.

Second, as many Greens will point out, the Liberals lifted this policy straight out of long established Green policy. Except, they did it wrong. Green policy calls this “Fee and Dividend”. The effect is the same – add a carbon fee at the source and provide a dividend to all Canadians from those fees. The net effect is that those that consume less carbon will pay less fees and, in fact, many will be ahead. Particularly those that don’t drive, which includes a lot of low income folks. Personally, I think the Liberals were out of touch with the average citizen, handing a policy with the word “tax” in it over to their opposition to play with. The Liberals also put in a few too many loopholes for large businesses, but that’s on them.

Why Not Just Tax the Polluters?

Thank you for asking. The CPC wants to do something kind of like this by giving tax credits to reduce pollution and allow people to buy into carbon savings accounts, whatever that is.

  • We’re all polluters to some degree – driving cars, heating homes, consuming food that is trucked in, buying product that comes to us on ships and aircraft. So by putting a tax on carbon, the carbon tax is taxing polluters directly.
  • The same argument the CPC makes against the Carbon Tax applies equally well to the tax polluters and tax credit plans. In the first case, the polluters will pass the cost on to consumers, in the second, revenue comes out of our tax system, which supports healthcare and roads and oh, so many things, to give some breaks to large corporations.
  • Who is going to police the polluters, levy the fines, and enforce them? Who is going to monitor the ones claiming credits? The elegance of the Carbon Tax is that it doesn’t require a load of complexity to implement. Nor does it create such obvious potentials for people to hide and cheat inspectors. And it isn’t like the CPC is known for their love of inspections anyway, having cut back on food and rail inspectors during their tenure.
  • Finally, it is complicated and obfuscated. The market based Carbon Tax is elegantly simple. Easy to understand, easy to administer, and clear in terms of the cost per barrel and the rebates being handed out. What the CPC wants to do is muddy, confusing, and impossible to clearly account for to anybody’s satisfaction.

But it Costs Me a Lot!

Are you sure about that?

Folks living in Alberta, Saskatchewan, Manitoba, and Ontario may actually be getting more money back then they are paying in Carbon Tax. These provinces have chosen to (or been forced to) let the Federal Government administer the Carbon Tax for them. As a result, citizens of these provinces receive the “dividend”. Sorry, folks in other provinces, I have no idea where your money is going.

What prompted me to write about this today was a website that popped up on my Mastodon feed (another topic, another day): A Carbon Tax Estimator.

Give it a try here.

For example, an urban family of four, living in Manitoba, with a family income of $80,000 per year, who fill the tank in their car on average once per week and use an average amount of natural gas for heat would look like this:

Carbon Tax Paid: $671.54 – this is the tax on fuel and natural gas – direct carbon costs.
Indirect Costs: $295.17 – this is an estimate of the increased carbon costs for food and other goods and services.
Carbon Tax Rebate: $1056.00 – the total federal carbon tax rebate. It isn’t a huge windfall, but this family is getting more back from the refund than they are paying in Carbon Taxes and indirect cost ($966.71)

For those inclined, this calculator is interesting to play with. What happens to the rebate if you are heating your home with an electric heat pump rather than natural gas? What if you are commuting instead of driving? What if you are driving an EV or a Hybrid or a smaller car? What’s the impact on people living in poverty (hint – it is substantial, and that’s good for all of us.)

This is the most important point – unlike taxing the polluters, which simply raises costs for everyone, the Fee and Dividend (sorry, yuck, Carbon Tax) encourages people to make choices that reduce carbon emissions. And that’s an important step in reducing Canada’s carbon footprint.

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