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Half shift


 

They muffed it.

Canada arguably needs two major policy “shifts”: 1) a carbon tax, or some similar instrument that would put a price on carbon, which economists will tell you is by far the best way of hitting our (self-imposed) targets for reducing our carbon emissions, and 2) deep cuts in marginal income tax rates, which economists will tell you is by far the best way of improving our abysmal productivity performance. 

The Liberal “Green Shift” plan was supposed to do both at the same time. It has done, at most, one. One is better than none, and is worth doing on its own. But it is not nearly as good as the two-fer.

We will get the promised carbon tax, starting at $10 per tonne of CO2 in the first year, rising to $40 in the fourth. Imposed at the wholesale level, it will not increase the tax on gasoline, which is already taxed at a rate equivalent to $42 per tonne, but will apply to other fossil fuels. By year four, the tax is projected to divert more than $15-billion annually into the federal treasury.

But the tax cuts? Over and over, the document promises that “every penny” of revenues raised will be returned to the taxpayer in tax cuts: the promised “revenue neutrality.” Did they do so? Not even close. 

On the personal side, they’re cutting the 15% bottom bracket by 1.5 percentage points; the 22% and 26% middle tax brackets, by a percentage point each; the 29% top bracket, by zip. That’s right: the top marginal rate will remain unchanged, the same as it has been for more than a decade. 

The general corporate tax rate, meanwhile, will be cut by 1% (on top of already scheduled reductions), as will the small business rate.

Altogether, these actual, honest-to-goodness tax cuts sum to about $9-billion, the bulk of it focused on the bottom tax brackets, where it will do the least good — in terms of raising productivity, I mean. The rest of what the Liberals call “tax cuts” are mostly for tax credits, ie spending programs by another name: $465 million for an “Improved Working Income Tax Benefit,” $397-million for an “Improved Employment Credit and Refundable Disability Credit,” and fully $2.9-billion for an entirely new Universal Child Benefit, to be piled, as the document notes, “on top of all existing child benefits.”

It’s not remotely “revenue neutral,” in other words. The Liberals have used the carbon tax to fund their spending ambitions. The productivity challenge has once again been ignored. 

I don’t want to dump too much on the Grits. Ignoring productivity has been a bipartisan effort. The Tories blew $12-billion on GST cuts that might have been used to reduce income tax rates. Now the Liberals have blown at least another $6-billion, and arguably $10-billion: the $4-billion cost of cutting the bottom tax bracket will have very little payoff in productivity terms. 

What that $15-billion might have bought instead! For about the same amount, we could have brought all three of the top personal tax brackets down to a flat 20%, and had enough left over to knock a half-point off the bottom rate. Or, if you prefer, we could have cut a full point off the bottom rate, compressed the two middle rates down to 20%, and cut the top rate to 23%.

As important, politically, the Liberals could have really sent a signal that they meant to reinvent the political spectrum — that they “got it” on the economy as much as they did on the environment. Instead, they come off looking altogether too conventional. The whole thing smacks of calculation, the usual slicing up of the electorate into little groups, each of which is assumed to take only its own narrow interests into account, rather than presenting a bold, coherent vision that the whole country could get behind.

Conclusion: Lots of Green. Not much Shift. It’s better than nothing, but it’s still very much half a loaf, and a real missed opportunity.

UPDATE: Mind you, the Tories are in no position to call the Liberals for trying to pass off tax expenditures as tax cuts, since they’ve played exactly the same game in their own budgets. That’s if intellectual consistency means anything at all to them.


 
Filed under:

Half shift

  1. I haven’t seen the Liberal policy/policy announcement, so AFAIK, Andrew, you might be right that they screwed it up.
    But I think you’re wrong about the income tax cuts. Everyone is going to pay the carbon tax, so everyone has to get an income tax cut. The only way to do that is to drop the lowest rate.

    If you drop the highest rate, and, say compensate by giving low-income subsidies, the middle-class gets screwed (too rich to benefit from the grants, too poor to get income tax reductions). Also, there’s no reason to tie the carbon tax into a plan to de-progressivise the income tax system. (Or is there?)

  2. C’mon Coyne, it’s not nice to beg to have selected bits of your blog reposted on the conservative website…

  3. I’m confused Andrew. Don Drummond is on record stating that Dion’s plan will indeed be revenue neutral.

    Who am I to believe now?

  4. They did screw up. They alluded to support programs for home renoes and probably the revival of energuide along with a slew of spotty tax rebates. That’s more overhead in setting up these new support programs and increased complexity to the tax return. That’s a terrible shift in taxes.

    I agree with Andrew that the next election may turn out to be the most policy driven yet–but after today, what are we left with? The incumbent who’s barely announced anything at all and is now turtling in a kind of cowardly defensive attack mode, another party who announces a wholly reactionary plan hoping to steal votes from their biggest competitor and finally the Liberals with a neither here nor there plan. This sucks.

  5. Golly gee.

    I betcha could glimpse the reflective glint of the
    flat tax Holy Grail on the horizon,eh?

  6. Jerom, actually, if one chooses to accept Andrew’s analysis, what the LPC has offered is a new taxing structure that favors the mid to low income earners while discouraging pollution.

    Again, if one chooses to accept Andrew’s view, I’d say that this plan is a rather good one and the choices are pretty clear.

    NDP – Cap and Trade
    LPC- significant tax cuts favoring mid to low income earners and a tax on carbon (except on gasoline)
    Greens – significant tax cuts favoring mid to low income earners and a higher tax on carbon including gasoline.
    PC – Status quo.

    I don’t know about you but those are pretty good choices.

  7. If its revenue neutral whos going to pay to administer it? If the Liberals were smart, and no one is accusing them of that, they would have promised to axe the GST completly to pay for this. The GST already has a huge beaurocrasy in order to collect it that could be shifted to collect this new tax and appear more revenue neuatral to the consumer as they are already paying for this cost through the existing tax.

  8. I do not follow the logic on how any proposal could be revenue nuetral it makes no sense. First to be revenue neutral you would have to know the exact price of everything and then monitor and measure the price of everything as everything one way or another relies on carbon energy somewhere in the supply chain. The only way then gov’t might be able to approach is somehow flag every input of revenue into the govt and then try to write off an amount with Revenue Canada so that we get a tax break but again even this falls down flat on the floor when you start drilling down through any set of numbers you choose. What will happen is some people will get credits add some people will get 1.5% (tax cuts are you kidding me or whatever the amount)but in the meantime the law of unintended consequences kicks in and almost everything will cost more. This idea that pump prices will not go up is blatantly absurd – first the gov’t does not set pump prices and dollars will get you timbits that the price will indeed go up as somewhere in the supply chain there will be an additional cost which yes virginia will be passed on down to the comsumer. Then surprise surprise you will never quite get the amount of a tax cut that matches the increased cost.

  9. So everybody who makes under $38,000 will save 1.5%, everybody who makes betwen $38,000 and $123,000 will save 1.5% on the first 38K and another 1% on the next $85K. Everybody who makes over $123,000 will only get savings on the first $123,000 (of TAXABLE income).

    It bears noting that only about 2% of Canadians fall in the group that lives in the highest marginal tax bracket. And even they will get quite a large benefit from the proposed tax cut – anyone in the top tax bracket will save around $1400 under this plan. (or 35 tonnes of carbon – given that we average out between 5 – 15 tonnes of carbon per person, that should be enough for a family of 4)

  10. Isn’t the bigger screwup today Harper’s response? He keeps suggesting high energy prices are the problem. High energy prices aren’t the problem, they’re a symptom of the problem. Our Prime Minister seems unable to understand that high fuel prices are directly related to global demand.

    For a guy who purports to have studied economics, he seems pretty dumb…

  11. Andrew, I know you’re generally disinclined to see refundable child tax credits, OAS and related items as part of the tax system, but really they are. They constitute basic annual income subsidy targets (essentially negative income tax) for seniors and families with children, and receiving the benefit is dependent on participation in the income tax system – i.e. filing.

    My guess is that the libs decided a more dramatic re-think of the income tax system along the lines of what you’d like to see would have been too much info for the public to digest. Seniors and families with kids who pay home heating bills and fill their barbecues 2 or 3 times over the summer can probably understand the good and the bad in this plan. Would you say that the introduction of a carbon tax today makes broader income tax reform (of your taste or of anotehr’s) more possible in the future?

    Separately, and to be real for a moment, we can’t say with certainty how the revenue-neutral claim will play out until after the fact, when we see the extent of uptake on the b-list adjustments (capital cost adjustment, child tax benefit tweaks, OAS boost, etc). The AG angle is interesting; I’m glad I’m not a forensic accountant working in Sheila Fraser’s office.

  12. My question: Is this plan regionally neutral? Or does it represent a massive money transfer from western to central Canada?

  13. Canadians are already the most heavily taxed and governed people on the planet. The “green shi*t” is communism. Dion, the marxist leader of Canada’s liberal party, wants to regulate every aspect of our lives and make each of us totally dependent on the state. The “green shi*t” will destroy Canada’s fragile economy and further erode our declining standard of living. Paying higher taxes will have ZERO impact on the environment, but this isn’t about the environment. Will higher taxes reduce solar flares Dion?

    The manufacturing sector has seen this coming and have responded by getting out of Canada which is the only choice left for Canadians who refuse to be enslaved by the most punitive tax rates on the planet.

  14. Andrew,

    I understand you consider tax credits as “spending” programs, I get that. I don’t think most Canadians would but I get why you do (even though I think you are wrong). To me, if money doesn’t go into consolidated revenue (ie – is never collected by CCRA or any government agency) then calling it a “spending program” may be semantically interesting but ultimately wrong and unhelpful.

    I also get that you would have preferred to see more income tax cuts instead of the tax credits to support poor Canadians and credits to help soften the impact for certain Canadians. That’s a fair values judgement to make – a fully defendable one. I also just disagree with it.

    A carbon tax, by its nature, is regressive. People living on low income are hit harder by it than others . That’s not an argument against a carbon tax, it is an argument that certain people (like me) feel should be taken into account as you design offsets. Now, I guess simply cutting income taxes, could help some low income Canadians. Maybe you would argue that there will be a trickle down effect by cutting the top marginal rate that will benefit all and lift all out of poverty and thus offset the carbon tax.

    I would argue that if you are introducing a carbon tax, you need to have some offset beyond income taxes to help low income Canadians or by its nature, the carbon tax would be extremely regressive. If you can tell me how you can/would achieve this through the tax system, without resorting to “credits” of some kind, I am all ears. If your alternative is “I would do nothing for low income Canadians” then I respect that position, I just disagree with you.

    I guess there is a third option; to create actual spending programs to help the poor (you know, the way most people use the word “spending program”). Hire a few thousand bureaucrats. Study the challenge and design a centrally delivered program or programs. There are some who would argue that’s what’s needed…you know, spending programs – the way most people would define them.

    I guess that was an option that was rejected for a number of reasons….only one of them was to maintain revenue neutrality of the program as the Green Shift achieves.

  15. Now..all you supporters of Mr Dion’s insane little idea…dont get mad when, people like AC, the Sun Chain, the National Post, Paul Wells etc etc start to break this little idea down, and, dont get all pissy when the big big big question actually gets asked…how many ton’s of GHG’s will this stop from being emitted? Because in the end..that will be the question. How does taxing what you need to survive and live and then, giving you back some of what you spent to survive and live help reduce our GHG emissions? I cant wait until the National Daycare Program is announced during the next election…hmmmm…I wonder where that money’s going to come from!!

  16. Hey unhappy Canadian,
    Have you ever been to another country? If so, you might want to back off on calling our tax rates “the most punitive” in the world
    In fact, according to the OECD, the following countries have a higher proportion of tax revenues to GDP:
    New Zealand, Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and the UK.

    That is a lot of places. But don’t let facts get in the way of your ideological driven belief that “Canadians are already the most heavily taxed and governed people on the planet.”

  17. Compared to Conservative plans to leave income taxes where they are, I think this is just a little bit misleading.

  18. Rob Silver,

    I have no objection to providing an offset to low-income consumers, much like the one that was introduced with the GST; indeed, I argued for just such a scheme in a recent column. What I object to is packing a lot of other things into the plan that have nothing to do with carbon or taxes, and counting them as tax cuts. A universal child benefit? A refundable disability credit?

  19. I wonder if a revenue neutral carbon tax could have saved the dinosaurs?

  20. Andrew,

    Your last comment leads me to the following question:

    How on earth will the AG decide that the carbon tax is “revenue neutral”? On what basis? What counts as “offsets” to the revenue derived from carbon taxes, and what doesn’t?

    Does it have to be specified in this plan to count as an “offset”?

  21. john g, my understanding of this is that the AG is to ensure that every penny collected through the carbon tax must be returned to taxpayers and not sit in the coffers or go to finance other programs.

  22. Does anyone know if there is any support for the struggling manufacturers who are going to have their taxes increased but won’t be able to cover all the costs through the 1% corporate tax cut since they don’t make enough profit? I didn’t see anything in the executive summary.

    I’m not really for giving them extra support but I’m wondering what McGuinty’s (Dalton, that is) reaction is going to be if there isn’t any. I seem to remember him going off on Flaherty about coporate tax cuts not helping them.

  23. This new tax will have serious negative impacts on many sectors of Canada’s economy.

    For example, Canada’s tourism industry will have to absorb higher costs as it struggles to compete for business with U.S. competitors.

  24. The (correct) practice in recent years has been to count tax expenditures against both spending and revenues, ie as spending programs — rather than, as before, leaving them off both sides of the ledger, as if the money had never been collected or distributed.
    If the AG follows the same rule, she would be bound to say the tax, as presently conceived, was not revenue neutral.

  25. “What I object to is packing a lot of other things into the plan that have nothing to do with carbon or taxes, and counting them as tax cuts.”

    As above, credits and OAS supplements and so on are part of, and are administered through, the tax system. The effect of the proposed changes is a reduction in the projected revenue-generating potential of the tax system. We’re on the ragged edge of arguing semantics.

  26. A tax is when the government takes a dollar from me. If it gives it back to me — or to someone else — that’s a spending program, whatever name you call it. If it refrains from taking it in the first place, that’s a tax cut.

    That’s not semantics. It’s fundamental. The dollar that the government takes and redistributes is out of my control, and in theirs — even if I eventually get it back. Particularly so since, to get it back, I have to do something (or be someone) the government approves of.

  27. But the whole “tax shaft” is based on what a great many people believe to be junk science. What happened to the Kyoto deal that Dion liked so much he named his dog after it? Think he’s forgotten about that little gem? Hmph. Hidden agenda? The Libs? Please say it ain’t so.

  28. hey Chris B;

    “have I ever been to another country?” I live in another country and I’m not the one who stated that “Canada pays the highest taxes in the world and most of them are levied on small business owners”….

    Catherine Swift, President of the CFIB can take credit for that comment and for determining that Canada’s tax rate is 47% higher than the average G7 rate…..

    The Fraser Institute, who tracks these things, has also determined that the total tax burden for Canadian families is now over 48% and that the avg. Canadians’ tax burden has increased by 1351% since 1961….

    I’m not talking about some ridiculous analysis of Canada’s tax burden as a percentage of it’s GDP as determined by the OECD – I’m talking about what percentage of total earnings are paid in tax, all tax, federal, provincial, consumption taxes, property taxes, taxes on fuel, liquor, cigarettes, land transfer taxes, etc – everything, all taxes combined are draconian, punitive and excessive by global standards…

    Don’t let the truth get in the way of “your” ideologically driven anarchistic tendencies Chris B…. jump on your bicycle and head down to liberal headquarters and celebrate your marxist leaders plan to destroy Canada’s economy

  29. Actually, these do have to do with both carbon and tax cuts. People with kids are going to have a larger carbon footprint, but fewer tax filers. Unless there’s some kind of breeder’s bonus included they’re going to get hit disproportionately per capita. Hence a universal child credit.

    Those with disabilities? Perhaps they were taking into account that the production of assistive technologies also generates more carbon through no fault of the disabled.

    I’m not sure about the improved working income tax credit though. That to me sounds like something that could have meant another half percentage point or so off the bottom rung.

    Incidentally, taking the money of the lower income brackets is the most productive way to go, as it affects more people who will therefore buy more things. Giving big tax breaks to the rich, while making it more obvious, doesn’t do as much because it ends up addressing supply and demand by adding to the supply end (as they invest in speculative ventures) instead of shoring up the demand (where folks buy the things they actually need)

  30. “A tax is when the government takes a dollar from me. If it gives it back to me — or to someone else — that’s a spending program, whatever name you call it. If it refrains from taking it in the first place, that’s a tax cut.”

    Huh? So lowering a tax rate is a spending program as opposed to a tax cut?

  31. I agree that a credit (any credit, including the funky US earned income credit) is not a cut. Certainly from an individual’s point of view it’s not a cut. It is, rather, targeted redistribution of wealth administered through the income tax system.

    But there is a very fundamental difference between a cut or a credit on the one hand, and a “spending program,” which requires an allocation of funds from consolidated revenue towards a specific initiative, which in turn requires the range of approvals, Treasury Board decision, regulation, staffing for program oversight, reporting, etc. To whit: is there not a basic fundamental difference between the Tories’ child care allowance and the old Liberal day care plan?

  32. Sigh. Did you even read the post you quote? “If it refrains from taking it” means “lowering the tax rate.” But cutting tax rates is different from handing out tax credits.

  33. And handing out tax credits is different from a spending program. Superb! We all agree.

  34. (That last comment was to Boudica.)

    Andy Jette, there is a difference between the Tory child care allowance and the old Liberal day care plan (or was, until the Tories started handing out money to the provinces and day care centres as well. But that’s another story.) The one is a better, more choice-friendly spending program than another. It’s just not the same thing as a tax cut, particularly in terms of incentives to work, save and invest, where it’s the marginal tax rate that counts.

  35. Well, at least someone forwarded something that gets policy talk on the table. I have taken note of Andrew’s questions/complaints and will read more… But for those talking CON heads, just continue recycling those curmudgeon notes you were using before there was a plan… And your guy’s plan is?

  36. Is bicycling Marxist? I wasn’t aware of that. I forgot that one’s free market cred can be determined by the size of engine (Bicycle = Marxist, Prius = Socialist, Civic = I dunno, Labour? Chevy Silverado = what? Fascist? that seem to me to be the other end of the spectrum).

    And quoting the Canadian Federation of Indiependent Business on small business taxes? Hmm – they would never bias a study…. and the Fraser Institute is certainly the most impartial arbiter of information in the country. I chose the OECD because they have no vested interest in anything – the just have reams of info.

    Finally how can I be both anarchist AND Marxist? I must be very confused

  37. By that standard, isn’t the differential treatment of investment income (capital gains) and earned income itself a spending program? What about deductions for charitable donations? Or for RRSPs? All are exceptions to the normal interaction of income and taxation level.

  38. Andy,

    Yes, and they are conventionally accounted as tax expenditures for that reason. The exception is, or should be, the RRSP, since it does not so much exempt savings as prevent them from being taxed twice. As such, it is not a departure from tax neutrality, but an essential part of it, at least under a conventional personal income tax system.

  39. “Civic = I dunno, Labour?”

    A 1987 Civic = Old Labour. A 2008 Civic = New Labour. A Civic hybrid = Gordon Brown.

  40. Thanks AC.

    A = carbon tax collected
    B = Calculated by determining the difference between actual revenues, and revenues which would have been accrued, considering ONLY the Dion tax cuts. Not considering any tax credits or spending.

    If A != B, then AG says not revenue neutral.

    Correct?

  41. john g,

    That would be my view, yes. Whether that will in fact be the practice, who can say.

  42. Andrew
    The semantic debate is truly gripping. But doesn’t it boil down to this test both for Canadians at large and the Auditor General:

    Is every $ raised from the carbon tax flowed back to Canadians in such a way that the recipients decide how to spend those funds?

    Choices were made about how to flow $ back. You can disagree with them. You can argue that a productivity agenda should have been pursued. Those are fair points but you are moving the goal posts a bit.

    The Dion plan says $ that comes in WILL NOT be used to fund things like daycare, or infrastructure, or whatever. The money that lands in people’s pockets is for them. They decide how to use it.

    In other words Government may decide how much goes back to people and it may favour certain types of people (like those nefarious creatures called “seniors” and “parents”) but that is true in EVERY TAX SYSTEM IN THE DEVELOPED WORLD.

  43. I’m not sure I understand. Your view is that the only revenue neutral tax shift is one that hammers the poor because they didn’t pay income tax to begin with?

  44. “But cutting tax rates is different from handing out tax credits.”

    Calm down, Andrew. I get your point but it all sounds like semantics to me. People are getting stuck on the word “revenue neutral” and its technicalities. What I’m looking at is where the revenue generated from the carbon tax goes. My eyes are on the end result and what I see are tax cuts, tax credits and incentives attempting to redress global warming.

    Frankly, I’m one of those people who believed that we needed a carbon tax and didn’t need the tax shifting scheme to bribe into doing the right thing. But I do understand that some do and others need the financial buffer to bear the increases.

    The bottom line is that we cannot continue to ignore the impact of pollution on our planet. If I can do something about it all the way getting a break in my taxes, you certainly won’t hear me complain about the semantics between a tax cut and a tax credit. They all amount to money in my pocket and a cleaner environment.

    Is Dion’s plan absolute perfection? I seriously doubt it but it is way better than what our govt has offered us to date.

    I haven’t had a chance to go through May’s proposal. Perhaps you could give us your take on it?

  45. From the guv’mint, circa 1999 (via the google):

    “It has often been argued that governments have the flexibility to use tax concessions, as a substitute for direct public spending, to achieve the same objectives. Such tax concessions are generally referred to as tax expenditures.”

    It’s a clip from a much longer discussion of the difference between tax structure, tax concessions and tax expenditures, and their main conclusion is that “there is a large element of subjectivity in defining tax expenditures.” They give the example of the dividend tax credit, which they argue “simply offsets the tax paid at the corporate level to avoid double taxation, and hence should not be classified as a tax expenditure.” They also seem to suggest that the very fact of a progressive (tiered) tax system could be interpreted as a tax expenditure, because “no consensus exists as to what constitutes a benchmark tax structure.” They take the position that the low-end rate is not a tax concession but ratehr part of the structure.

    This is why I’m not an economist.

    Your argument is that tax expenditures ought not to be treated as distinct from program spending. It’s a valid argument, I don’t think it’s realistic, but more to the point there doesn’t appear to be anything approaching a consensus on distinguishing between tax expenditures and concessions versus tax structure.

    Being of significantly feebler mind than the guys at Finance who wrote that thing, I take the position that if it’s part of the tax code, it’s part of the tax structure. The fact I am not (a) a parent, (b) a rural/northern dweller, or (c) old, means I don’t interact with those areas of the tax structure, but I am working on a and c so someday I will. And if I did have a kid and last year I got $1K back and under this scheme I’d be eligible for $1350 or whatever, I’d experience that as a tax cut, not a program.

  46. Well I was disappointed that Dion didn’t have the spreadsheets, graphs, projections and so on, that would have shown concretely how his plan is revenue neutral.

    And surprisingly, there was no indication of how much GHG’s would go down. I was hoping to see a reporter ask that question, and get Dion’s answer. But both CTV and CBC cut away from his press conference, to cover Harper.

  47. “And surprisingly, there was no indication of how much GHG’s would go down. I was hoping to see a reporter ask that question, and get Dion’s answer. ”

    Junkie, that’s because anyone with sense understands that the more expensive it is to pollute, the less pollution will be produced. Why ask about the obvious?

  48. Oh Andrew. I feel a 6-month blogging hiatus coming on.

    Two points:

    1. I’m glad you would be ok if the plan was not revenue neutral but “failed” (according to your test) because of “expenditures” you support (ie – GST-like refund for poor Canadians) but find it outrageous that it fails to be revenue neutral (again, based on your definition, not ordinary parlance) based on “expenditures” you don’t support. Again, that’s fair, it just kind of goes against most of your post from today, but who’s keeping track. Or is the GST refund that only poor Canadians (including 16-year old students regardless of their parent’s income) not an “expenditure” but a “tax cut”….sorry, the definition is so confusing for a simple Liberal like myself.

    2. You argue that the Libs should have cut the top marginal tax rate because it would have improved Canada’s dreadful productivity record. A worthy goal – one I support. One that has nothing obvious to do with with a carbon tax. To me that’s not an argument against what you are arguing for, it is just a fact. Government will have more revenue from a carbon tax that will help achieve environmental objectives and they should return that money to Canadians to help achieve another objective (in your case, increased productivity).

    Now, one of the objectives Mr. Dion has set out is to reduce poverty by 50% overall and 30% for Children. Also, I think you would agree, a worthy goal. No, it is not directly linked to levying a carbon tax either – just like your productivity argument. And, as with your productivity objective, it is being achieved (in terms of today’s announcement) entirely through the tax code. Part of this is to help offset the regressivity inherent with a carbon tax (and I’m glad to hear that you support SOME measures to achieve that goal) and other tax related measures are intended to achieve another worthy goal (reduce poverty, in particular amongst children).

    Reasonable people can disagree about which should be the OVERRIDING priority of the Canadian government but that’s really not an argument against the Green Shift which is an expression of Liberal values….

  49. “Junkie, that’s because anyone with sense understands that the more expensive it is to pollute, the less pollution will be produced. Why ask about the obvious?”

    Because we have a target we need to reach by a certain time. The point is not to price pollution, it’s to reduce it to a certain level by a certain time and this is the mechanism. Obviously, any number would be a guess but they surely must have a ballpark idea of what the end result is going to be.

    Is it too much to ask what their projection is?

  50. It’s not my job to parrot on behalf of the libs, but they do have a reference to a Kyoto Phase 2 (2020) target in there. 20% below 1990 levels, 25% below if other countries (I gotta assume this means US and China) sign on to Kyoto Phase 2 targets as well. Not a projection, true. But for what it’s worth.

  51. Rob,

    Right, right, and right. I do support the plan, on balance, because I think a carbon tax is, along with cap-and-trade, the best way of reducing carbon emissions (as opposed, say to the grab bag of subsidy schemes that all the parties, yours included, still support — but that’s another story). It’s not sufficient to condemn the plan that it’s not revenue neutral (the public accounts would agree with me on that) and it’s not sufficient to condemn it that it passes up the opportunity to make meaningful tax cuts, the second time in recent years that a party has blown billions of dollars on everything except the one thing that do most to address a concern on which all our futures depend: how on earth we are going to be able to afford to pay for all the promises we’ve made to each other, as the population ages.
    That demographic challenge, it seems to me, is on a par with climate change, at least in terms of how it affects this country. Like climate change, it requires that we get started now, and make steady progress over many years – if we only react once the problem is upon us, it will be too late. But whereas all the parties at least pay lip service to climate change, productivity passes all but ignored. I say again: all those surpluses, all the billions in GST cuts and billions more in carbon tax revenues, and the top marginal rate is still where it was at least a decade ago.
    Anyway, perhaps I’m just suffering from inflated expectations. Your leader told us, and continues to tell us, that the plan is revenue neutral, that it gives back every penny in revenues raised in tax cuts. It is not, and does not. Your leader told us, and continues to tell us, that it marks a bold, transformative shift in tax policy, away from income and onto pollution. A cut of one percentage point hardly merits such superlatives; a cut of zero percent certainly doesn’t.

  52. I’m not as pessimistic as Andrew here, and have to process the Liberals’ report further before completely forming my opinion; but I am very grateful for what he has added to the discussion. I recall Andrew more than once in the past year suggesting the Liberals should deeply cut income tax – he is being consistent in his statements. In fact I’m glad that the focus of the media is now on actual policy rather than slices of prepaid prepackaged marketing.

  53. Amen to that one James. No more Oily the Splot, please!

  54. Andrew said: “The dollar that the government takes and redistributes is out of my control, and in theirs — even if I eventually get it back. ”

    Actually, you don’t get your dollar back. You get part of it, less the cost of administering the process. The balance is part of someone else’s dollar.

  55. “And surprisingly, there was no indication of how much GHG’s would go down. I was hoping to see a reporter ask that question, and get Dion’s answer. ”

    “Junkie, that’s because anyone with sense understands that the more expensive it is to pollute, the less pollution will be produced. Why ask about the obvious?”

    Actually, Boudica, Junkie asked a terrific question and the answer is not at all obvious. Even Premier Campbell’s government admits that its carbon tax will have a relatively small impact on total GHG emissions. I think the question we (maybe just I) would like answered is whether the benefit of this program actually justifies the cost.

    Also, is it too much to ask that we differentiate between “pollution” and “CO2 emissions”? The two are not interchangeable and Mr. Dion’s proposed program targets the latter, not the former.

  56. Meanwhile, the Globe & Mail is reporting:

    “The federal government is being challenged in court by Friends of the Earth Canada for filing a plan to reduce greenhouse gases that doesn’t meet Canada’s obligations under the Kyoto Protocol, the first time any country has faced such a lawsuit.”

    This of course is largely a result of Pablo Rodriguez’s private members bill, that made it all the way into law. Surely Dion has thought about how his plan will or won’t meet the requirements of that law. Afer all, he expects to be PM one day, and that law will be on the books for him to deal with.

    Dion is going to have some serious explaining to do, if and when the PPG reporters press him on this and other GHG reduction issues.

  57. Laurel, I disagree. The better question would be what measure would be the most effective and quickest way to reduce GHG?

    Answer: Carbon Tax

    Or do you have a better idea?

  58. Andrew,

    You’re a smart guy. Keep the revenue side of the equation (ie – the carbon tax) exactly as proposed (ie – $40 in year four).

    Price out very roughly – I know you are a columnist, not a politician trying to get elected as PM – your “GST Credit” like proposal to help make the carbon tax progressive. What’s it cost – 2, 3 billion? I have no idea but if meaningful it’s more than nothing.

    So now eliminate all the evil “expenses” you dislike in today’s Green Shift. You know, those hobby horses like helping seniors and parents. What you left with? Probably enough to cut the top rate by, what, 1%? 2%? 4% – is that enough to transform a policy from “timid” to “transformative”? Really?

    Again, you aren’t running for anything so you have no burden to propose a competing plan….I’m just saying….When it comes to income and corporate tax cuts, $14 billion ain’t what it used to be….

  59. I have an idea Boudica rather than tax the source of the energy which after all is not the problem it is the emissions that are the problem. Tax emissions! Let’s face it folks here is a scenario say tommorow I develop a home heating oil furnace or combustion engine that has zero emmissions (impossible but one could be made much more efficient) ….. how much you want to bet I will still have to pay the carbon tax? hmmmmm think about it.

  60. Mr. Coyne – those tax credits that you take issue with are the best ways to put more money into the pockets of low income Canadians. Those low-income families who will benefit greatly from the proposed tax credits are the people who most need financial help, and also the people who are not affected much by a reduction in income tax.
    So, if your goal is helping out the struggling families of Canada, I don’t see what’s wrong with using tax credits to do it…

  61. Rob,

    You must have missed the paragraph where I describe the kinds of tax cuts they might have brought in in some detail. But to recap: using Liberal numbers, each percentage point cut to the bottom (15%) tax bracket costs something on the order of $2.7-billion. Each point off the second (22%) costs $1.9-billion, each point off the 26% third rate another $600-million, and I’m told that each point off the 29% top bracket (assuming anyone ever thought to cut it) would cost about $750 million.
    You can combine these in any number of ways, but to compress the top three brackets into a top rate of 20%, as I proposed, would cost about $14-billion (reckoned purely in static terms, ie ignoring any offsetting increase in the base arising from the cuts). Nine points off the top marginal rate — a nearly one-third reduction — would count as “transformative” in my books. And you’d still have a billion or so left over for offsets — more, if you were prepared to go “revenue-negative.”
    Or suppose we went to three rates: 14, 19, and 23. That would cost about $14.7-billion. Not as transformative, but still cuts rates by three to six percentage points in the top three brackets — as opposed to zero to 1 under the Liberal plan.

  62. Clearly Canadian,

    I’ve no objection at all to tax credits. Just don’t pretend they’re tax cuts, and recognize that the more you spend on these and other programs, the less of that carbon tax loot you have left to cut taxes on income — which I had understood to be the intent of the plan. It was, after all, called “tax shift,” not “tax-and-spend.”

  63. Mr. Coyne,
    Thanks for your response, I appreciate that you actually read and respond to comments.
    First, a caveat: I’m not a tax expert. But it would seem that a central goal behind income tax cuts is to leave Canadians with more money in their wallets at the end of the year. If you are a low-income Canadian who does not pay much income tax (if any at all), how can the Liberal plan keep those families from being left out without using tax credits?

  64. Clearly,

    Agreed. Let me repeat, I don’t have any objection to a low-income tax credit. And I don’t actualy have any hang-up about revenue neutrality: I”m the one who proposed that they make the thing revenue-negative, ie cut income taxes by more than the additional revenue raised by the carbon tax, at least in the short run.
    I’m merely pointing out that the Liberals have not done what they said they were going to do, that they have not delivered the kinds of tax cuts they promised, and that to the extent they have cut taxes, they have cut in ways that, while perhaps more politically popular in the short run, deliver the least bang for the buck in terms of long-run productivity increases. Or in other words, more or less exactly what the Tories did.

  65. Oh, and one other thing: I don’t agree that “a central goal behind income tax cuts is to leave Canadians with more money in their wallets.” The goal should be to give them more incentive to earn it.

  66. So this is what the Liberals had in mind when they spent the last two years saying “every economist knows that income tax cuts are better”. Ultimately they had no idea why.

  67. I didn’t hear Ryan protest when Harper, after raising income tax, came back a little later and dropped them back again. Or all the tax credits he created for workers, parents and puppies et al.
    Right now i am still digesting the nature of the plan. The overall concept is firm but it remains to be seen if they can sell it. Certainly having Andrew and Paul pulling out their hair isn’t the best ‘first reaction’ you could hope for, tho. Hate to think what Chantel ‘Dion must die!’ Hebert thinks.

  68. I think the libs should just give me my share of tax return and then I will gladly pay it all back in new carbon tax which can be used for saving the earth… up to how much they give me of course cause its revenue neutral?

  69. Will the impact on jobs also be neutral? It would appear to me that all the lost jobs in Alberta will easily be replaced by new green tax collecters at CRA.

  70. Andrew

    Page one of the Liberal document, last sentence in the opening paragraph: “We need to make polluters pay and put every single penny back into the hands of Canadians.”

    Seems to me that that is exactly what they then propose. At the end of this long discussion it seems to me that you question what they call the vehicles they have chosen BUT that is not the same thing as saying they are not doing what they said they would do.

    Your meta-theme is that you do not believe that enough has been done to spur productivity. This is a fair and valid point but it might be more reasonable to simply say: I’d have done things differently and made different choices rather than saying that the plan does not do waht it says it will do.

  71. The problem I see with the carbon tax versus income tax cut is that it is not a zero sum game, quite apart from the administrative costs. If the carbon tax works and people reduce their usage, then the government takes in less revenue and has to reduce the “rebate”, and/or either increase income tax or the carbon tax yet again to compensate. It becomes a downward spiral – or upward spiral in the case of taxes.

    Personally, I am convinced the whole GHG and climate catastrophe scenario is a red herring to gain more control and taxes anyway, but that’s for another blog. Cut pollution, not CO2 – plants need it to live!

  72. ESJ,

    “Revenue neutral” does not just mean that you are careful to spend it all. It means you cut taxes by as much as you raise them.

  73. The present babbling about whether one carbon tax plan or another is the “best” sounds like a passel of witch doctors clucking about whether it’s more effective to sacrifice goats or chickens when attempting to entice the gods into making it rain.

    The single most important priority for government at present is to AVOID doing something precipitous and ill-advised that will devastate our economy – and to KEEP avoiding it at least long enough for the global warming Kool-Aid brigade to come to understand that national policy should be made on the basis of empirical scientific reality rather than ridiculously simplistic computer models of inherently unpredictable complex interdependent nonlinear systems.

    Here’s some empirical scientific reality:

    (a) human-generated carbon dioxide amounts to a statistically insignificant (i.e., within the margin of detectable error) portion of the planetary carbon dioxide cycle. In Canada, forest fires generate more carbon dioxide (as well as lots of nasty nitrous compounds) than all forms of transportation combined – and yet we have a policy of not stopping forest fires. Carbon is carbon, people;

    (b) in any event, carbon dioxide is insignificant as a greenhouse gas compared to, for example, water vapour. But nobody’s trying to tax water vapour production;

    (c) the INCREASE in China’s carbon output over the period 2006-2010 will be larger than Canada’s TOTAL carbon footprint. So even if every last Canadian were to spontaneously disintegrate, the net reduction in total annual anthropogenic carbon dioxide production would disappear in less than two years thanks to China alone;

    (d) why are we focusing on carbon dioxide anyway, given that empirical evidence (not models) demonstrates that increases in carbon dioxide levels follow, rather than precede, increases in global temperature. In other words, let’s make sure the causality arrow is pointing in the right direction before we hang legislation off it; and finally,

    (e) seeing as how that big yellow ball in the sky dumps more energy onto Earth in an hour than the human species generates, from all sources, in a year, it should be obvious that even the most minute fluctuations in solar irradiance have an astronomically greater impact on Earth’s climate than anything humans can, or ever could, do. What the Sun’s doing – or not doing – is more important than my dwindling collection of incandescent light bulbs

    Right now, by the way, the Sun’s not doing much of anything. This is not good news for people who live north of the 45th parallel.

    Now, before the true believers out there start chirruping about the IPCC and the soi-disant “broad scientific consensus” on AGW, understand this: in real science, empirical evidence trumps projections derived from models. Always. Every time. There are no exceptions. And models that cannot incorporate and explain new observed data go in the dumpster. That’s how science works – not by “consensus”. As soon as somebody appeals to “consensus”, you’ve left the scientific sphere and are lodged in the realm of politics.

    All of that said, by all means, let us reduce pollution. Smog exacerbates asthma, and clean water and land are vital to human comfort, if not survival.

    By all means, let us develop efficient, economical, environmentally friendly sources of energy (a category that includes nuclear power but excludes grain-based ethanol, wind and solar power at current technology levels).

    By all means, let us husband our natural resources. If you think it’s hard trying to cut back on gasoline, stop for a moment and think about a world without plastic. Oil is far more valuable as a feedstock for polymer production than as a fuel.

    And by all means, let us have tax breaks. Because unless the next solar activity cycle cranks up very, very soon, we’re going to need the extra money to buy bunker fuel and fur coats. If solar irradiance drops only a little, and stays low, the next quarter century or so could get really chilly.

    And if you think global warming would be bad for Canadians, try growing canola in a snowbank.

  74. In my view, the very top income brackets (in which my husband and I fall) are most able to adapt to the coming carbon-constrained environment. On the other hand, a few hundred dollars a year tacked on to the living costs of my in-laws would be very hard for them to sustain. Furthermore, they would be less able to afford the measures that might reduce their carbon tax costs. Those just getting by don’t enjoy the flexibility that the rather well-off do. Mr. Coyne forgets, apparently, that the top income earners have most benefited from the GST cuts. They aren’t going to fret if their heating or electricity costs rise a bit – meanwhile they enjoy a nice GST holiday on their latest auto or other high-priced consumer goody. What I’ve noticed is that the uber-wealthy are the ones who often embrace green because it assuages their guilt, and that comes at a price (like most so-called “sin taxes”).

    If pricing carbon is the good move that many believe it to be, it has to be at least somewhat politically salable.

  75. I might also add that many of the other vote-buying CPC measures pertaining to children and sports activities have been enjoyed by people at the very highest tax brackets.

  76. From Mr. Coyne,

    ““Revenue neutral” does not just mean that you are careful to spend it all. It means you cut taxes by as much as you raise them.”

    True. And the salience of the revenue neutrality argument will depend entirely on how we define the scope of the taxation as versus spending. I do think a critical mass of Canadians will disagree that “foregoing revenue” via tax concession/expenditure shouldn’t count towards calculation of revenue neutrality. And I don’t think the AG will use the opportunity afforded by her office’s prospective role under this plan to launch a parallel debate with the ministry of finance on the appropriate definition of tax structure vs. tax concession vs. tax expenditure vs. program spending. It will make the Harper-Dion debate interesting.

    I just want to echo Clearly Canadian and others above in saying this has been a fascinating discussion. Thanks to our esteemed host for leading and engaging with us.

  77. But here’s the problem with the cap and trade or carbon tax schemes – and they are schemes…. CO2 emissions are not to be confused with pollution and whether either actually contribute to climate change is doubtful. The scientific consensus is that human activity has no effect on the weather. So why are Canadians facing higher taxes? To discourage them from heating or cooling their homes? To encourage them to use a bus to get to work (and have you ever seen the exhaust on a bus? commercial vehicles cause significantly more pollution than automobiles).
    So how are these higher taxes going to clean-up the environment. They won’t. Dion’s “plan” is all about the redistribution of wealth. Dion is a marxist and his agenda is to have an egalitarian proletariat society where everyone is dependent on the state. Dion wants to cripple the economy of Canada because as a marxist he believes that capitalism is bad. There can be no other explanation for the lunacy of his “green shift”. If Dion was serious about “saving the environment” he’d have a plan for abundant and affordable energy, he would be promoting alternative sources of energy and would propose the closure of coal generating stations in Canada and, more importantly, in China and India. As a Canadian I am greatly distressed by the political direction of this country and there is no damned way I will stay in Canada and tolerate this slippery slide into poverty and despair – because the only result of Dion’s insane scheme will be the total and absolute destruction of Canada’s economy. Call it what you want; liberalism, socialism, marxism, a green-shift…. Canada’s economy is faltering and Dion wants to introduce new taxes? At a time when there are record revenue surpluses in Ottawa? And people are debating this like it’s a good idea? Are you all mentally ill?

  78. If Dion was serious about “saving the environment”, he’d have done it when he had the power to do so. His government signed the Kyoto accord and then sat on their hands, 12 years later and now they want us to pay because they failed to fleece us sufficiently the first time around. Get ready for Kyoto round #2.

  79. Andrew is right to point out that the use of tax credits results in this plan failing the revenue neutrality promise.

    The Income Tax Act runs for thousands of pages. Those of us, such as myself, that make a living interpreting this monstrosity are required to be precise. Politicians monkeying around with the ITA should address their policies with a similar precision.

    There is a very real difference between a tax cut by lowering the rate, which everyone in that bracket qualifies for, versus a tax credit, which only people doing what the government wants to encourage qualify for. This attempt to modify behaviour is which is why it is classified as spending. This is not Andrew’s opinion, this is how it is accounted for in the very budget documents that describe credits.

    What seems like semantics to some posters makes a very real difference to myself and my clients.

    They promised neutrality, and they didn’t deliver it.

  80. Well I think it’s a bit of a stretch to call is his government for 12 years. He wasn’t the leader and he didn’t have a particularly long time as environment minister. [not saying his plan was going to work…] Paul Martin was lukewarm on Kyoto until he decide to lambaste the Americans during an election campaign.

    I am surprised by the so called “facts” being touted here. It doesn’t seem to me that there is a lot of actual evidence that disputes the idea that CO2 causes is causing climate change.

    As for the carbon tax, I support the idea, realize a lot of details need to be worked out. I’m not convinced that the productivity agenda is part of this plan, but I think it should be.

    People seem not to understand that in Canada we use marginal tax rates. So a decrease in the bottom rate is a tax cut for anyone who pays that rate, in principle everyone who pays taxes. Therefore the richest and the poorest (who pay taxes) get their taxes cut.

  81. “This attempt to modify behaviour is which is why it is classified as spending. This is not Andrew’s opinion, this is how it is accounted for in the very budget documents that describe credits. That seems like semantics to some posters makes a very real difference to myself and my clients.”

    The “very budget documents that describe credits” refer to forgeone revenues in the form of tax concessions and/or expenditures. These documents do in fact distinguish between direct program spending and tax concessions/expenditures.

    Further, being old isn’t a “behavior” the government, or Dion, wants to encourage or discourage. Nor is simply living North of 60. We can have a debate about whether tax credits for kids and for having a job (earned income credit) are tax expenditures in the same vein as deductions for charitable/political donations; I would argue that “behaviors” as fundamental as having a job and having kids are so fundamentally basic that their treatment in the tax code shouldn’t be equated with treatment of donations to political parties.

    I (now) appreciate this is not simply about semantics. This is about defining the rules of the debate. Dion says his plan is revenue-neutral becasue projected additional revenue and projected foregone revenue (tax cuts plus tax concessions/expenditures) cancel each other out. I fail to see what is inaccurate (or, as some appear to be claiming, misleading or dishonest) about that particular claim.

    If I have 3 apples and I eat one, I have 2 apples left. If I have 3 apples and I slice it and then eat it, I don’t have 2 uneaten & unsliced apples and one sliced & eaten apple. I still have 2 apples.

  82. I think we already have carbon taxes – gasoline at the pump is taxed by both federal and provincial governments as well as GST and in some provinces PST (or HST). All that really is happening is that the Libs are giving Ontario and Quebec a break (by not pretending to apply it to gas at the pump) and because those provinces are blessed with hydro power – anyone see the voting patterns emerging with a national election (after all you only need either Ontario or Quebec to win power – forget about the rest of Canada). Unfortunately the West will be screwed once again because our energy is now declared to be ‘dirty’.

  83. Andrew

    “Revenue neutral” means you put every penny back into Canadians’ hands. This is what the Shift says it will do.

    You have a valid point that it is difficult to quantify with precision the value of a credit (as is the case with other fiscal expenditures.) But Department of Finance estimates this regularly. Every Budget that has included a new exemption has estimates of the cost.

    Bottom line though for most Canadians is this question: will this shift take less out of my pay cheque and/or deliver to me and my family a bigger refund?

    That is the test.

  84. “All that really is happening is that the Libs are giving Ontario and Quebec a break (by not pretending to apply it to gas at the pump) and because those provinces are blessed with hydro power.”

    With respect, Ontario is “blessed” as much with nuclear plants and coal plants that should be closed by now as it is with Hydro. Manitoba, BC and Newfoundland are also quite blessed with hydro.

    Quebec is also blessed with a massive aluminum smelting industry. Ontario, you may have heard, makes cars (sometimes), and steel, and nickel. None of these industries are what you would call perfectly carbon-free. Nova Scotia has coal. Newfoundland has oil.

    It’s not always “the West” versus everybody else. There’s more going on.

  85. This whole GHG debate is ludicrous. Why can’t we talk about something relevant and important in this country? The green lunatics are in charge of the asylum, and are prepared to fritter away our whole economy and way of life for the sake of electoral politics. We only produce 2% of the world’s GHGs. China probably adds that much in a year. If the Liberal tax is entirely successful, where will we be? 1.6% ? Will the atmosphere notice? This is stupid. Do we really think we have that much moral authority in the world that our “leadership” will make a difference? Go to any foreign country and try to find news of Canada – good luck.

    This tax is not revenue neutral since the top rate doesn’t change, so once again we get “tax breaks” for everyone except those who actually pay taxes.

    But this is Canada and there is no problem too large that it can’t be solved by more government and more taxes.

  86. Andrew:

    You have convincingly busted the Liberals on their claims of revenue neutrality.

    A couple points you missed:

    Nowhere in Dion’s plan is there any mention of how much emissions will be cut. Which, if I’m not mistaken, was the whole point of the exercise. Layton’s plan (which you appeared unaware of last night on CBC) was unveiled two weeks ago and sets caps and a timeline.

    Secondly, this plan does tax the “things we want more of”, like public transit. Doubling diesel taxes will make transit more expensive and less enticing to people.

  87. “Doubling diesel taxes will make transit more expensive and less enticing to people.”

    Two words. Meh. Tro.

    Speaking of which, any Montrealers out there who remember the joke about why the Metro is blue?

  88. To me, the most cynical part of the Green Shift is the decision to exempt gasoline and aviation fuel.

    The current excise tax on gasoline is not a carbon tax and it is disingenuous to pretend that it is. If the excise tax can be called a carbon tax then why not call business taxes on refineries a carbon tax and exempt them too?

    If a government wishes to introduce a carbon tax in order to modify consumption of carbon, I fail to understand why it does not apply across the board without exception. Otherwise, why not just bring back the GST to pay for the new spending programs?

  89. “The current excise tax on gasoline is not a carbon tax and it is disingenuous to pretend that it is. If the excise tax can be called a carbon tax then why not call business taxes on refineries a carbon tax and exempt them too?”

    A friend of mine worked at a gas station one summer. Should his income taxes be retroactively tagged as carbon taxes and be exempted?

    Come on. The gas tax is a tax on gas. The corporate tax is a tax on business profits.

  90. “If a government wishes to introduce a carbon tax in order to modify consumption of carbon, I fail to understand why it does not apply across the board without exception. Otherwise, why not just bring back the GST to pay for the new spending programs?”

    Good point, Brian. And on that front, this is where I think that the LPC tried to fend off what was sure to be a crucifixion had they touched gasoline.

    That being said, if the intent is to ensure that consumers use less gasoline, the current high prices (which haven’t reached a ceiling yet and are not likely to go back down) is already doing that.

    One could adopt a purist position and say that all carbon should be taxed. Or one could recognize that this policy is enough of a risk for the LPC w/o having to ensure political suicide at the polls in the next election.

    Besides, I personally am enjoying watching the CPC having to squirm and explain the lies they told on that point by responding that Dion must surely be lying about that one.

  91. “The gas tax is a tax on gas. The corporate tax is a tax on business profits.”

    The other thing about business profits is that they can be offset or offshored (sort of how the richest among us pay relatively low taxes because their excellent accountants shelter their income). A carbon tax should be on a strict consumption basis. “Exempting” gasoline is stupid – just rebrand existing Federal Fuel Tax as carbon tax.

    Aviation fuel is trickier – given that it has, historically, been cheaper to fill an aircraft’s tanks beyond the necessary load when departing a low-tax area than pay excessive duties on a normal fill on arrival at a high-tax destination, it might require the duty to either be kept low or for the US to impose a simultaneous tax.

  92. Charles,

    I’m aware of Layton’s plan. I just don’t think it’s credible. What I said last night was that this was the first credible plan that any of the major parties had brought forward.
    They’ve all talked about cap and trade, which is fine as far as it goes, but no plan that only covers the large final emitters — ie about half of emissions — is going to get us anywhere near our targets.

  93. @Edward Bender: the problem is that carbon taxes aren’t just about reducing CO2 – or they shouldn’t be.

    Reducing combustion emissions through combustion efficiency improvements driven by high prices means reductions NOx, SOx and particulates – smog and asthma causing agents.

  94. Brian, Andy, Boudica,

    They haven’t exempted gasoline: it’s already taxed.

    The argument the Liberals make is that the current 10 cent excise tax on gasoline is equivalent to a $42 per tonne carbon tax. Hence, they say, there is no need to adjust the tax in the first four years, ie while they are ramping up the carbon tax from $10 to $40. In other words, in the startup phase they’re just bringing other forms of fossil fuel up to par with the existing tax on gasoline.
    They don’t say this, but it’s pretty clear what comes next: the carbon tax continues to increase beyond $40, and the gasoline tax gets folded into it. Meaning the tax on gas will increase, starting in year five.

  95. Thanks for clarifying Andrew. What I wasn’t sure of is whether they had planned on using the existing gas tax revenue in their “shift.”

    That makes more sense.

  96. Andrew,

    Thanks for the reply, but the issue stands: where are the emission targets (which you praised last night)?

    Norway’s carbon tax experience resulted in a 2% emission cut….in a country that is light years ahead of us in green solutions.

    This is what makes Dion’s plan so disingenuous. If he is announcing a tax policy, fine. But if this is meant to be his grand plan for the environment, give me a break.

    This is not going to make an iota of difference in our overall environmental footprint.

  97. Charles, I’ve been looking for comparisons like the one you cited for Norway. Where did you get that piece of info?

    Please share.

  98. Thanks Charles. I’m just wondering, though…

    Since Canada is a much larger GHG emitter than Norway, is that a fair comparison?

  99. Charles and others

    Those who suggest there are no targets in the Liberal proposal should look at p.16:

    “We believe that our target should be to reduce greenhouse gas emissions by 20 per cent below 1990 levels by 2020. This should be increased to at least 25 per cent if other countries take on comparable efforts. This is in line with what the science tells us we need to do. We must achieve absolute greenhouse gas emissions reductions, and we must begin today.”

  100. It is.

    That is the problem with carbon taxes. It cannot, with any certainty, predict or meet emissions target. All it does is tax pollution, not place any limits on pollutions. A cap and trade does both.

    Btw, Norway has other parallels to Canada. It’s s considered the third largest oil producer in the world (http://en.wikipedia.org/wiki/Energy_in_Norway).

  101. This thinly-veiled attempt to redistribute the wealth of western Canada into the pockets of Quebec and Ontario voters (which, to the Liberal mindset, is where it rightly belongs) will not go unnoticed. Fanning the flames of western alienation, truly a Liberal tradition.

  102. Charles, I agree that a cap and trade policy is needed but why not have both considering the fact that a carbon tax allows us to move quickly and shift behaviour right away?

    Why does it have to be one or the other?

  103. ESJ,
    That sounds awfully like past Liberal promises on Kyoto, and we all know what happened there–30% above 1990 levels.

    “We believe…this should…if other countries…”

    Where do they spell out the number of tonnes of greenhouse gas emissions reductions, by year.

  104. Learmont, I guess it is fair to pass the sins of Martin and Chretien onto Dion but surely you can see the difference in terms of commitment to this issue.

    Having essentially staked his entire political future on being the leader to bring Canada into a sustainably environmental era, it would be complete political suicide for him to not follow through on this plan once in office.

    Dion, in effect, turned himself into a One Issue candidate yesterday. Even if one is given to give politicians the benefit of the doubt, logic alone tells you that Dion would want to follow through on this plan.

  105. Mr.Learmonth,

    You can’t have it both ways. You cannot say “there are no targets” and when this is shown to be wrong change your line to “ahh, well how did that work last time?”

    If you want to spout Conservative talking points then that is fair enough. If you want to have a substantive exchange about today and how we can move forward, well then welcome aboard.

    Where are the year over year targets? Are you serious? The Government’s widely ridiculed plan does not provide these. Major environmental groups do not call for annual numbers. Nobody who looks at this topic does that.

    The general scientific consensus is 1) 20% or more by 2002 and 2) reductions below 1990.

  106. I only have one question for the naysayers:

    Do you have a better idea?

  107. In think Andrew has said it best as this is not a plan but really an election platform, budget and large government program all rolled into one. Of course this does not surprise me because that is always the liberal solution to any given problem -setup another government program. I give Dion major cudos for such as it does appeal to a certain shallow first glance that makes me feel happy sort of response however as you drill down and as usual with liberal plans it fails to make any serious dent in the problem and major promises will be broken – I love the ” Promise ” gas prices will not increase – hmmm wait a sec aren’t large trucks diesel and don’t these diesel trucks deliver the gas to the stations and since diesel will be carbon taxed then doesn’t that mean the cost of delivery will go up … hmmm I wonder do you think that this will be passed on to joe canuck

  108. “In other words, in the startup phase they’re just bringing other forms of fossil fuel up to par with the existing tax on gasoline.
    They don’t say this, but it’s pretty clear what comes next: the carbon tax continues to increase beyond $40, and the gasoline tax gets folded into it. Meaning the tax on gas will increase, starting in year five.”

    Also known as the UK’s “Fuel Price Escalator”.
    http://en.wikipedia.org/wiki/Fuel_Price_Escalator

    “The end to the escalator was announced on November 9, 2000, following the UK fuel protests, of which it was a contributory factor. When the escalator ended, fuel in the UK was the most expensive in Europe, with fuel tax representing over 75% of the retail price of fuel. In 1993 UK fuel had been amongst the cheapest in Europe.”

  109. Andrew, you are a sham. There are many independent experts saying the plan is revenue neutral. For you to say, “tax cuts …to …….. the bottom tax brackets, … will do the least good — in terms of raising productivity,” is a totally irresponsible comment; especially when you couple it with comments on how the rich need a tax break. Your thinking that only the wealthy can be productive is inexcusable. Maybe we should start talking about social and economic justice; something I doubt you have ever given much consideration to.
    You sound like a whiner who just might have to start taking responsibility for a consumptive lifestyle.

  110. This plan is simply to rob provinces of their wealth and give it to the federal government so they can doll it out at their discretion to buy votes. Scientists are backing off global warming to the new term,climate change, but Dion is still sticking to Kyoto? The old term that ‘we can’t do anything about the weather’ still goes and we do not have to spend billions on schemes to clean our emissions. We do not want the federal government sticking their noses in our local affairs. Provinces are mature enough to solve these problems on their own. Liberals 13-year history of sitting on their hands doing nothing proves that,meanwhile provinces have been far ahead of the federal government in action plans.Any more money to Ottawa is a drain on our economy.Let the feds stick to defense,highways,security,and other national areas.

  111. “Andrew, you are a sham.”

    Andrew doesn’t need my help defending himself, but…he’s not exactly wrong about the productivity thing. Unfortunately that’s because the only generally agreed upon measures of productivity are based on income or GDP output per hours worked, which is frankly not a very useful concept. By this definition the average NHL hockey player is 5 times as productive as a Supreme Court Justice, and – well, I don’t know how much Andrew makes or works.

    This is another post for another day. More to the point for today, I don’t think these criticisms (revenue non-neutrality, wrong focus from a productivity standpoint) will reasonate with Canadians who aren’t obsessed with precise interpretations of the minutiae of tax policy and macroeconomic.

  112. “Nowhere in Dion’s plan is there any mention of how much emissions will be cut.”

    It’s true. However, the point of the carbon tax is to make energy sources which do not generate CO2, more competitive – without direct subsidies.

  113. That carbon emissions must be priced and taxed somehow is beyond doubt. But in the wake of Dion’s presentation, Canadians are wondering whether the Liberal leader, who cannot even balance his own chequebook, according to his wife, is the right man to be in charge of a carbon tax. The economy, after all, is like an organism and therefore utterly unpredictable. Dion’s own plan contains too many imponderabilities and is heavy on wishful thinking, rather than actual detailed calculations and computations. For example, Dion has neglected to make any allowances for the people of British Columbia, who will face their own provincial carbon tax starting this summer. Will they be taxed twice? If not, will they still be eligible for the income-tax shift under the federal program even if the province has opted out of it?

    The cuts to income tax may look promising at first, but at closer inspection, it is plain to see that there is not enough of a safety margin built into Dion’s plan that would protect taxpayers and consumers from unexpected consequences – which always occur, as surely as the sun rises in the east. Under his tax plan, the bottom income-tax bracket would be cut from 15% to 13.5%, with the remaining brackets being reduced by 1% each, which is not a lot. Meanwhile, the Green Party has come up with a more reasonable plan, which would apply a rate of 15% to all incomes under $37,000, thus giving hardworking Canadians more of a tax break than they would see under Dion’s program.

    The Green Party is proposing a Green Tax Shift that comes much closer to the ideal solution, which Dion has ignored completely: It is probably safe to price carbon at $40 a tonne right from the start, instead of waiting for four years. But in return, the income-tax system should be switched to a flat tax, as the one envisaged by the Canadian Taxpayers Federation. Such a flat tax would come with a 15% rate for all incomes below $80,000 and 25% for anything above that amount – the threshold of $80,000 alone demonstrates that the authors of that plan have a more accurate reading of the current circumstances taxpayers find themselves in in Canada than all the politicians combined.

    A carbon tax of $40 per tonne of emission coupled with a 15%-25% flat tax built around a threshold of $80,000 would work best – for the economy and the environment. This way, taxpayers would have a sufficient safety net in case the carbon tax produces unforeseen side effects in the economy (such as exorbitant inflation, reduced competitiveness of Canadian companies, etc.).

    As of now, the Green Party seems to be the only party that “gets it”. The Liberals are trying to move in the right direction, but as usual, have botched it before they have even started. The Conservatives call it a crazy plan, but have failed to table anything useful themselves – and they ignore the fact that many prominent conservatives, like David Frum, are in full support of a carbon tax. And the NDP is also railing against the carbon tax plan.

    On the sidelines of the general debate, there have been critical voices out of Alberta, such as Alberta’s finance minister Iris Evans, saying that a carbon tax would be detrimental to Alberta and that it would unfairly discriminate against the province. This is not quite accurate, because the purpose of a carbon tax is to reduce the use and production of carbon, and while, say, Québec would not see a carbon tax on its environmentally-friendly hydropower, there is no discrimination as such. A carbon tax will go wherever there are carbon emissions, and if Alberta happens to be such a place, then naturally the tax will apply there more so than in other jurisdictions with less carbon output.

    However, since Albertans would be hardest hit by a carbon tax, not only at the level of individual consumers and taxpayers but also across its entire economy, they should be eligible for much more substantial tax cuts and breaks than the rest of the country – if Dion’s plan came to fruition, that is. No such “special treatment” would be necessary if the carbon tax were introduced in connection with the flat tax of 15% and 25% as described above.

    Canadians will have to do a lot of reading in order to form an educated opinion about the carbon tax plan. But as things stand right now, and if Canadians actually do their “homework”, instead of merely listening to their politicians (always the wrong thing to do), they will conclude that if a carbon tax had to be swallowed somehow, of all the plans currently out there in circulation the plan of the Green Party would make a lot more sense than what Dion has tossed to the masses in the hopes of putting the Liberals back in power.

  114. As per usual the Liberals have no idea about anything, we really need a new tax when we can hardly get by on how much fuel, and heating costs are already. I hope this idea sinks the Liberals since they don’t have any good ideas. All they know how to do is to grab more of the taxpayers money to line their own coffers and pockets.Are there any Liberals with any common sense or did that all vanish in the last 14 years? At least Stephen Harper is doing a great job and has cut our personal taxes which we really needed. Let Harper continue on his course of governing, there is light at the end of the tunnel with him and his party.

  115. How many times do we have to say,”CO2 is NOT pollution!” Boudica, please note, as you keep repeating the fallacy. Catalytic converters were put in cars so they would mostly only emit H2O and CO2 through their exhausts, which scientists then, having not been politicized, realized were not pollutants. Carbon taxes are a cash and power grab with no scientific basis. Greenhouses routinely push their CO2 levels up to 1000 parts per million (the ‘free’ atmosphere is about 389 ppm) so plants will grow better. The more CO2 for the plants, the more oxygen is freed for us to breath. Repeat after me: “The sun drives the climate, not a trace gas”. CO2 is a bureaucrat’s dream – an invisible trace gas that can put people on a guilt trip and be taxed. Get rid of real pollution, not an imaginary one! Junk science is not a basis for public policy.

  116. “At least Stephen Harper is doing a great job and has cut our personal taxes which we really needed.”

    Funny, last time I checked (when I filed my taxes), my personal income tax actually went up a bit on the same amount of income. Sure, they cut the GST, but there has not been any substantial cut to personal income taxes — quite the opposite would be true, in fact.

    Don’t get me wrong: I don’t want Dion as PM either. I think he would be the worst ever for this country. But I had also had high hopes for Harper, almost all of which he managed to dash somehow.

  117. I have read Mr Coyn’s blog and the first paragraph say it all. Then I read the comments that followed . To me most of these seem to be written by self proclaimed experts on science and tax to the same extent as Mr Dion explaining his carbon tax policy which to put it mildly was educated incoherence. A tax is so easy to inflict but to put the proceeds in the hands of politicians to disperse is like pouring petrol on a fire with the same final result.As Mr coyn says the first part of the tax policy MAY be OK.but from then on it falls into a total lack of comprehension

  118. Aviator is right:

    1. That human derived CO2 causes so called global warming is still (fact) an unproven theory that is increasingly looking scientifically unsound (eg compared to solar drivers). None of the GCM models use CO2 in them (look it up). Correlation is not neccesarily cause, sometimes in science there are coincidal covariates. Look at all the medical papers that correlate some health issue with some variable in isolation.

    2. Canada “doing something about it” will have no effect at all, regardless of whether China plays ball or not. I’m all for conservation, but lets not get stupid like this. Dinging Canadians big $$ for something that might not exist, and that almost certainly will not help, is crazy.

    3. Its really NEP v.2.0 – western provinces get nailed for all the C tonnes (eg cold, oil producing, large distances, etc) – the tax transfers go largely to Ontario and Quebec, which is really what this is all about – getting votes in Ont and Que.

  119. let the conspiracy theories begin

  120. Revenue Neutral?

    That sounds like a Dalton McGuinty election promise.! Have you ever known a Politician that ever told the truth, let alone a Liberal?

    If this guy really cared about giving a tax break, he would simply put this idea into play, forget all the tax breaks that we would be alleged to get, just charge the carbon tax and get rid of the GST. That way everybody would get a tax break, instead of trying figure out who will get what.

    But this of course is too simple and would actually benefit your wallets.

    But I of course have beaten the system. I have moved out of Canada to a place, believe it or not where I can actually live on my pension. I won’t have to get a job as a school guard or a greeter at Wal-Mart just to make ends meet.

    I of course don’t vote and even if I was still there, I wouldn’t, because there is no one to vote for. They are all the same. Lies, lies and more lies. The only thing you can actually count on is more taxes.

  121. The conclusion of a report by the British TaxPayer’s Alliance watchdog, states that “In many cases, individual green taxes and charges are failing to meet their objectives, are set at a level in excess of that needed to meet the social cost of CO2 emissions, and are causing serious harm to areas of the country and industries least able to cope.” The study found that the social cost of Britain’s entire output of CO2 was £11.7 billion in 2005 but in the same year, the total net burden of green taxes and charges was £21.9 billion. Meaning that even two years ago taxes were £10.2 billion in excess of the level agreed to meet the Britain’s CO2 emissions. The Alliance calculates this excess is equivalent to over £400 for each household in Britain.”We need more honesty about the costs of extra green taxes when British taxpayers already pay some of the highest pollution charges in the world,” said Matthew Elliott of the TaxPayers’ Alliance.
    The report also reveals that the main “pollution taxes” of fuel duty; vehicle excise duty (road tax); the Climate Change Levy; Air Passenger Duty; the Landfill Tax and the EU Emissions Trading Scheme, each have serious flaws which indicate that the government is less concerned about the environment and more concerned with raking in excessive revenues. In addition a second study by accountants UHY Hacker Young backs up this claim by revealing that the Government gives back in tax breaks just two per cent of the money it collects through environmental taxes. UHY Hacker Young tax partner Roy Maugham said: “It’s surprising just how lopsided the Government’s approach to green taxes has been over the last ten years. “At the moment it’s all stick and very little carrot.”

  122. Well, how about talking a bit about the elephant in the room in all this – immigration. Bottom line is if you add 10% to Canada’s population in a decade, then there has to be a 10% reduction in GHG production on the part of the original population to simply stay even never mind seeing any reduction.

    Under Kyoto, third world and developing nation GHG emissions didn’t matter but if one of their citizens move to a developed country, their GHG emissions suddenly do matter.

    Very simply, if growth in Canada’s GHG emissions (CO2 plus others) is a real problem, requiring real and concrete solutions, then stop making the problem worse by bringing more people into this cold, large, country where by definition new-comers must consume more energy than in most of their home countries.

    A clampdown on immigration would naturally offend a key Liberal Party voting block and so will appear in Mr. Dion’s policy book anytime soon. Still, the silence of pretty well all the political parties, climate activists, media types, etc. on this aspect of carbon use is puzzling.

  123. Make that “will NOT appear in Mr. Dion’s policy book any time soon”….

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