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PermanentTaxOnEverything: If you’re going to get beaten up, you might as well fight


 

I went camping with my brother and his hilarious kids a couple of weekends ago in Algonquin Park. We got eaten alive by blackflies. It was fun. In the gas-guzzling SUV on the way back to Mark’s home in Oshawa (Liam: “Dad, when are we gonna get there….”), I noticed the acre on acre of new housing developments, eerily Truman Show-esque subdivisions of truly immense new homes. Yes, Mark said, people are flocking to Oshawa, even though property taxes there are roughly double what people pay in Toronto, because Oshawa’s municipal council has decided to build up local infrastructure and try to make the place more livable. Incidentally, the mayor who made that call was re-elected in 2006 with nearly three-quarters of the vote.

This is only the umpty-dump-jillionth demonstration that people don’t build their whole lives around their tax bills. If you like a place, you are willing to take a tax hit to live in it. If you like a policy, you are not likely to fuss too much about its tax cost. This may be some consolation to the Liberals, because like Andrew Coyne, I don’t see anything revenue-neutral about their PermanentTaxOnEverything™. Nor do the Liberals even put much effort into pretending otherwise. Their pamphlet (which is easily three times longer than it should be; the Liberals must hand it over to an elementary-school grammar teacher, chosen at random, for the basic edit it should have received long before today) handily divides fiscal measures into “Personal tax reductions,” “Business tax reductions,” and “Additional support.” Hmm. Additional support. Government programs.

The Liberals will take serious criticism for this. They could have avoided it by arguing frankly, from the outset, that their scheme shouldn’t be revenue-neutral because the federal government exists to do things and it needs revenue for the job.

Courtesy of the Fraser Institute, here’s that think tank’s Tax Freedom Day over the years: the day on which Canadians stop working to pay thee median federal, provincial and municipal tax bill for a double-income, two-child family. (No link because I asked the Fraser Institute to do the time series for me.)

1992   1 June
1993   4 June
1994   9 June
1995   11 June
1996   16 June
1997   19 June
1998   20 June
1999   23 June
2000   24 June
2001   18 June
2002   22 June
2003   22 June
2004   22 June
2005   25 June
2006   23 June
2007   18 June
2008   14 June

So since the Harper Conservatives took office, Tax Freedom Day has moved forward 11 days in 3 years, its fastest forward move ever. Other data provided to me by the Fraser Institute suggest the federal share of the tax burden, used to calculate Tax Freedom Day, is now at its lowest since 1995. That GST cut imposed a significant hit on federal revenues. Stéphane Dion used to argue — at the first Liberal leadership debate in 2006 in Winnipeg — that the second cent of GST cut should be cancelled and used to pay for an enhanced National Child Benefit. A version of that proposal has survived to become part of today’s PermanentTaxOnEverything™. The difference is that the Dion who used to argue for a larger federal state now plans for a larger federal state while denying he’s doing so. I fail to see how that is “smart politics,” but I have rarely understood what makes the advocates of “smart politics” so smart.

No matter. The Conservatives’ interest now lies in narrowing the debate to two questions: Dion’s consistency, now that he has pinned his party’s fortunes to a policy he used to decry when its most prominent proponent was Michael Ignatieff; and this question of revenue neutrality.

The Liberals’ interest, then, lies in broadening the debate. If this turns into an argument about whether Dion’s numbers sum to zero, he will lose and deserve to lose. Liberals need to argue that what they are doing is worthy policy as such. On one hand, that it is important to quickly put a price on carbon because too much Tory inaction has followed too much Liberal inaction. On the other hand, that the Liberals are not interested in apologizing for income-tax cuts or for the other measures they will propound for seniors and families with children.

On that second note, something truly extraordinary got buried in the mounds of Liberal verbiage today.

That’s the “new, universal child tax benefit worth $350 per child, per year, on top of all existing child benefits. This will provide direct financial assistance to Canadian families whether or not they pay significant income taxes.”

Sound familiar? It should. Under Paul Martin, the Liberals expended considerable resources, including the credibility of one communications director, fighting against just such a universal benefit in 2006. (See “beer and popcorn.”)

This Universal Child Tax Benefit, worth $2.9 billion when the program reaches maturity in four years, will probably be accompanied, in the next campaign, by some Liberal proposal to increase the number of state-supervised daycare spaces in the country. But so what. It represents a formidable attempt to grab back the political centre and to acknowledge that three years of Harper government cannot simply be erased if a Liberal government replaces it. Or it could, if the Liberals would admit (first to themselves, then to Canadians) what they are doing.


 

PermanentTaxOnEverything: If you’re going to get beaten up, you might as well fight

  1. Aren’t they just defining “revenue neutral” as meaning that all the money will go straight back to Canadians, rather than only Canadian tax-payers?

    I can’t see how anyone could have expected they’d raise, to use the NDP example, home heating prices, without giving people back some of the money, even if those people don’t pay taxes.

  2. Without giving away any inside secrets, the alternative “launch strategy” to a weighty book with all kinds of numbers and words that the OLO considered for today was a cute cartoon character and four muppets named “Jason”, “John”, “Paul” and “PVL” who only grunt and repeat ad nausium monosyllabic insults that they try to pass off as their contribution to the future of the country…..turns out the muppets were cute but didn’t focus group well.

    My personal opinion is the country is poorer for having a detailed plan on climate change and the economy instead of the cartoon and the muppets but I only speak for myself in that regard.

    If I can restate your frame: if people end up discussing the substance of what is now before them, Dion will be fine and in fact, could be in a great position. (pause for 10 seconds….discuss substance of proposal before them…..maybe you need 30 seconds….)

    If they instead buy into unfrozen caveman lawyer argument (“I may not know much but I do know that once a politician has stated a position in public, it must remain his position for the rest of his days, no matter what….”) or the “Queen’s University Poli. Sci department argument” (“sure government isn’t collecting another penny then they did last year but come on, everyone knows a tax credit is really a cash grab that leads to huge bureaucracies and is really a ‘program’, not a tax credit, I mean, who are you trying to kid calling a “tax credit” a “tax credit” instead of what it really is, a cash grab that leads to bigger government….”)

    They were cute muppets and you should have heard them grunt and throw insults….oh to imagine….

  3. This is by far the absolute best analysis of the new Liberal policy I’ve seen all day. Freaking awesome job at deconstructing it Paul. I don’t think Canadians are going to support it and I think it’s going to be savaged by the pundits.

  4. Great article. It doesn’t actually address anything relevant about the plan, just a bunch of nit-picky garbage. “They are saying this, but it may be slightly different.” Who the f*** cares about little things like that? Is it an overall good idea or not? Does it promote new technologies enough? Will it be too large a hit for families (BTW, my home is heated by hydro electric so no increase for me)? Can companies react fast enough? Are the incentives to reduce emissions enough to actually allow investment in lower emitting production systems? This are the important things. Not “the liberals are inconsistant in their policies”. I don’t want consistancy when it ignores new information. If I am driving to an intersection and the light turns red, I stop. I don’t just keep driving because the light used to be green and I want to be consistant. That’s called being a moron, not someone you want running a country.

  5. Rob, Coyne went to Trinity. Play fair. Queen’s is innocent.

  6. It seems to me that with the price of oil skyrocketing, we’ve already had the increase in energy costs far beyond what any environmentalist with a dog named Kyoto would have ever proposed.

    Yet here we are staring a carbon tax in the face anyway. It’s like calling a time-out in the dying seconds of a 10-0 hockey game in order to score goal number 11.

    Of course, on top of all that, it is just the same-old liberal policies disguised as an envornmental policy. It just seems to me this is insinuating a whole lot of stupidity in the average voter.

  7. The question is: does this over the short and long term, effectively reduce our carbon emissions, and does it make those who prefer not to care about their carbon emissions, do most of the paying?
    Whether or not Dion supported this in the past – someone once said there’d be no attacking Income Trusts if he was elected, and once a time ago Jack supported a carbon tax – is really insignificant. At least we have someone leading the discussion.

  8. I agree Dan – that is the question. By reducing my taxes by $585 every year only to have me pay $800 in new carbon taxes will give the Liberals the magical ability to control the weather.

    If only the dinosaurs had figured out a revenue neutral carbon tax, perhaps they could have avoided that whole Ice Age catastrophe.

  9. Just checked out the Green Shift website and used the calculator to check my savings.

    45k a year as a 25 year old policy analyst… and I save… wait for it… 353 dollars. Yup, 29 dollars a month all to myself! I bet that will MORE than be enough to cover my increased airfare for travel, home heating, groceries, and gas bills. Sounds like a real winning policy to me.

  10. Great article, Mr. Wells, and I hope Canadians recognize that under the Tories, tax freedom day is coming sooner and sooner with each passing year.

    Dion can manipulate the numbers any way he wants, but he still has to account for the $62.5 Billion in additional spending promises he’s made since 2006. And since Canada’s revenues are just above its expenditures, Dion will either have to raise taxes (through a carbon tax or the GST), or cut spending (but Dion’s no Paul Martin), or plunge the country into a deficit and increase our already-outrageous debt (no wonder Dion likes Trudeau).

    Let’s see how the Conservatives rip the Carbon tax proposal apart.

  11. Of course Brian, but the key is if your ‘random numbers’ aren’t under your control as is the case under Harper, along with your vested interest in helping control our contribution to the environment, what are you supporting?
    If you were told that you can save more by doing this, it seems incredibly assinine to protest someone who provides you with savings and MORE opportunities to save.
    But then you and Neil, sharers of the same tinfoil, no doubt, have your talking points all made up for you, right?

  12. Hey Dan – aren’t you tired of getting your ass handed to you in every argument?

    My ‘random numbers’ are taken directly from the handy-dandy calculators on http://www.green-shift.ca

    Apparently, unless I am a senior or farmer with kids who makes under $35,000/year — I’m one of the unfortunate contributers to the “revenue neutrality” part of the plan. Ergo, I pay more in carbon taxes and increased costs of goods and services than I get back in tax refunds.

    Speaking of assinine, the only talking points that are needed to argue against a carbon tax are the words of your man Stephane himself, who said:

    ” a carbon tax is less effective than a carbon market at reducing emissions. Some of my opponents for the Liberal leadership have suggested that a carbon tax would be the most effective measure to curb climate pollution. This is simply bad policy, for the following reasons:

    1. A carbon tax is almost always implemented as a direct tax on fossil fuels. Given the current price of these fuels, however, it is difficult to argue that a further price signal will dampen consumption or shift demand.

    2. A carbon tax is a flat tax – it costs each polluter a fixed amount per tonne of emissions. Such a tax will not inflate with a bull market or recede in times of difficulty. In the energy market, in particular, soaring prices make anything but a prohibitively high tax a mere nuisance for large producers.

    3. Finally, and most significantly, valuing reductions in emissions equally across all sectors and industries eliminates the potential benefits to be had by maximizing reductions where the cost is lowest. In a carbon market, those areas that produce the least expensive real reductions will experience the highest level of interest and investment, maximizing the level of reductions per dollar spent.”

    The only thing assinine Dan is your defence of a policy premised solely on the basis that its a Liberal party policy — regardless of fact that party itself opposed such an idea only months ago.

  13. Gents, we’re not going to escalate the personal tone of this exchange any further, are we? Thanks, I thought not.

  14. Mr. Wells

    The Liberal plan clearly states that the “Additional Supports” you condemn are not funded from the new carbon tax revenue.

    Page 33: “In addition to the tax reductions and tax credits within the Green Shift, the Liberal Plan will be offering targeted benefits through the 30/50 plan that will help low-income seniors and low-income families. These measures are part of the Liberal Party’s broader election platform….”

    Moreover, (see page 39) they also seem to say that they will do other things on climate change above and beyond their shift which presumably will be funded from other revenues.

    Seems to me this is precisely what you said they should do when you wrote “…the federal government exists to do things and it needs revenue for the job.”

    You also don’t think their plan is revenue neutral. Well, they say they will return every penny to Canadians in the first paragraph of the first page of their document. You — like Coyne — may quibble with whether or not they do this through “real” tax cuts but isn’t the real test whether the money ends up back in the pockets of Canadians?

    You write that Dion will lose if this debate is whether or not his plan sums to zero. This seems bizarre. His document says clearly that battling climate change takes more than this shift. He also clearly identifies other things which, presumably, he will discuss during an election.

    He says this shift is revenue neutral BUT THAT IS NOT THE SAME THING AS SAYING all of the Green actions he will propose will be paid for by the shift.

    On a final point we should remember that the debate over the conservative child benefit in the 2006 election was a debate about the best way to provide child care. A choice between a daycare plan and a cash payment. It was not a debate about whether families should get support through child credits and benefits. Liberals introduced child benefits so it is ludicrous to argue that they have somehow changed their tune with the proposed new $350 benefit.

  15. Read Page 41, Steve.

  16. Page 41 is a table. Shows $15.3 B in revenue from carbon tax and $15.4 B out. In other words more goes out — e.g. from other government funds — so it is revenue negative.

    Also, none of the “Additional Supports” are here so they are clearly not paid for by the shift. And none of the things on p.39 are here.

    So if you want a full government plan to battle climate change which is not revenue neutral then you would seem to have your wish. Plan does not say that the shift is it. There is nothing more. Says the exact opposite.

    And if you want a shift that returns every penny raised to Canadians then Page 41 would seem to show that that is what they propose.

    I think you are right that the debate to come will be between narrowing this issue or broadening it. Seems to me that that is also what is in the plan’s text: detail about the centre piece with markers mentioning additional proposals alreay made or yet to come.

    I just do not understand your exact criticism(s).

  17. I don’t see where it says that this plan will be revenue neutral for every single individual, particularly “policy analysts” from New Brunswick who don’t seem to be able to actually analyze a policy.

  18. While we are kind of on the topic of paying close attention to numbers, it’s worth pointing out that the Fraser Institute’s Tax Freedom Day is junk science. They use average rather than median income, exclude several forms of income such as capital gains and include some highly dubious public expenses. Neil Brooks, who knows more about tax than this whole board ever will, has written a fine paper about it, and there is a shorter article here http://www.parl.gc.ca/information/library/PRBpubs/prb0632-e.htm

  19. I am amazed and cynical at all the Don Quixotes and the vanity of people who feel (not think) they can control the weather. “Stop climate change now!!” Will Stephan Dion show leadership and hold his breath for extended periods so he doesn’t emit CO2 when breathing? I don’t see this policy as attracting the middle of the road voter. Better chance to pick up some greens and dippers. Since it can’t be proven scientifically, climate change is something that needs it’s believers to accept on faith. Sounds like a new ideology or religion to me. The liberal arts crowd seems to drink the kool aid, scientifically trained crowd – not so much.

  20. Brian refers to a website many comments above, but with the wrong address. The correct address is:
    http://www.thegreenshift.ca

    There are buttons at the bottom that point to a calculator. The website appears to be run by the Liberal Party of Canada.

  21. Maybe Mr. Wells can find out whether the tax is going to be $40 per tonne of carbon, or per ton of carbon dioxide. If they are going to tax coal at more than $40 per tonne, it seems the latter. However, with Canada’s emissions at 650 million tonnes of carbon dioxide per year, then they would expect $26 billion of revenue, not $15 billion. Remember carbon dioxide is only 27% carbon by weight.

    Also, they claim that carbon dioxide emissions will drop 50% over 12 years (ie, to 80% of 1990 levels, which are about two thirds of today’s). Will the tax be revenue neutral at the start of the period, or at the end, when it is only collecting half as much revenue? Inquiring minds want to know.

  22. To follow up about the website:
    The website doesn’t give cost estimates, only tax savings estimates, so I don’t know where Brian and Ryan got their numbers, which are significantly higher than the generic “average family” costs in the policy document.

    The policy doc. is fairly vague on the total gross cost of the carbon tax (and the website is very specific on the total gross benefit of the income tax cut) and while I understand this is great marketing, it is disingenuous. I hope someone comes out with reliable costing soon.

    Also, I’ll point out the doc. downplays the cost increases due to the tax; but if those cost increases are small, the tax won’t be effective. They’re stuck at cross purposes: selling it as an effective (ie high) tax and a not-too-unpolular (ie low) tax.

  23. Am I the only person who got really excited when I read the document? As far as I can tell.. its a good policy, with bad optics. Oh how I hate the word ‘optics’.

  24. Rob, what’s wrong with the politics department at Queen’s? Ned Franks never steered me wrong and there are few things I found more restful at the SPS than a Courchene lecture…

  25. sf is, of course, trying to be funny. (He points to a CPC mock site)

    The actual website under discussion is the Liberal-created one at http://www.thegreenshift.ca

    I messed up the link HTML the first time, but I think I got it right here. If it doesn’t work, type it in.

  26. Come to think of it, why is the CPC (or is it just Stephen Taylor, personally) allowed to use Liberal logos on the site? Is that trademark infringement, or allowed as fair use or some other reason?

  27. ? sf’s comment with the CPC mock site has disappeared.

  28. Sigh. Anyone can wish any comment into the cornfield with the “Report Abuse” button. Some of you are WAY TOO HEAVY-HANDED with the “Report Abuse” button. Here, let me go get some o’ those comments back.

  29. Sorry! I flagged an earlier post because it contains a link which misappropriates the Liberal party logo, which is probably trademarked. I thought it would just notify a moderator who could make their own decision.

  30. What the Liberals are doing is remaking the tax system while imposing a carbon tax. I’m not sure that’s necessary. BC’s approach is laudably straight-forward: emitters are taxed as consumers while taxpayers get equal refunds. The virtuous among us get out ahead and the refund’s size makes the most difference to low earners.

    Instead the Liberals are just creating a tax to fund their spending priorities and income redistribution thinking and that really isn’t very special.

    I’m a bit concerned about the tax increase on diesel if there’s going to be no offsetting relief for transit operators. This need not come in the form of fuel price reductions but some other form of assistance (such as a “Public Service Obligation” grant on the basis of passenger-km served) could help offset the imminent fare hikes in many transit systems.

    That said since the City of Edmonton just canned their trolleybuses in favour of diesel buses might indicate how likely any of this is going to happen.

    +1 Sophie on the word “optics” by the way…

  31. hmm… year 4 revenue – year 4 expenses = $85,000,000. Not exactly pocket change. I know there’s margin for error and all that but you’d think at least the back of the envelope figures would add up to “neutrality”.

    Is Greg Sorbara doing these numbers from retirement? Some of the tax “rebate” numbers look depressing like the shafting that middle income Ontarians, particularly those with two incomes, got from the Health Tax.

  32. Mr Dowling,

    So the plan gives back more in tax cuts and benefits than it takes in. This is bad? How can a plan be a tax grab if it flows more back than it takes in?

    And middle income Canadians are getting a shafting?

    StatsCan (http://www40.statcan.ca/l01/cst01/famil05a.htm) says the average 2 earner household has $91,400 in income in 2006. Liberal plan will deliver $700 in relief assuming the two earners make the same.

    Average 2 earner household makes $93,300. Assuming 2 children this family gets back $1350.

    Plan says average firect energy costs will go up about $250. Call it $300. Family with no children has $400 more and family with 2 kids has more than $1000 more.

    This money is delivered to help people pay the indirect cost increase on other things.

    Bottom line is that energy costs and the cost of things that require energy to make or transport (so basically all goods and some services) are going up WITH OR WITHOUT a carbon tax.

    Cap-and-trade (either the Conservative’s weak version or the NDP’s version) will increase costs.

    The issue here is not “Liberal tax = higher energy prices.” The issue is WHICH PARTY has a plan to put money into the hands of Canadians to help them pay costs that are going to rise with or without a carbon tax?

  33. No Sophie. You weren’t the only one. Frankly, the only issue I take with what Paul wrote is that he assumes that Canadians pay any attention to what the pundits have to say on this matter. I’m sure that, as someone above just said, the Ottawa Intelligentsia will tear Dion’s proposal to shred because… well… It’s from Dion.

    But in the rest of Canada, what we see is the first serious proposal aimed at tackling climate change and it didn’t come from the government. Polls have consistently shown that despite the Punditry, Canadians want a carbon tax. We didn’t even ask for it to come to us with a tax cut attached. We didn’t ask for a revenue neutral policy. Most of us don’t need to be bribed into doing the right thing for our planet and our children who are to inherit it. Dion understands this and it is why he is betting everything on that very fact.

    I personally welcome the debate and the differing views but the notion that Dion has to worry about a backlash at the polls when he’s the only to have provided leadership on this issue (well Elizabeth May did also) only serves to show that some people need to spend time outside of the Ottawa fish bowl.

  34. AH! now I remember why this whole thing seems familiar : Those with short memories about the impact of gasoline taxes can look back to 1980, when Joe Clark’s Conservative government fell over an 18i?? per gallon gasoline tax, in what then-finance minister John Crosbie famously called “a short-term pain for a long-term gain,” of improving the federal fiscal framework. In what became known as the the 18i?? election, Pierre Trudeau came out of retirement, cruised to easy victory and gave us the Charter of Rights and the National Energy Program.

  35. Naturally, Wayne, that wouldn’t have anything to do with the fact that most of the country saw Clark as being ridiculously incompetent.

  36. Hey Sophie : I am afraid you are incorrect as it had everything to do with it!~ regular canadians thought he was incompetent … kinda like someone else who is a poltical leader right now. In fact I was a Liberal at the time and if I recall the slogan we used then it was Joe WHO?

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