Mixed Feelings on Carbon Tax

As expected, Stephane Dion today unveiled some of the details for the Liberal Party plan to implement a carbon tax, which they are referring to as a Green Shift. I'm a fan of the carbon tax idea, I just wish it was implemented by someone less pussy-footed than Mr. Dion. Predictably, the Conservative Party is launching an ad campaign against the idea, to the dismay of tree huggers everywhere.


So what is a carbon tax anyway? According to Wikipedia, "A carbon tax is a tax on emissions of carbon dioxide and other greenhouse gases. It is an example of a pollution tax, which some economists favor because they tax a 'bad' rather than a 'good' (such as income)." This sounds like a good idea if we want to clean up the environment, even if the Kyoto Protocol is dead in the water. The idea is to tax polluters based on the amount of carbon dioxide they are responsible for, starting at $10/t of CO2, rising to $40/t in the fourth year. This is a good thing: people will have to pay more for products that have higher pollution side effects, and they will choose to buy things which are less taxed, and thus cheaper.

The Conservatives are referring to the tax as a "Tax on Everything" and, truth be told, it pretty much is. I mean, our entire economy is based on burning coal, oil, gas, and burning those things puts carbon dioxide into the air. So this is basically a new tax on everything. Some things will be taxed more heavily than others, depending on the way they are produced and distributed. That's the whole idea of a carbon tax: encourage companies to pollute less by taxing them proportional to their pollution.

So Mr. Dion is proposing a new carbon tax, which will increase the cost of most of the things we buy. Stephen Harper is decrying it as just another tax grab, which is what it appears to be. The Liberal response is that the tax will be "revenue neutral", and they back that up with plans to reduce income taxes:

* Reduce the corporate tax rate by 1%
* Reduce the small business income tax by 1%
* Reduce the lowest personal income tax bracket rate by 1.5%
* Reduce the second- and third-lowest personal income tax bracket rates by 1%
* Introduce some other new tax credits and supplements

Fantastic. So we can shift taxes from income (a "good") to pollution (a "bad"). There's just one problem. Mr. Dion just can't sell it. The man lacks any sort of conviction, so all Mr. Harper has to do is sneer and say that the Liberals are just creating a new tax to fund their program spending promises and the people will believe it. Even I believe it, and I'm personally a fan of carbon taxes (see paragraph 1). I would be more apt to believe Jack Layton than Mr. Dion in this case, and that is frightening. In the end, this is a political issue, and Mr. Dion is a poor political leader.

Just one more thing. Mr. Dion doesn't seem to be completely forthcoming. In response to allegations that the carbon tax would increase the price at the gas pump, he was quoted as saying: "This price is a world price and these [oil] companies are making a lot of profit, so we don’t expect an increase at the pump." Sorry, Mr. Dion, but that's just not the way it works. Sure, the oil companies are making billions in profits, but in case you haven't noticed, the companies that distribute it at the pump are already being squeezed out of business. Increasing their costs is going to result in either (a) increased costs for consumers, or (b) more distributors going out of business, or (c) a combination of the two. My money is on (c). In my opinion this is the way it should be, but I wish that Mr. Dion would stop pretending that it will be otherwise.