Carbon tax requires trust in government
Be wary of claims that tax is revenue neutral, says Paige MacPherson.
To accept the idea of a functional carbon tax that helps end climate change and doesn’t amount to a cash grab requires one thing that Albertans should be wary of giving: blind faith in government.
Shortly after Alberta Premier Rachel Notley announced her government’s multibillion dollar carbon tax, she and other ministers attempted to sell the tax as revenue neutral. Their reasoning was that the money collected from taxpayers would be spent in Alberta. If the qualification for a revenue-neutral tax scheme is that the government spends every dollar, then every tax in the country would fit the bill.
The government’s ill-fated spin was rightly laughed out of the legislature, with journalists, opposition politicians and even economists who endorsed the carbon tax quickly disagreeing that the government’s plan was anything close to revenue neutral.
However, carbon-tax proponents still hailed the “gold standard” of Canadian carbon taxes: British Columbia’s so-called revenue neutral carbon tax, which has been in place since 2008. Earlier this year, it was revealed that B.C.’s tax was not actually revenue neutral — and that the B.C. government, like so many other governments, were playing games with the budget numbers. Just a spoonful of sugar helps the medicine go down.
B.C.’s carbon tax has served as an excuse for overtaxing British Columbians by hundreds of millions of dollars. When the tax was introduced, meaningful tax cuts were put in place to offset the sting: reductions to business taxes and income taxes mostly balanced the ledger. As the carbon tax increased year after year, the B.C. government began using tax credits to offset carbon tax.
The problem, revealed by the Fraser Institute, was that the B.C. government was using pre-existing tax credits in its revenue-neutrality calculation — including two B.C. film-industry tax credits which were on the books for 15 years prior. By the institute’s estimation, this means the B.C. carbon tax stopped being revenue neutral in 2013-14.
The B.C. government acknowledged this in its recent budget, eliminating some of the pre-existing tax credits from its calculation. Still, the institute noted that British Columbian taxpayers will see a $599-million net tax hike between 2013-14 and 2016-17.
The carbon tax will not make a dent in climate change, by the most optimistic government projections. But on top of that, to buy what carbon-tax proponents are selling, you need to put your faith in the government to tell you the whole truth about how much money they’re taking from you.
It is unwise for taxpayers to place blind faith in the government when it comes to budgeting. Always be cautious of the spin. Alberta’s NDP government had a balanced budget date in their election platform: 2018. That promise changed multiple times and is now a vague commitment to 2024, if oil prices rebound. (Alberta Finance Minister Joe Ceci also vowed in 2015 to get Alberta “off the royalty roller-coaster.” So much for that.)
It isn’t just provincial governments that play Houdini with their numbers. During their election campaign, the federal Liberals promised “modest deficits” of no more than $10 billion and a balanced budget by 2019-20. It only took them a few months to triple the deficit to $30 billion and scrap that balanced budget date.
On the carbon tax, the federal government is no better, declaring their carbon tax will be “revenue neutral,” but meaning only for their own level of government, not guaranteeing revenue neutrality from any province they attempt to force a carbon tax on. “Revenue-neutral carbon tax” has taken on a whole host of meanings in our country.
Ultimately, if you believe the carbon tax will be effective and won’t amount to yet another cash grab, you’re required to believe the line, “trust us, we’re from the government.” Based on their track record, those are nothing but famous last words.