Carbon tax theory never quite works out
THE EMIRATI GAVE POPE FRANCIS A GENUINELY WARM WELCOME, THING. — DE SOUZA
Like communism, free love and inserting cheese into pizza crusts, the notion of a revenue-neutral carbon dioxide emissions tax may seem sound in theory. It’s only reality that gets in the way.
Last month, for example, 27 Nobel Prize-winning economists penned an open letter extolling the virtues of a carbon tax-and-dividend scheme for the United States that looks identical to what Prime Minister Justin Trudeau is planning to impose on several provinces later this year.
“A carbon tax should increase every year until emissions reduction goals are met,” the economic luminaries propose. To ensure political palatability, the plan, crafted by the U.S. lobby group Climate Leadership Council, would send carbon dividend cheques of US$2,000 annually to American families. And this perpetually rising carbon tax “will replace the need for various carbon regulations that are less efficient.”
Despite theoretical arguments from academic economists, however, the real world has something to say in rebuttal. The political history of a carbon tax in both Canada and the U.S. shows experience and democracy differ from economic theory in several important ways.
Recall, for example, former federal Liberal leader Stéphane Dion’s disastrous 2008 election campaign. Dion’s defeat was properly blamed on his incomprehensible Green Shift platform that included a carbon tax plus a collection of tax cuts and new spending increases that Canadians didn’t understand and didn’t want.
Fast forward to Justin Trudeau’s 2015 election platform in which he said: “We will … put a price on carbon.” This has since evolved into his carbon tax and rebate scheme soon to be imposed on Ontario, Manitoba, Saskatchewan and New Brunswick (plus Alberta, in all likelihood). Small and mediumsized businesses, along with daily commuters, will have to pay the freight for those carbon dividend cheques meant to bribe voters into supporting the plan. And note how Trudeau now describes his tax as “a price on pollution.” Trudeau’s marketing effort to rebrand his carbon tax as a “pollution price” hints at the deep-seated animosity Canadians have for any effort to tax the necessities of their lives, such as heating, transportation and food.
Doug Ford won Ontario’s election 2018 on a promise to kill the province’s cap-andtrade carbon tax. Jason Kenney is promising the same in Alberta should he win the upcoming provincial election. And a recent poll conducted in New Brunswick reveals the depths of dislike towards a carbon tax in Canada. Of the 1,200 provincial respondents surveyed by NRG Research Group, only 31 per cent supported a tax, while 62 per cent were opposed — that’s two-to-one against. This mirrors trends seen in the United States, as well.
And there’s good reason for voters everywhere to be deeply suspicious of promises that a carbon tax will be revenue-neutral. British Columbia’s current carbon tax was once touted as a “textbook example” of revenue-neutrality. “Every dollar raised will be returned to the people of B.C. in the form of lower taxes,” politicians promised when it was first introduced in 2008. Today the province’s carbon-tax take is funnelled straight into general revenues, to be spent however the government wishes.
Finally, while carbon taxes are theoretically supposed to replace a panoply of less efficient environmental regulations, this never seems to happen in real life. In fact, it appears the Trudeau government is actively increasing the level of inefficient regulation alongside the incoming tax. Pending federal legislation Bill C-69, for example, promises to make future regulatory approvals for such mega-projects as pipelines and terminals far more complicated, if not outright impossible, by larding on new criteria covering such things as gender analysis, sexual identity, native reconciliation and climate change in addition to traditional development concerns. Canada will be getting the worst of all worlds: higher taxes plus more stifling and irrelevant regulations to slow Canada’s economy.
Whatever economists or politicians may claim, the theoretical model of an efficient and revenue-neutral carbon tax never seems to survive contact with the real world. And voters, it seems, are smart enough to realize that.
CANADA WILL BE GETTING THE WORST OF ALL WORLDS.