Light bulb switchover generates big tax revenue
Back- of- envelope calculations suggest our governments are enjoying a $ 250- million bonanza
I’ m not enthusiastic about returning yet again to the tiresome subject of compact fluorescent light bulbs ( CFLs). However, the mail has been so steady and so uniformly furious that who am I to ignore what looks a consumer rebellion?
A few readers say they’ve no complaints with CFLs they installed to replace incandescent bulbs — soon to be black market contraband in both Canada and the U. S. — but readers’ accounts of switchover horror stories run heavily in the opposite direction.
Jerry, for example, writes that he’s enthusiastic about going green and saving electricity costs at the same time.
He rose to the government’s efficiency and sustainability argument like a trout to the fly, replacing all the 60- and 100- watt incandescent bulbs in his home with the 50 CFLs that promised to use a quarter the power and burn 10 times as long.
Six months later, he was scurrying around the house frantically replacing dim and burned out CFLs with more expensive CFLs that also burned out early. Now he’s back again, replacing CFLs with incandescent bulbs from the stockpile he’s decided to hoard in the basement.
“As a Canadian, I feel that I have been scammed by the manufacturers of those CFLs and ripped off by the Harper government that had promoted them, had outlawed incandescents, and had collected tax on all of those very expensive CFL bulbs. I have even begun to question their energysaving claims. It’ll be a while before I run out and buy a bunch of LEDs, or anything else that makes similar assertions — once burned, twice shy,” he writes.
Hmmm. His observation about the tax collected got me thinking about advice to reporters trying to decipher the nefarious schematics of the Watergate scandal: “Follow the money!”
Maybe Jerry’s onto something. Could this whole misbegotten scheme be an ingenious tax grab dressed up in the clothing of sustainability?
Let’s see, about 375 million CFL bulbs are expected to go into the light fixtures in about 12.4 million households. About 1.2 million families live in B. C.
The average cost of a CFL is $ 5.02, so consumers will be forking over about $ 1.8 billion for new bulbs.
I got that average price by going through the sales inventory of my local Home Depot, adding up the prices charged for all the usual household CFL bulbs ( I left out the specialty and industrial stuff) and dividing by the total number of units for sale. Individual prices ranged from a high of $ 17.98 for a single 42- watt spiral, to a low of $ 4.49 for a four- pack of spiral minis. I wound up with a total of $ 467.65 divided by 93 bulbs.
The average cost of an incandescent bulb, on the other hand, is about 75 cents, based on a four pack of 60- watt bulbs selling for $ 2.98 at London Drugs. In other words, a domestic light bulb inventory costing $ 281 million is going to be replaced with one costing more than $ 1.8 billion. That’s an extra $ 1.5 billion or so available for sales tax levies.
The combined federal and provincial sales taxes on light bulbs amount to 12 per cent in B. C.
For convenience, I used the same rate for the rest of the country. Provincial and federal rates range from five per cent in Alberta where there’s no provincial sales tax to highs of about 15 per cent in Quebec and Nova Scotia. Averaged, the rates across the provinces come to a hair over 12 per cent.
I left out the three territories because they levy only the federal GST at five per cent and their combined population is smaller than Kelowna.
This means the sales tax revenue raised from forcing Canadians to buy 375 million CFL bulbs would be almost $ 226 million, of which about $ 16.8 million would be B. C.’ s share from the seven per cent provincial sales tax. In addition, if every consumer is charged a 15- cent levy per bulb, ostensibly to cover their eventual disposal as hazardous waste ( more on that next time), another $ 56 million is added.
Compare that to the total revenue stream from taxes on incandescent bulbs of about $ 34 million. It’s a difference of $ 248 million. Wow.
On the surface it appears government’s policy of forcing consumers to switch to energy efficient bulbs will generate almost $ 250 million in new tax revenue, an increase of more than 650 per cent over tax revenue generated by sales of the old incandescent bulbs.
Remember, I’m no tax economist, I’m just a curious consumer scribbling a few calculations on the back of an envelope, so this is just surmise for purposes of discussion, not a definitive analysis. On the other hand, the numbers suggest maybe Jerry’s onto something with this tax grab theory.