Is Dion's Proposed Carbon Tax Revenue Neutral?
Many Critics Feel it Might Push Some People to Freeze in the Dark
Aug 28, 2008
As a federal election appears to be around the corner, Liberal Leader Stephane Dion seeks to ‘sell’ its proposed carbon tax to increasingly environmentally conscious Canadians. The intent of the carbon tax will be to tax consumption, as opposed to earnings. In return for increased costs imposed on Canadians that such a tax might generate, Dion promises a sharp income tax reduction. This carbon tax will be revenue neutral, Dion and his party analysts promise.
But is the carbon tax really what it is all worked up to be? Certainly, it would penalize heavy consumption by increasing costs, so one can reduce their costs by reducing their so-called ‘carbon footprint’. It would encourage consumers to seek less-polluting ways to get around, access their food and heat their homes. In theory, this all sounds great. It gives people a sense they may be able to control their expenses by using less, while at the same time benefit from a tax reduction.
However, Dion has not spoken to low-income Canadians about what they need in order to reduce their own carbon footprints. Are we going to jack up the cost of heating fuel, electricity and goods transported from faraway places, without assisting low-income Canadians in paying additional costs? Reducing income tax works for middle and upper income Canadians, but for lower income people that pay little or no income tax, this is certainly not revenue neutral at all.
First, low income Canadians that drive are most likely using older, less fuel efficient vehicles. The imposition of further taxes on fossil fuels will likely make it more expensive for low-income people to drive, while others with the capital to cover the costs of a late model fuel efficient vehicle or even a hybrid will benefit.
Second, heating fuel in one’s home is an essential part of living in Canada. Low-income tenants do not have the say or authority to force their landlords to install better insulation or high efficiency furnaces in their units, but are often asked to pay their own utilities. Low-income homeowners do not have the capital to purchase new appliances, furnaces, insulation and other cost saving measures in their homes, even with a substantial rebate.
Third, not all municipalities provide alternative transportation to the personal vehicle. For those living in northern or remote areas, the idea of switching to public transit to save fuel costs is academic. In larger municipalities, outside of major urban centres like Toronto or Montreal, public transit is limited at best, leaving most people reliant on personal vehicles. Those unable to shoulder the cost of a personal vehicle in these regions are effectively shut out of their communities.
Fourth, businesses involved in the transportation of goods and people will be hit with major costs, which will certainly be passed down to the consumer. Trucking, freight, rail, courier and related industries will be forced to cut back or charge substantial increases in shipping costs to customers, which will in time, leads to substantial hikes in the cost of necessities, such as groceries, clothing and other supplies. Industries that rely heavily on fuel or hydro services to operate have already been forced to scale back; this time, the same will likely happen to the transportation sector.
Low-income Canadians do not get a break in these rising costs and it is not likely the carbon tax plan has room to provide this type of assistance. In British Columbia, where a similar carbon tax plan has been passed and put into place, citizens were provided with a $100 rebate. The question remains whether this is really enough to keep the poor from once again freezing in the dark.
