Friday, February 22, 2008

No Ontario Carbon Tax - For Now

While BC is marching down the ill-guided road of silly-minded taxes with a so-called carbon tax, Ontario Premier McGuinty is ruling it out; at leat for now.

When one reads his carefully scripted comments here it seems that he has left the door open to a carbon tax. He says that a carobn tax works for BC because of the diretion it is pursuing but not for Ontario because of the direction it is pursuing.

It is really unclear what McGuinty means when he refers to 'the direction Ontario is pursuing'. It would be logically valid to conclude that if McGuinty decides to change the 'direction he is pursuing' that a carbon tax would be acceptable.

It raises the credible question as to what he means by 'the direction Ontario is pursuing'.

So, while it seems Ontarions are so far saved from a carbon tax, who knows when the 'direction McGuinty is pursuing' will change?


Mike Honey said...

I presume his "direction" comments refers to any initiative that will give the Ontario economy that "last little push" into a full blown recession. With Ontario's largest employer, the auto industry, standing on the edge of the abyss, even Mr. McGuinty can figure out how potentially distastrous the effects of a "Carbon Tax" could be.

We are safe for "now". However, the BC budget has shown us, or at least those of us who care enough to actually thing about this stuff, where this is all headed. Yet another politically correct excuse for a tax grab. In addition, should Stephane Dion and the federal liberals actually get elected we can all look forward to some form of carbon tax at a national level.

Adam Norman said...

I, for one, like the idea of a carbon tax; it is economically efficient. It remedies the artificially low price of carbon pollution, which harm people who do not benefit from the burned fuel.

If it is revenue neutral, corrects externalities, and is not offensively distorting, what's to complain about?

Mike Honey said...

Ah, but that's a big if isn't it? Unfortunatly a "revenue neutral tax" is an oxymoron. If you look at what BC has done it is only "revenue neutral" if you are in the lowest two tax brackets, for every one else it's an additional tax. I will certainly remember to crunch some numbers next year to see if it was actually revenue neutral for lower income BC residents. My guess is that it won't be.

Also, at $1.10 per litre of gas the motorist is paying about 54 cents tax; they are already paying for their carbon pollution.

Economically speaking, Canadians are the highest taxed citizens of any in the idustrialized world. There simply is no more room for additional taxes, however justifiable the cause may be.

Adam Norman said...

Respectfully, Mike, here are a few ideas I haven't had the time to research:

You say: "it is only 'revenue neutral' if you are in the lowest two tax brackets, for every one else it's an additional tax.

What you say is actually quite fair tax policy. Consumption taxes generally hurt poorer people more; if the carbon tax is revenue negative for the bottom two brackets (i.e. benefits the poor) and revenue positive for the top two (hurts hurts the rich), it can all work out, and be a good, progressive, revenue-neutral tax.

Also, while Canadians may (or may not) be the highest-taxed people (and I don't dispute that we are highly taxed), I would argue that there is room for additional, revenue-neutral taxes. If our carbon output needs to be reduced (and it seems to me like it does, as we are also among the greatest polluters per-capita in the world), we only have a few choices: caps, regulation, or taxes.

Taxes are, as I said before, efficient, corrective, and (potentially) revenue-neutral.

Thanks! Keep up the good work.

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