Tuesday, March 25, 2008

Carbon Tax Budget Surprise

The BC government will hit BC drivers with a carbon tax, supposedly to reduce energy consumption. How is it then, that government budget assumptions have gasoline and diesel consumption going up by more than they ever have in the past?

There are two problems here. First, why is the government bothering to impose a carbon tax in the first place if it doesn’t expect energy consumption to go down. Could it be political posturing? Seems likely.

Second, government spending went out of control last year and is forecast to go up at two-times the rate of inflation in the years to come. Revenues are not keeping pace. So, where is the revenue going to come from to fund this spending if gasoline and diesel consumption actually go down?

Other taxes will have to go up. In fact, it appears the government expects much higher revenue from BC Hydro. Hydro rates are already on the rise. Expect them to go even higher in the future.

This is a good example of the type of contradictory policies we see when central planners try to modify our behaviour. It didn't work in the Soviet Union (remember that place?). It won't work in BC either.

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