Rethinking Lifestyle

In a recent blog post, our Member of Parliament, Vic Toews, devoted his blog to a discussion, really a vilification, of the “NDP carbon tax.” This is truly unfortunate! A much more enlightened approach would have been a comparison of the NDP proposed carbon tax with a hypothetical Conservative carbon tax.

Inherently, there is nothing in a carbon or resource tax that increases taxes for the taxpaying public. The effect of such a tax on total taxes depends entirely on what the government decides to do with the revenue raised by this tax. Mr. Toews asserts the NDP intend to use such revenue to pay for social programs. He may be right. However, there is nothing about a carbon tax that determines how it will be used.

A carbon tax could as easily support conservative values. A carbon tax could make a reduction in income and payroll tax possible. Alternatively, the revenue gained through a carbon tax could be returned to taxpayers as a dividend payment.

Inherently a move towards a carbon tax is a tax shift: it shifts taxes from those who earn income (because most of our tax today is income based) to those who use energy. As with any tax shift, such a shift would result in gainers and loosers. As a society, we would need to deal with that, but such a shift would be of benefit to all of us.

Mr. Toews is probably correct when he says that a carbon tax would increase grocery prices, increase heating costs, and increase the cost to farmers of operating their equipment. The effect of the carbon tax would be to increase the cost of anything requiring as a major input fossil energy. But these cost increases would be offset by lower labour costs (because people pay less income tax). This means that with a carbon tax, everything we buy, where the major input component is labour, would be cheaper.

The big bonus of a carbon tax is that it would create market incentives to conserve energy. Take a hypothetical example. Assume it now costs me $2,000 annually to heat my home. Assume I now pay $10,000 in income tax. The only incentive this tax regime creates is that I hire a better accountant. Now assume, to make it drastic, that the shift to a carbon tax eliminates my income tax, and adds $5,000 to my heating bill. Presto! There now is a huge incentive for me to heat my home more efficiently – no need for a PowerSmart program to get me to install a more efficient furnace or to upgrade my insulation. Pure market incentives would eliminate the need for costly subsidy programs.

So please Mr. Toews, there is a need to debate whether we want more government programs or less, but there is a greater need to debate whether we want an NDP carbon tax or a Conservative carbon tax. Please, don’t confuse the two debates. It is a disservice to the country.