Premier Gordon Campbell's overly-hyped claim that his government's carbon tax is revenue neutral might be true for the provincial treasury, but it is certainly not neutral for individuals or businesses. It will drain family income directly with higher gasoline and home heating costs, and indirectly as municipalities and businesses pass on their energy cost increases. Equally devastating is the economic hit to some of the province's biggest industries when the carbon tax leaves them less competitive in the world marketplace. The government's own estimates show the carbon tax will do little to help it reach its greenhouse gas reduction goal. Carbon taxes will have unintended consequences for families and the economy in B.C.

A carbon tax taxes fossil fuels - such as gasoline, diesel, home heating fuel and natural gas - for the carbon dioxide released into the atmosphere. The B.C. carbon tax starts at $10 per tonne on July 1 and goes up by $5 each year to $30 per tonne in 2012. At the gas pump, the tax starts at 2.4 cents and rises to 7.2 cents per litre by 2012. The goal is to reduce greenhouse gas emissions by 33% from 2007 levels by 2020. In theory, the carbon tax will manipulate people into using less fossil fuel, but ironically, the premier's own behind-the-throne carbon tax guru suggests people's behaviour won't change until the carbon reaches $180 per tonne. That translates to a 43.2 cents per litre tax increase at the pumps.

B.C.'s carbon tax is supposed to be revenue neutral. The new carbon tax, we are told, will be matched by individual and business income tax reductions. The last time Canadians were told a tax would be "revenue neutral" was when the GST was introduced. Instead of neutral, the federal government has collected billions of additional tax dollars. The same will likely be true of B.C.'s new tax.

The carbon tax will reach much farther into the pockets of British Columbians than first understood. Municipalities and businesses also pay the carbon tax. So while income tax cuts will supposedly offset the direct costs of the carbon tax, at least for those able to assume the correct low-carbon lifestyle, there are no tax cuts for the indirect costs - higher property taxes and high prices for goods and services. The province has not included these costs in its calculations.

Some municipalities in northern B.C. have calculated the carbon tax effect on property taxes. Municipal governments will have to pay the carbon tax on their heating bills and gasoline for fleet vehicles. That increase will be passed along in the form of higher property taxes. In Williams Lake, for example, the mayor's office calculates the property tax increase for citizens will be an extra one per cent. Mayors in northern towns have banded together to fight the carbon tax, but have been told straight out by the province's finance minister they'll get no relief from the carbon tax. The carbon tax will therefore increase the cost of local government, which is, of course, funded by local taxpayers.

Business will pay the lion's share of the carbon tax. Of the $1.85 billion the government expects to collect from the carbon tax over the next three years, about 70% of that will come from business, but business will only get 30% of the tax cuts. Individuals, on the other hand, will pay 30% of the cost and receive 70% of the tax cuts. But don't think for a minute this means a break for individuals. Businesses that sell domestically will flow that tax increase back to consumers. Face it, there is only one taxpayer.

The carbon tax will cause real problems for exporters. Most big industrial employers in British Columbia export their products and compete against companies that do not face carbon taxes. The forestry industry is already in big trouble, and the carbon tax could be the last nail in its coffin. The mining industry, one of the highest paying industries in the province, is an obvious place for displaced forestry workers to look for new employment, but the mining industry could be hit hard once the carbon tax reaches $30 per tonne. For a large mine, the carbon tax could add up to $4 million per year to costs. That cost increase might be absorbed now because of high commodity prices but it could mean less growth. Less growth could mean lower greenhouse gas emissions, but it also means fewer high paying jobs.

The carbon tax will do little to reduce greenhouse gas emissions, will hurt B.C. families and businesses, and won't go away when the wheels of the global warming bandwagon fall off. Canadian taxpayers should hope - and ensure at the ballot box - that Ottawa and other provinces do not follow Premier Campbell's agenda. His quest for a political legacy has put him out of touch with the realities of B.C. families.

By: Maureen Bader
Posted: June 02, 2008
Type: In the News

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