Tuesday, July 01, 2008

A great weakness in the carbon tax sales job

I filled up the Neon on the way home Monday, saving about 70 cents by avoiding the carbon tax that kicked in Canada Day. The service station was doing a booming business.
Which suggests that the Liberals' carbon tax works. If people are topping up the tank on a sunny afternoon to avoid paying the 2.3-cents-a-litre tax, then maybe we'll make other changes. We'll bike to work or share a ride one day a week, or cut down on the number trips to the stores on a weekend.
The carbon tax is one of the most interesting public policy issues in a long time, exposing a lot of contradictions.
Premier Gordon Campbell has been cast as the green defender, the champion of social engineering and government's wisdom.
And NDP leader Carole James has aligned with the Canadian Taxpayers Federation in opposing the Liberals' carbon tax.
The NDP stance looks mostly like political opportunism. The NDP favours a carbon tax levied at the wholesale level, not retail. Instead of 2.3 cents at the pump, the tax would be hidden in the cost of gas. Not much of a difference.
The New Democrats are on stronger ground when they note that big industries that release greenhouse gases without burning fossil fuels are exempt from any taxes on their emissions. (Like energy companies that flare off gas from wells.)
That regulation is to come - sometime - under a new cap and trade system. It will set emission limits for industries and companies. If a company can't make its limit, it will have to buy credits on the market to offset its excess emissions.
Mostly though, it looks like the New Democrats have decided to ride the wave of public anger without worrying too much about policy distinctions.
It's a bigger wave than I expected. One of the arguments made by critics is that the tax is irrelevant. Gas prices have risen 45 cents a litre in seven months - what's an extra 2.3 cents?
But that's not the way a lot of people see it. They see the government piling on when they're already having a tough time.
You reap what you sow, St. Paul wrote. And the Liberals spent a lot of their first term sowing the idea that government was a bad thing. Campbell liked to tell audiences that one new deputy minister told him she could cut her staff by one-third - and do a better job.
The message was that government was self-serving or incompetent, certainly untrustworthy.
But the sales pitch for the carbon tax relies heavily on trust in government. And the Liberals are struggling in their efforts to win people over.
Ipsos-Reid surveyed British Columbians on the carbon tax in the week before it was introduced. A narrow majority - 53 per cent - agreed that putting a price on greenhouse gas emissions is a good idea.
It was an almost even split when people were asked if they would be willing to pay higher fuel taxes if they were offset by an income-tax cut.
And 61 per cent doubted the B.C. carbon tax would change peoples' behaviour.
The poll also found 82 per cent thought the government should be targeting major industrial emitters instead of bringing in the carbon tax.
And the poll found the public isn't buying the Liberals' claim that the tax is revenue neutral - that the $631 million to be collected next year in taxes on gas, heating oil and other fuels will be offset by other tax cuts.
Only 19 per cent of those surveyed said they believed that would happen. The sentiment that it's a straight tax increase was shared by 57 per cent of British Columbians.
That's a problem for Gordon Campbell. Right now, he needs people to trust in government.
Footnote: Support for the carbon tax is strongest on Vancouver Island, where 23 per cent of those surveyed agreed it was the best way to curb climate change. The north, where only 12 per cent agreed, and the Lower Mainland, at 15 per cent, were the least supportive.
The Liberals will be helped a lot if gas prices stabilize (and if heating fuel costs don't rise higher by fall). But if they keep rising, the public will likely be slow to let go of their resentment.


Alexander said...

The carbon tax shouldn't be called social engineering. In terms of economics, it's actually a tax to cover the 'externality' of fossil fuels. Essentially, the tax captures the real cost instead of the market cost of using fuel. Setting the right price of the tax is the tricky part.

A more clear example, is cigarettes. Smoking has a HUGE social cost. Smokers have way higher health costs over their lifetime then non-smokers. By taxing them on their purchase, we help recover some of the 'social cost'.

The NDP are trying to score political points or do not have a flipping clue about how economics work (I suspect the latter) because taxing the suppliers of fossil fuel is useless. The cost will get past on to consumers easily because there are so few suppliers who have a lot of market power.

Declan said...

I guess if, after 7 years of Campbell and the Liberals, people are all convinced that all they want to do is *raise* taxes, it just shows that people are morons, especially on the subject of taxes, I'm not sure there's much more to read into it than that.

And that's without getting into the people who alternate between arguing that the tax is too small to affect their behaviour but big enough to drive them into bankruptcy.

DPL said...

Gordo is in the Globe this evening( Thurday 3) telling those folks way up north to stop being dependent on using Diesel. I don't quite understand what he wishes them to use . I never saw a bus system in Tuk or as far south as Inuvik, but if Gordo says is time to stop, well they better get their collective acts together. When King Gordo says stop by gosh they better listen. Wonder just whom he will be lecturing tomorrow. It's bad enough he can ram through legislation in BC but he really hasn't a clue on what's used in the high north. No trees to burn, no rapid transit and no bus stops. But Gordo is always right folks so get your acts together up north of 60 or else. My gosh we sure pick some weird MLA's

Anonymous said...

Now we are getting tow full page adds in many newspapers telling us hw great a deal this is. The money could be better spent on getting the poor and sick a place to sleep or maybe reopen a few operating rooms or a school or two. The big sell is on My gosh the two page adds are in the Globe and Mail as well. Nobody in ant other province is getting stuck with this deal

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