Carbon Taxes: Controversy & A Guaranteed Income

Carbon tax Controversy

The discussion about carbon taxes has been ongoing for many years. Are we going to get a carbon tax? How will it work? How much will cost? What will the effects be? Where will we have lunch, and so on. Typically the political argument has the conservatives opposing carbon taxes, although that is slowly changing, while the liberals, NDP and Greens all in agreement that they are necessary. The one constant is that everyone has vastly different visions about what a carbon tax should like. Prime Minister Trudeau recently announced that the federal government was going to implement a carbon tax and gave the provinces two years to implement it on their own as referenced in this CBC article. In response, the Green Party mentioned that it did not like that Trudeau was using the previous Conservative government’s carbon targets. The response from the NDP was that the liberals were “embracing targets they previously were against.” So while the Liberals, Greens, and NDP were all in agreement that carbon taxes were necessary they all disagreed on how the actual implementation of a carbon tax should be approached.

In response to Trudeau’s new carbon tax initiative, provincial governments in Saskatchewan, Nova Scotia, and Newfoundland  were angered by the approach taken to force them to implement a carbon tax and walked out of an environment ministers meeting. These concerns are largely the same we’ve heard so many times before mostly claiming that it’s going to cost too much. Saskatchewan Premier Brad Wall has criticised the liberals carbon tax plan as costing families upwards of $1,250 a year with $2.5 billion leaving the province. Nova Scotia Premier Stephen McNeil joined Bad Wall in opposition saying that there are better ways to combat climate change.

Carbon Tax Concerns

So why bother with this when it is so controversial? Simply because it’s about being good stewards of our section of the earth and setting a good example for the rest of humanity and future generations. A carbon tax is coming whether people like it or not, and many of the concerns around it are based on how much it might raise the cost of living for the average Canadian. So we should take this opportunity to work together to try and make it be as fair as possible for everyone in Canada as some of these concerns are not entirely unfounded. Taxes on a good or a service always raise the cost of the good or service to that end user, and not everyone in society is equally able to handle a tax increase without it impacting how they are paying for the necessities of life such as food and shelter. This is the main reason why many people are concerned about the extra cost a carbon tax will add to the average household.

Energy is a big part of our lives and produces a lot of carbon emissions. Every product you purchase used some form of energy for its manufacturing processes as well as delivering the final product to the store where you purchased it. If you tax energy than most goods and services in town will become more costly to both produce and consume.  For example, Loblaw’s grocery stores burn a lot of gas to deliver groceries to your local grocery store. As Loblaws is not a social enterprise and grocery stores don’t always have good margins, they are unlikely to eat that extra cost themselves. That likely means the cost of food will go up in addition to the cost of driving a car or a delivery truck. However, we are also consuming goods and services at an unsustainable and alarming rate that is bad for the earth in the long run. So at some point, something has to give. Now some of this can be mitigated by changing lifestyle habits. Drive less, take more public transit where and when it is available and consume less goods. Our society does consume a lot of goods unnecessarily and is inherently wasteful with the products it does consume every day. Think of all the products we use once and then throw away like coffee cups or the unnecessary amount of plastic in a lot of product packaging. Think of all of the items in your life that you threw away rather than repaired. Making these goods more expensive will cost people money but it could inspire changes in our consumerist mindset that could prove beneficial in the long run. Why drive your car all the way downtown to work if you can take public transit? That removes the stress of driving and replaces it with the opportunity to relax with a good book on your commute instead. And if companies can change their ways too we’ll all be better off. Using electric-powered delivery vehicles might reduce a lot of greenhouse gas emissions. The more we can reduce the financial impact of a carbon tax on average Canadians, the more likely it is to gain popular support. The implementation of a carbon tax will likely be more successful if it focuses on businesses and trying to inspire them to develop more environmentally friendly manufacturing and delivery processes than by increasing the tax burden on the average household.

Reducing The Financial Burden

Now, nobody likes paying taxes. The common perception is that taxes go up and wages do not leaving you with less money to pay your bills. And recent data from Statistics Canada shows that wages aren’t growing as much as they used to. This creates an incentive to reduce the impact on individuals from carbon taxes. As I mentioned above, the less impact a carbon tax has on the average person the more likely they are to support it. So how do you manage all these concerns to implement a system that is fair and works for as many people as possible while also making a positive impact on the environment? The concerns of a higher cost of living can be greatly reduced through one of two ways. BC’s revenue neutral carbon tax plan is one way that sees carbon taxes a consumer might pay offset through a reduction in personal taxes in other areas. The idea behind this is that it is as close to revenue neutral as possible. It also seems to work so it has that going for it. The other way concerns about carbon tax can be alleviated is through some form of a guaranteed basic income. It is on the idea of a guaranteed basic income that I’m going to focus the rest of this blog on. The discussion around carbon taxes and a guaranteed basic income could be taking place hand in hand. If you look at a guaranteed income to supplement and support people’s incomes rather than to replace a source of income entirely then it becomes much less costly to think about. Instead of giving a citizen $30,000 a year it’s closer to $3000 for example. These numbers aren’t based on anything, they’re just examples. Supplementing incomes is much easier to accommodate than replacing incomes and could be used to provide people with enough of an income boost to balance out any increases in the cost of living

No Need To Re-Invent the Wheel

This all sounds costly, and difficult to both manage and implement. How would governments on any level go about implementing this? This is where the carbon tax could be used to support a guaranteed income. A carbon tax without a corresponding decrease in taxes in other areas for consumers should give the government an increase in tax revenues. The biggest problem to tackle with a carbon tax is that the richer a citizen is, the less it is going to impact their daily life. Someone making $80,000 a year isn’t going to feel the impact of a carbon tax the way someone making $20,000 a year will. So how is this balanced to make it a bit more fair for everyone? We could take some cues from a system we already have in place for this exact reason. The GST/ HST rebate system could be used as a model to put a portion of carbon tax revenues directly into the pockets of people based on need. When someone files taxes with CRA they are automatically assessed, without their needing to apply, as to whether or not their income is low enough to qualify for the rebate. The purpose of this rebate is to give people with low wages some additional support by giving them a portion of the taxes they pay back at a standard fixed rate. Cheques go out like clockwork every three months and everyone is happy. Why can’t we use this same system, or one like it, to redistribute a portion of carbon tax revenue generated by government back to those who need it most? The system to evaluate who needs it is already in place so new programs don’t really need to be invented. You can just expand an existing one that is proven to work. In theory, this should be cheaper than reinventing the wheel. Under this system, every Canadian citizen would have their incomes evaluated to see if they would qualify for a Carbon Tax rebate like they already are with the GST/ HST rebate. Now everyone’s need is going to be different, so you could implement different rebate levels on based on income level. Someone making $20,000 a year of taxable income would get a larger rebate than someone who would make $30,000 a year. Someone who makes $40,000 would get an even smaller rebate, and so on. Ultimately no one cares if Wal-Mart’s tax bill goes up or if their costs go up just as long as those increases are not passed on to the end consumer. Governments are fully capable of putting together a system that lets business pay the tax while providing relief and reward to the average citizen. This might help to get the public to respond more positively to the actual implementation of a carbon tax than they otherwise might. It is one thing to say you support a carbon tax to help the environment when no one has said what the actual tax itself will look like and how it will operate. It is quite another to actually pay the final tax. Whatever system for carbon taxes is ultimately put in place it must recognize the fact that each province is unique and there isn’t a one size fits all solution for each region of Canada.This must be combined with the fact that not everyone is equally equipped to be able to pay more taxes. If government works to reward people for being environmentally friendly rather than just punish them through higher taxes they will garner much more public support. And Canada really does need to get it right the first time. Because, ultimately if the implementation of a carbon tax is botched and is unpopular enough then the next government will just remove it and we will be back at square one. The story of Australia’s carbon tax and its subsequent repeal provides a cautionary tale for Canada and a warning to us to get it right for the sake of the health of both mother earth and our children and their children.

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