Carbon Tax Anything But Revenue Neutral

By Aaron Wudrick and Paige MacPherson

Did you really believe them when they said it would be revenue neutral?

Last week, the Trudeau government announced a technical paper on its proposed federal carbon tax which suggests it will mimic Alberta’s carbon tax plan, quashing the optimism of those who believed the federal government when they said their carbon tax would be revenue neutral.

The federal government had long insisted its plan would be, “revenue neutral for the federal government,” with any revenue generated staying in the province where the tax is imposed. Last October, Saskatchewan-based federal Public Safety Minister Ralph Goodale, said publicly of the planned federal carbon tax that, “every single penny remains in Saskatchewan and under Saskatchewan’s control.”

The Saskatchewan government was highly skeptical; as it turns out, for good reason.

When Alberta’s government announced its own multi-billion-dollar carbon tax, Premier Rachel Notley and other ministers tried to spin the tax as revenue neutral. In all previous uses of this term, it meant that every dollar raised by the government would be returned to taxpayers. The Alberta government’s new definition was that every dollar they take from Albertans would be spent by the Alberta government.

By that definition, every tax in Canadian history would be considered revenue neutral.

Alberta’s carbon tax takes billions from taxpayers and the government plans to spend that money, at least partially, on corporate welfare to big emitters like oil companies and green energy corporations. A smaller portion of the revenue is dished out in rebates to some Albertans. Additionally, the small business tax was cut by one percentage point.

Alberta’s carbon tax has been criticized for making the necessities of life cost more, taxing rural and suburban residents disproportionately, indirectly raising other taxes, and contributing to corporate welfare. All without making a dent in global climate change.

The government spent $9 million on advertisements during a biting cold snap, repeating over and over to Albertans that a tax that makes heating and gas more expensive is great. It was a desperate attempt to sell the carbon tax to a population that doesn’t support it.

Carbon tax proponents have slammed the Alberta carbon tax for not being revenue neutral, being confusing and lacking transparency.

Even the so-called gold standard of carbon taxes in Canada, British Columbia’s revenue neutral model, was revealed by the Fraser Institute not to be revenue neutral. The government had been playing accounting tricks, costing taxpayers hundreds of millions.

The idea of a revenue neutral carbon tax, even if it fits the accepted definition, involves such incredible faith in government that it’s difficult for persistently-misled taxpayers to swallow.

But the federal government’s suggestions that its carbon tax would be revenue neutral is even more disingenuous.

Even the original suggestion of revenue neutrality (that money was recycled back to provincial governments) was misleading; it came with no guarantee that provincial governments would give that revenue back to taxpayers.

It also glazes over the reality that collecting taxes and redistributing revenue involve administrative costs. And, what about any additional HST or GST raised as a result of higher prices and tax-on-tax?

If the federal plan is to take money from taxpayers and dish it back to businesses they choose in the form of corporate welfare, and select people they choose in the form of rebates, it will not be revenue neutral.

It’s bad enough that our prime minister is pushing the idea that provinces are free to do whatever they want … as long as they do exactly what he wants them to do. But, reusing the absurd revenue neutral spin quickly abandoned by the Alberta government, just because they like the way those words sound, will not instill faith in jaded taxpayers that carbon taxes are anything more than another tax and spend scheme.

Aaron Wudrick, Federal Director, and Paige MacPherson, Alberta Director, are with the Canadian Taxpayers Federation. (This column originally appeared in the Huffington Post)