AIMS asked to comment on “green” taxation

FREDERICTON – Canadians have been warned it’s going to devastate the economy. Its critics say it’s powerful enough to cripple industries. Ordinary New Brunswickers worry whether its impact will make it even more difficult for them to pay their heating bills.

But beyond the rhetoric surrounding the federal Liberal’s proposed carbon tax there appears to be a lot of uncertainty and questions on just how the policy would work.

At its core, the idea of a carbon tax is to simply tax more heavily the things Canadians want to see less of — in this case emissions — and offer tax breaks on items Canadians want more of, such as income.

The idea of taxing consumption rather than income is generally supported by economists.

“The general idea of reducing taxes on income and shifting them to consumption is a good one. The least harm and the least distortion comes from consumption taxes,” said Ian Munro of the Atlantic Institute for Market Studies.

However, there are concerns about just how a carbon tax would affect everything from power rates to key New Brunswick industries such as forestry, trucking and agriculture.

“It will make us less competitive,” said David Murrell, an economist at the University of New Brunswick, adding “it will not do our industries any good in New Brunswick.”

Liberal leader Stéphane Dion’s proposal puts a price on carbon — a greenhouse gas largely emitted through the burning of fossil fuels that contributes to climate change — and calls for that money to be reinvested to help low-income families and other Canadians.

The policy also means the more individuals use, the more they pay.

The country’s 700 worst polluters, mostly heavy industry and power plants, would end up paying the most under the plan.

The price would begin at $10 per tonne of greenhouse gas emissions and increase by an additional $10 per tonne each year until it reaches $40 per tonne.

For example, the Liberal’s so-called Green Shift states the cost of filling a typical barbecue propane tank will rise by 24 cents in the first year, increasing to 95 cents in the fourth year.

A family using roughly 1,800 litres of heating oil per year would see their costs jump by $50 per year in the first year of the plan, increasing to $203 in the fourth year.

Dion has also pledged the carbon tax would not apply to gasoline prices as the excise tax charged at the pumps is equal to the price of carbon that would be set by his government.

Drivers of diesel vehicles would receive a one-year reprieve before paying a pollution tax that will reach seven cents by the end of year four.

The Liberals say the first year of their plan will see the average household paying an additional $60, which will jump to roughly $250 in the fourth year.

However, Dion says the plan would be “revenue neutral,” meaning the money collected by government as a result of the carbon tax would be redirected back to Canadians in the form of tax cuts and credits.

“Carbon taxes have just been huge grabs for governments,” said Adam Taylor of the Canadian Taxpayers Federation.

Carbon tax schemes in European countries have failed to reduce emissions, devastated manufacturing companies and been windfalls for governments, he said.

Taylor also disputed the idea of Dion’s tax being so-called revenue neutral as it would see some taxpayers paying more and having that money redistributed to other taxpayers.

“If they want to sell their plan as a wider income redistribution plan they should at least be honest and say that’s what their intentions are here,” he said.

Under the plan, the lowest federal income tax rate will decrease to 13.5 per cent from 15 per cent, while the middle-class tax rates will drop from 22 per cent to 21 per cent and from 26 per cent to 25 per cent. The plan also calls for lower corporate tax rates and credits to encourage industries to reinvest in greener technologies.

There would also be credits for particular groups such as farmers and truckers, while rural Canadians would receive a $150 credit as they typically consume more energy.

In the fourth year of the plan, a single earner with an income of $35,000 would receive a $357 tax break. The same individual one child would receive a $936 tax-break.

A single earner with a salary of $50,000 would receive a $337 tax-break.

But critics of the plan say there are too many unknowns and the carbon tax will hit regular New Brunswickers simply trying to make ends meet.

Peter Nelson, executive director of the Atlantic Provinces Trucking Association, said Dion’s plan will cost the industry billions of dollars. Although Dion is offering some relief for industries that would be hardest hit, it won’t be enough to prevent the devastation, he added.

“That’s money that they’re not going to have to reinvest in their companies, in their employees or new technologies and equipment,” he said.

And, those costs will be passed along to consumers.

“The more it costs the long-haul trucking company to operate, the more it’s going to cost consumers for the food they eat, the clothes they wear.”

Even though a Liberal carbon tax won’t be added to the price of gasoline, drivers will still end up paying more as costs faced by refineries and industry are passed along to consumers, said Murrell.

“We’re a pass-through province with a lot of driving. New Brunswickers drive more.”

There have also been questions on how a carbon tax would impact a second refinery in Saint John — a major project for the local economy.

Conservatives, including Prime Minister Stephen Harper, have highlighted that provincial Liberals have expressed concerns about the plan.

Instead of proposing a carbon tax, the federal Conservatives would begin regulating caps on emission in 2010.

Any company exceeding the caps would pay $15 per tonne above the target into a technology found. That fund would then be used to develop green technologies.