Revenue Negative, Revenue Neutral, Revenue Positive

Whooee! Well friends an' foes, I was just over to BigCityLiberal MJ's boog where he's on about Andrew Coyne. Coyne says Dion flubbed the presentation of the tax-shift (d'uh...) and should have presented it as a massive reduction in income tax and then explained where the lost revenue would be coming from. Coyne floated the idea that the tax should be introduced as "Revenue Negative".

Coyne's on the money when he sez Dion flubbed the presentation. Bigtime. As to the Revenue Negative aspect, I'll get into that soon. First, I need to take issue with one thing BCL said:

Dion's promise is that, if the average Canadian is going to pay an extra $1,000 to for example heat their home, they will get $1,000 in income tax cuts.

Wrong and wrong.

I disagree with Coyne's across-the-baord Revenue Negative idea and also with the idea that everyone who spends an additional $1000 in Carbon Tax will have their Income Tax reduced by exact same amount. As far as I know, Dion has not made such a promise. I'm open to be corrected but if Dion has any understanding of how a tax-shift actually works to reduce carbon, he cannot make such a promise.

Of course, we don't have any real details from Dion, so far, as to how the tax-shift will be implemented. That's another part of his flub-a-dub on presenting his idea when it was only half-baked. Half-baked wouldn't be so bad if we got a peek at the recipe and knew what the tax-shift would mean for various types of income earners and carbon outputters.

If the eventually to be released LPC plan is like the GPC plan, Revenue Neutrality is at the receiving end -- not at the paying end. Total taxes collected will remain at the same level as now. Taxes payable by individuals will be directly related to their carbon output.

I think that for many middle-income earners, the tax-shift will, indeed, be Revenue Positive. That's positive for the taxpayer, negative for the tax receiver (that's the Receiver General for Canada). Those who have taken or do take measures to reduce their carbon footprint will pay less carbon tax while still enjoying a break on income taxes. Low income earners will be accommodated and those who pay no tax at all will get "refund" cheques - just like many low income earners and poor people get credits under current tax laws.

Consider two typical middle-income earners with equal incomes. If all other things are equal (i.e. family size, RSP contributions, age, etc.), these two tax payers will each pay the same (reduced) amount of income tax.

Overall taxes will rise for the middle-income earner who owns a couple of SUV's, a power boat, some ATV's and snowmobiles; who drives everywhere instead of walking when practical; and who fails to be efficient with home heating and cooling.

Overall taxes will go down for the middle-income earner who practices conservation and efficiency. This practice is often referred to by naysayers and Luddites as "freezing to death in the dark."

I've taken many measures to reduce my own carbon footprint. I've also taken a few online tests to estimate my output and have consistently found that Ma and I use about 60% of what the average Canajun uses. We don't freeze in the dark. CFB lighting, thermal underwear, walking when practical, multi-tasking whenever we use a motor vehicle, digging dandelions and never buying chemical pesticides, composting, keeping the hot water heater set to a reasonable temp, etc. etc.

Despite the fact that we already use only about 60% of the energy used by average Canadian, we live in an older (1880), detached, wood frame house that could use plenty of energy efficiency upgrades. We live in a small town with only one supermarket, one drug store, one gas station, one lumberyard, one hardware store and one set of traffic lights. Not everything we need is available locally but most of it is and much of our shopping can be done on foot.

But, dang it all, we can do a lot better. Our old shack could really use better doors and windows. Once we start paying less income tax and we can see we'll be better rewarded by increasing our energy efficiency through tax reduction (and possible government incentive programs), we'll be a lot more likely to spring for a few thousand bucks' worth of 21st century windows and doors. We're already shopping.

I expect that a revenue neutral tax-shift will reward people like me and punish people like my boat-owning, 3 vehicle-owning, frequent jet traveling, air conditioner-using neighbours. Without a tax-shift, the best way Ma and I can save tax money is to lower our incomes by purchasing more expensible stuff -- like new business vehicles, trips to professional conferences, socking away more in RSP's or actually taking a cut in pay. With a tax-shift, we can make more money, spend less and ultimately pay less tax simply by reducing our carbon footprint -- something almost everyone can do, even if we've already done a lot.

That's the whole concept of a carbon tax: to get people to quit wasting energy. If we were to simply offset all carbon taxes with equal income tax reductions, we would create little incentive. The fact that consumers can lower their tax bill while lowering their energy bill is what makes a carbon tax work.

JimBobby