Monday, March 19, 2007

Tories Endorse "Carrot And Stick"

My favorite item in the budget, something which I had previously endorsed, offers the dreaded "carrot and stick" approach to reducing automobile emissions:
Gas guzzlers will be dinged with a new tax of up to $4,000, fuel-efficient cars will get a rebate worth up to $2,000 and old wrecks will be offered a short-cut to the junkyard, under today's federal budget.

The boldest initiative is probably the system of car rebates and taxes, which unabashedly uses the tax system to influence consumer behaviour, something that environmentalists have long advocated.

Although most provinces have rebate programs for fuel-efficient cars, only Ontario has a tax on gas guzzlers. The federal Liberals never dared to implement such a system although it was carefully considered. It will likely meet fierce disapproval from the Ontario-based auto industry.

Finance Department officials say the rebates and levies will basically cancel each other out, leaving the government with the same amount of revenue as before. But they acknowledge there are no studies to prove that the tax changes will actually influence buying patterns.

A revenue neutral, tax and rebate system, to entice compliance and reduce emissions- where have I heard this philosophy before? This is a great idea, partisanship aside. When you couple these rebates with provincial ones, like the proposed 2000 dollar PST cut for hybrids in British Columbia, you have a very attractive incentive. You also have a powerful deterent, with sizable TAXES for polluting behavior.

The fact the Conservatives have endorsed the carrot and stick approach, which will impact industry, particularly domestic automakers, is a complete departure from all the rhetoric. Flaherty's announcement endorses the tenet of cost attached to pollution. This sort of initiative is exactly the kind of logic that environmentalists have long argued. It begs the question, if the Conservative endorse this philosophy as it relates to consumers, why all the resistence to the same approach with industry?


Anonymous said...

Perhaps because the "gas guzzler' tax only applies to New purchases. Put a couple km's on some hot wheels and wham! USED and exempt. Some carrot. Some stick.

JimBobby said...

"Put a couple km's on some hot wheels and wham! USED and exempt."

Hmmm... somebody had to buy it new and pay the tax. They will need to recoup that expense when reselling. Thus, the price of used gas-guzzlers will also increase as they come on to the market. Re-taxing the same vehicle everytime it changes ownership would be the option. In practice, that could make a thrice-owned gas guzzler cost more than a brand new gas-guzzler.

I agree that more could have been done. A one-time tax on the gas-guzzling vehicle - new or used as of now - would be more effective. The bargain right now will be used gas-guzzlers on the market before the new car tax comes into effect.

James Robert

Anonymous said...

I heard on the news that they already have plans to bring slightly used high-end vehicles into Canada from the States. So no gas guzzler tax will be paid on either end. It's just a shiny thing that will do nothing for the environment.

JimBobby said...

"I heard on the news that they already have plans to bring slightly used high-end vehicles into Canada from the States."

That's got my blood pressure up.

Who's "they", btw?

Typically, the budget goes to committee(s) and gets tweaked. This i sa real loop hole that needs plugging and I hope that the budget will be amended to do that.