Wednesday, June 18, 2008

Carbon Plan Details

CBC has released more details of the Liberals tax shift proposal. Most intriguing, the Liberals will offer the idea of a "carbon tariff" on imports:
No new taxes are expected on gas for cars, trucks and buses, and special help was to be offered for low-income Canadians to buffer the higher prices they will have to pay for goods and energy.

The new details confirmed by CBC News sources Wednesday include:

Across-the-board personal income tax cuts of around 10 per cent for all three tax brackets, as people pay more for heating costs, food and other items.

A moratorium on new federal taxes on aviation and diesel fuel for the first year of the program.

Extra help for low-income Canadians in the form of tax credits so that they will get money back to help pay for higher cost of goods, even if they report no income on their tax returns.

Additional help for rural and northern Canadians to help soften the blow of possibly higher costs.

Assistance for non-profit groups that may face a crunch — for example, women's shelters that have to pay significantly more to heat their premises.

New tariffs on goods imported from countries that have no carbon taxes, as a way to even out higher costs for similar goods produced in Canada.

Enriched tax breaks for companies using and inventing green technologies, to encourage research and development as well as investment.

I thought it might be premature to roll out the idea of a carbon tariff now, but it's an excellent counter to the economic apocalypse the Conservatives will predictably argue. That's how you "lead the world" Mr. Baird, you actually do something, which gives Canada the leverage to force others to comply. This idea effectively blunts the competitive disadvantage argument, while at the same time offers an incentive to get others on board. Anybody claiming that a carbon tax will move more jobs out of Canada, have lost a key talking point.

When Rubin of the CIBC first came out with carbon tariff plan, I emailed it too a few Liberals, hoping the party would consider the idea as part of the plan. In my opinion, the idea of a carbon tariff may be the most important element in lowering the world's emissions. Nice to see this Liberal plan has a sense of the big picture on global warming.


A few more details:

According to party insiders, the shift would impose a tax of $10 per tonne of greenhouse gas emissions in the first year, rising to $40 per tonne in the fourth year.

The tax, which would be applied at the wholesale level, is expected to generate up to $15 billion per year in revenue by the fourth year.

Among the tax measures, insiders say Dion's plan would reduce the tax rate for Canadians in the lowest tax bracket to 13.5 per cent from 15 per cent. That amounts to a 10 per cent tax reduction.

The tax rate for the two middle tax brackets would be cut by one percentage point, to 21 per cent and 25 per cent. That would amount to a tax reduction of five and four per cent respectively.

No reduction is proposed in the top tax rate for high-income earners.


Gayle said...

I have been waiting to comment until I see the plan, swayed as I have been by Grumpy's strenuous objections :), but from what I read here I like it.

I do think it is a bold move on Dion's part. I hope he can sell it, not just because it will help the liberals defeat Harper, but also because it should help the environment.

It takes a lot of guts to promote something like this.

calgarygrit said...

Would that violate NAFTA?

Anonymous said...

I think this plan is worth the wait. Canadians will see it as serious policy that commands respect, not the cartoon show on the other channel.

RuralSandi said...

So far it is interesting - methinks the Tories are scared shiftless.

About NAFTA - if Obama were to become president - I think the focus will be on outsourcing,human rights and the environment...hmmmm....

Steve V said...

"Would that violate NAFTA?"

The Americans have floated the idea too, so it would be interesting to see how that plays out.

I think they are actually scared, say what you want, but rarely does an opposition seize the agenda in such a fundamental way. And for the Con apologists, sure you can howl and howl, but in the end, this will sink in, and your side has NOTHING to offer, or at least NOTHING that anyone supports.

It's strange, because even the people who think this is a bad move politically acknowledge the merits, consider it "good" policy. That might mean something in the end, because this will be a long discussion, it's not a 30 second ad.

Steve V said...

"It takes a lot of guts to promote something like this."

There goes "not a leader". Even critics use the word "bold", quite a departure from "wimp".

Steve V said...

I'm reading some of the Cons today, and it's actually kind of pathetic. Jason Kenney, taking a break from making no inroads with "ethnics" offers juvenile play on words, while Rick Dykstra suggests Canadians will "be turning on lighting their candles, turning off lights". "A wall of darkness".

What next, telling people to store up on canned goods? LOL.

Anonymous said...

And the problem with turning on candles? Makes for a nice atmosphere.

I only have a light on in the room I'm in - have done that for quite some time.

ted said...

A "border tax adjustment" is permitted under GATT/WTO rules. If you apply an environmental tax, like a carbon tax, in Canada, you can apply that same tax on imports from countries that do not have such a tax. The only thing seems to be that it hasn't really been put to a practical test. There is a reference to an academic paper on this subject in my blog post

Steve V said...

Thanks ted, good stuff :)

Jesse said...

Now, I'm on board with the plan. But I don't quite see how taxing imports will ensure the "Canadian jobs will be lost" attack is defeated. Canadian companies that export will still have increased costs (particularly if they're, y'know, environmentally irresponsible).

If the corporate tax cuts were priced so that (for the sake of argument) the median corporation wouldn't lose anything, jobs would just shift from the environmentally lousy end to the environmentally good end. If the world were only Canada. Jobs that depend on environmentally unsustainable industry will probably still be lost; they'll leave, and instead of exporting from Canada to wherever, they'll export from, say, Mexico to wherever.

Tomm said...

CBC's story was maddening.

It was titled something about a $15 billion tax reduction.

Please don't tell me that the same story from the other side would have gotten such positively biased coverage?

In regards to the plan, I'll wait to comment until it comes out with details and analysis I can sift through.


Steve V said...


Actually, Rubin from CIBC makes the argument that a tariff could result in manufacturing jobs returning to Canada. That's the opinion of a highly respected economist.


CBC has been slamming Dion for months. I just love how people claim bias, when if you actually look at the coverage, empirically, you see that it's the Liberals who should cry foul. I look forward to tomorrow's AT ISSUE panel, with the former Conservative worker, the guy who used to work for National Post and the woman who hates Dion. Wow, clearly biased, just not in the way you suggest ;) Just the facts please, straw man arguments aside.

Jesse said...

Well... I think he's confining his opinion to industries that produce things Canadians themselves buy, for the immediate future.

Any sort of "big picture" job gains would rely on the rest of the Western world applying a carbon tariff to goods from countries that don't have a tax that's up to snuff (which Rubin thinks they will).

If my Canadian company makes widgets for export to Japan, and a company in Beijing makes widgets for export to Japan, and Canada throws on a tax + tariff, I'll still go out of business / move production to China.

The tariff would help mitigate the damage for Canadian companies that produce goods for Canadian consumption that compete against goods from, say, China.

But, why, in the last, say, 20 years, have we not just applied big time tariffs to Chinese goods anyway, because their labour costs and environmental compliance costs are (already) (much) lower? Because economists generally think this is a bad idea.

I think the carbon tax is an incredibly important policy. But I think pretending it's going to immediately be pain-free would be wrong, and I don't think even Dion is trying to claim that.

Steve V said...

"But I think pretending it's going to immediately be pain-free would be wrong, and I don't think even Dion is trying to claim that."

Nobody is claiming that, only countering the economic ruin nonsense.