Sunday, June 15, 2008

Revenue "Neutral", We'll Prove It

Some details are starting to emerge, about the Liberals "tax shift", and I must say this idea should help counter the nonsensical Conservative attacks:
Stephane Dion will deploy Canada's auditor general to backstop his claim that a Liberal carbon tax will be revenue neutral, not the massive tax grab depicted by the Tories.

Under the plan, the federal treasury would not keep a dime of the roughly $14 billion in revenue the proposed carbon tax would generate. Rather, the money would be shifted back to consumers in the form of offsetting cuts to personal income and corporate taxes.

But Dion is not going to ask Canadians to simply trust him on that.
The plan includes a promise of legislation that would require the independent auditor general to review the tax shift annually and to verify publicly whether it is living up to its advance billing as revenue neutral.

"We will prove this," Liberal finance critic John McCallum said in an interview.

"I know politicians aren't always believed, and when we say it's revenue neutral people will be skeptical and they'll refer back to the GST. But we will have the auditor general verify each year it is revenue neutral".

Having third-party verification will be key to insulate the Liberals from the already known Conservative attack lines. Having the Auditor-General verify that any plan is actually revenue neutral might just expose the "trick" theme for what it is, fear mongering. I actually think this is quite a shrewd move, because it does say, don't trust us, trust those who have no vested interest. This idea moves the discussion outside of the purely political realm. I like it.

The above addresses the Conservative attacks, the following will address the NDP lines:
Insiders say Dion and his inner circle have agonized over details, trying to ensure that no one is unfairly penalized by the carbon tax. Various measures have been built in to protect those who can't afford or can't access alternative energy sources, such as poor, elderly and rural Canadians, or those whose livelihoods are dependent on fossil fuels, such as truck drivers.

Originally, I was fine with a delayed release, because it afforded the Liberals the rare opportunity of having floated a vague plan, having everyone else expose their criticisms, which allowed for "tweaking" to address those attacks. In the end, the plan would already incorporate the counter talking points, which should result in a better package. Reading the above reinforces that notion, although the time is clearly NOW for the release.

Finally, McCallum offers the "only adult in the room" assessment:
"I cannot say to you that no Canadian will be unharmed by this" he said.
"What I can say is that we've done our very best to ensure that the most vulnerable Canadians will not fall through the cracks and they will have assistance to make the necessary adjustments.
"But the whole planet has to adjust to higher energy prices and costs, and dwindling supply relative to demand for oil, and it's not going to be totally painless for every human being."

Any serious discussion assumes some cost for people, that seems inherent to the idea of changing our habits. If the Liberal plan seeks to mitigate the harm, offer ways to offset, provide a clear path that could lead to lower taxes for the average Canadian, then people will understand that it can't be a free ride initially, attempting to change society in a such a fundamental way.


Lizt. said...

Didn't the Europeans go against a carbon tax, and instead went ahead with Cap and Trade ?

Steve V said...

Some wanted a carbon tax, others wouldn't endorse it, so they settled on cap and trade. It sounds to me like cap and trade was the compromise for the EU.

Anonymous said...

There're costs to both. Carbon tax makes it a centralized redistributive mechanism, cap & trade lets the free market reallocate resources.

Steve V said...


Well, that's the thing isn't it. To argue that cap and trade only targets the big emitters, fails to acknowledge that any cost is passed on to the consumer, there is a trickle down. That's not to argue merit, just that it's intellectually dishonest to claim one harms ordinary people, while the other doesn't.

catherine said...

I think the cap and trade did not require the same level of support that a carbon tax would. Some of the countries participating in the EU cap and trade already had a carbon tax, and all of the EU countries levy substantial taxes on gasoline. There are still discussions of a EU tax on certain items, such as imports and airplanes.

I like this AG oversight plan too.

Möbius said...

That's not to argue merit, just that it's intellectually dishonest to claim one harms ordinary people, while the other doesn't.

Either system harms the consumer, or there would be no point in doing it. The idea is to stop people from consuming carbon fuels like there's no tomorrow.

Anonymous said...

I can see what he is saying ... with a cap and trade, after a certain amount of carbon is emitted it becomes costly to buy credits and all those costs are passed on to consumers.

But, with a carbon tax, there is still a cost, but it is paid to the government. So, as costs to the consumer go up, the tax credits and income tax cuts can be passed on to offset those.

For the consumer a revenue neutral tax is better than an artificial cap. For the environment? Six of one, Half dozen of the other.

Imagine in a campaign though, DIon being able to offer lower income tax, lower corporate tax, and tax credits for the poor - and the NDP/Conservatives will have nothing to offer.

ottlib said...


I have some reservations about this.

That annual report would become a political football leading to some danger that the AG's office will become politicized.

I agree that having the third-party check on the tax-shifting plan is a good idea but we have to be careful in how we implement that. If not done properly we will have yet one more officer of Parliament being corrupted by partisan politics.

Steve V said...


Why? That's the point, the AG just runs the numbers. Period. I'm not worried, that's a Con paranoia perspective.

ottlib said...

I know it sounds simple but in politics it is never thus.

As I said, I agree with you but we just have to make certain it done properly.

I am happy that the plan will include such a measure but when it comes to implementing it I hope it receives as much thought as the actual fiscal measures.

Anonymous said...

Starting things off with publicly declaring that AG would verify is a great opening move by the Libs. It neutralizes Tory "tax grab" attack. And people are definitely listening now.

burlivespipe said...

I suppose this should lead to the inevitable CON party line: "The AG is a Liberal stooge!"
And Big Oil will threaten to take their ball and go home.
From what you write, I like. Incentives to change, yet some level of relief for the small businessman and less fortunate.
I'm just wondering, but wasn't there suppose to be some source of revenue from this funneled to encourage alternative technologies?

The Grumpy Voter said...

The Auditor General *monitored* the EI surplus for years and years and years and demanded the Liberal government (of which Dion was a member, if I recall) stop over charging EI and collecting what eventually amounted to over $50 billion dollars for years and years and years and years. If the Liberals refused to listen to the AG as they ripped Canadians off, why should anyone care whether the AG monitors this carbon tax? She will be powerless to do anything if it isn't revenue neutral just like she was powerless to do anything about the EI surplus. I think it's a TAD hypocritical for Dion to bring up the AG given his own record of ignoring the AG for years as Canadians were robbed of their money.

Mark Dowling said...

I agree with ottlib. In general, the AG should work on whatever the AG thinks fit and should not take direction from either government or opposition. The office is certainly not one of political validation. The AG will have to scrutinise the project on the back end and should not be prejudiced by having endorsed it at the outset.

I'm thinking that heretofore independent economists would have been asked to validate this - why not now?

Con paranoia? If I was a paranoid Con I'd love to damage independent officials like the AG, at least while in power, and validating political platforms would be a great way to do it.

JimBobby said...

I'm just wondering, but wasn't there suppose to be some source of revenue from this funneled to encourage alternative technologies?

So far, I don't think we've seen anything on this from the Grits. The tax-shift rearranges where the revenue comes from. By its nature, a tax-shift does nothing to change how money is spent. Alternative and renewable energy investment is needed and a spending shift is needed along with a tax-shift. Let's hope Dion lifts a few more Green policies and the green investments will be considered.

The carbon tax, alone, is designed to reduce CO2 output. As such, it is an incentive for alternative energy use as well as conservation and efficiency.

...why should anyone care whether the AG monitors this carbon tax? She will be powerless to do anything if it isn't revenue neutral...

Like she was powerless on AdScam?

The AG only reports what she finds. If the voters don't like what she tells them, they can turf the government. That's exactly what happened with AdScam and exactly what would happen should the AG report that the carbon tax was not being administered in a revenue neutral manner.

The Grits aren't the only ones who ignore AG reports. There were a few reports on Chalk River that went ignored last fall.

It is up to the voters to act. Grumpy voters can't express their grumpiness at the polls. When enough are grumpy, as in Jan 2006, a sitting government will fall.

oops... Whooee!

JimBobby said...

Grumpy voters can't express their grumpiness at the polls.

Should read: Grumpy voters can express their grumpiness at the polls.

Steve V said...

If not the AG, then who? Sure, you could bring out "independent" economists, but then again, I'm sure the Cons could find someone to argue the opposite. The AG is THE institutional impartial reader, so the symbolism of welcoming an independent audit for verification is politically shrewd.

Anonymous said...

Sometimes I think Grumpy is the ultimate concern troll, or maybe it is just the nature of grumpiness.

Steve V said...


I agree. Anybody naive or gullible enough to vote for Harper in 2006, on the pretense of "change", certainly isn't someone who's advice we should heed.

Mark Dowling said...

As I understand it, the US seems to have lots of this kind of thing, like the OMB, the Congressional Joint Committee on Taxation and the Congressional Budget Office.

The GAO does the post-game stuff as the AG does now.

I imagine Parliament could strike a JCT-like body...

Steve V said...

"I imagine Parliament could strike a JCT-like body..."

Wouldn't that just make it more political?

Mark Dowling said...

Not if the committee had access to independent researchers. At least they could call witnesses and get testimony sworn rather than have the debating in the Post and the Globe.

Let's face it the US Congress is the most partisan institution on the planet so if they can make it work... the problem in Canada is that the Executive can actively hinder the Parliament by interfering in the membership and operation of Committees - that's a lot harder from the White House. I'm just stuck for an appropriate place to put such a body.

Steve V said...

"Not if the committee had access to independent researchers. At least they could call witnesses and get testimony sworn rather than have the debating in the Post and the Globe."

I hear you. But, wouldn't it just end up with dueling "independent" analysis. I mean, this is all so complicated, that one could easily find different interpretations of the same numbers. Any Con members on the committee would do everything in their power to repudiate any findings, as would other parties, with their own agendas. That brings me back to the AG, or somebody else directly responsible for this file. I don't want this near our MP's.