I suspect that many of us regard taxes as a necessary evil. Our Prime Minister, Stephen Harper, has said that in his opinion, all taxes are bad. In this column I want to challenge that notion.
I agree that there is something ill-fitting about taxes on property or income. We feel property and income is something that belongs to us. We have worked for this; it is ours. We feel government is imposing on what is rightfully ours when it applies a tax on our property or earnings. And in some shape or other, these are the most common taxes we pay.
But there are other taxes. We already have our tire and battery levies and our taxes on tobacco and liquor. These taxes recognize that some of our actions affect others or the environment negatively, and that government intervention is needed to ensure “that the polluter pays.”
What about the consumption of non-renewable resources? Doesn't government have some responsibility in transferring the cost of dealing with dwindling resources from future generations to the consuming generation? Doesn't government have some responsibility in discouraging the consumption of a scarce resource? I believe it does, and it really is not that difficult!
Let's assume that my household pays $20,000 a year in taxes: primarily property tax and income tax. That's a lot of money, and I am motivated to try to reduce the amount of tax I pay. I will be motivated to avoid or hide doing things to my property that will increase its tax evaluation, and I may be motivated to hire a good accountant in order to help me reduce my income tax. But it is hard to see how anything I do to reduce my tax bill makes the world a better place.
But now let's assume that the whole tax regime were changed. Let's assume that the taxes I pay are based on the energy I consume. The amount of tax I pay is the same, and the tax revenue to the government is the same. But the whole world has changed. If I now want to reduce the amount of my tax, I will be motivated to find ways of using less energy. And as I do that, the world becomes a better place, a healthier place.
In practice things would be a little more complicated. Were we to shift our tax burden from income and property to energy consumption, the tax burden would be re distributed. No doubt there would be winners and losers, and the losers would hurt. This would need to be taken into account. Some adjustments would be necessary.
But a lot of accountants would be looking for work. The administration of a carbon tax at the point of extraction or import would be a lot simpler to administer than our current tax structure.
A carbon tax is one form of a resource tax. The sooner our governments shift from the current taxes to a carbon tax, the healthier our planet will be. Perhaps our survival depends on it.
Eric Rempel
Thanks Eric. Interesting idea but I don't agree that energy consumption alone would be good public taxation policy. There are many things to consider in establishing tax policy. Healthy/active living, cultural/social contributions, responsible planning for education and retirement and housing, public safety, etc., and the taxpayers need to be provided with incentive for all of these things. However, I think I do agree that a carbon tax could be one part of good overall public taxation policy. I like taxation better than Cap & Trade which I think that will commodify Co2 emmissions, spawn all kinds of derivative trading, and will confuse and undermine the objectives of Cap & Trade. Let's keep the objectives clear and the outcomes measurable - I'm not confident Cap & Trade can do that. Taxation is easier to administer and measure.
ReplyDeleteHi Ron,
ReplyDeleteI think we agree. Sometimes 500 words does not let one say all one wants to say. It seems to taxation has 3 bases:
1) Raise funds to finance government projects. There is no relationship between the object taxed and the project. This is the most common approach to taxation. Often, but not always, there is some consideration of ability to pay.
2) Force the polluter to pay. This approach, in part underlies our alcohol and tobacco tax, as well as the tire and oil levies, but in truth it is weakly applied anywhere in the world.
3) Modify behavior, encouraging desirable behavior and discouraging undesirable behavior. This thinking also underlies the "sin" tax and the levies mentioned above. We also see little of this approach applied anywhere in the world. Where it is applied, it is to promote development, and the question of whether that development is good in terms of sustainability is not asked.
So if you want to add, to a resource tax, a tax that will encourage healthy/active living and public safety, I'm with you completely. However I can't, at this point, conceptualize a creative healthy living tax, whereas the carbon tax is, in my opinion, there waiting to be applied by a bold, forward thinking government of whatever stripe. Liberals may prefer a straight forward Carbon tax, Conservatives might prefer "Fee and Dividend". I am happy with either.