Thursday, June 19, 2008

A green line in the sand

It's taken long enough -- too long in my personal opinion -- but finally, Stéphane Dion has finally drawn a line in the sand. And the line is coloured green. In most parts of the world, a "Green Line" is a formal or informal cease-fire line -- such as that which exists between Israel and the West Bank, the Turkish and Greek parts of Cyprus, the Muslim and Christian parts of Beirut, the Catholic and Protestant neighbourhoods of Belfast. However a first review of Dion's new plan which he is calling "The Green Shift" certainly impresses me, for the most part.

The plan puts a tax at the source of pollution -- the more one pollutes, the more one pays. That's as it should be. It also offers broad-based tax relief, with an across the board tax cut of between 1.5 for lower incomes to 3.5 percent for the middle class; recognizing that most higher incomes (below $122,000) can no longer be considered "rich" in this country. (I know quite a few two income families with a combined gross of over $100,000 and they certainly don't see themselves as wealthy in any sense of the phrase.)

It also gives relief to families (including a major boost in the Child Tax Benefit, which would go a long way towards meeting the Campaign 2000 goal of eliminating child poverty) and lower income seniors, as well as to people in rural areas and the Far North to recognize the higher costs of living relative to urban areas, something I've suggested for quite a long time. It also makes several non-refundable tax credits fully refundable; similar to what Québec has done at the provincial level for years.

I do have a couple of concerns. First, while gasoline won't be taxed any further (supposedly; oil companies can always pass on their costs in the wholesale price), diesel will go up 7 cents a litre. With truckers barely making it by as it is with oil hovering at $133 a barrel any income tax cuts they get will be eaten up by higher operating costs. We've already seen the effect with higher food prices -- stores can't be expected to absorb the costs on their own entirely.

Second, while the plan calls for increases in carbon taxes to be passed back to Canadians in the form of personal and corporate income taxes to be monitored by the Auditor General, it is not explained exactly how this will be done. Because our top accountant only monitors spending after the fact -- in some cases up to three years after -- there's no way of knowing whether we're being scammed at the front end or at the back if retailers decide to engage in some mischief.

To put it into some perspective, this proposal is in effect an accounting change as big as the conversion to the Euro currency; and while there were set exchange rates by the European Central Bank that did not stop some retailers across the board from rounding up to the next euro rather than using rounding up or down as called for. This continues to be an issue as more countries adopt the currency. Even if incidents of price gouging were few and far between, first impressions are very hard to eliminate when proof is offered.

Be that as it may, this is a significant change in thinking,and certainly if implemented the most important tax reform in twenty years. It will also make people think about their energy choices. It's the kind of thinking big and outside the box that we need and it's something I can certainly support.

One should not be surprised that PMS would come out swinging against this. He wants to protect the profits of Big Oil without a windfall tax -- something a carbon tax would address in a roundabout way. We can lead, follow or get out of the way. I prefer a leader than a follower.

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Anonymous said...

(supposedly; oil companies can always pass on their costs in the wholesale price)
That's what has happened in la belle province...

BlastFurnace said...

One notes that the carbon tax in Québec was supposed to be counterbalanced by the big income tax cut; but people do notice what comes out of the pocket and not in their paystub, and I don't think anyone really expected oil to hit the levels they did, the carbon tax there was designed for an $80 per barrel world.

And Gord Campbell is worried about the backlash when the carbon tax kicks in BC next month, which has also been offset by an income tax cut.

Still, I give Dion points for thinking big in the middle of an energy crisis. A leader tries to do what is right, not what's popular.