Taxation and the middle class

[ijmorlan]

The poorer the person, and therefore the less gasoline etc. they are likely to be able to afford, the less they pay in tax; but they still get the same cash grant so they come out ahead. Note that this is way better than rations and other clumsy mechanisms because it leaves the choice of exactly how much to consume in the hands of the individual.

The problem with the rebate system, and the carbon tax, is that it *does* affect poor people more. And here's why: they get a larger tax return -- and this occurs only once a year. With that money, they're not saving it to pay for carbon taxes and using the rest for whatever. They're spending that money right away, perhaps on thing they don't need, like a larger screen TV. They don't save it, though. So what winds up happening is that these people are more broke 11 months out of 12, and in that 12th month, they behave like someone with money.

I think it would have been better if the rebate was monthly, or perhaps quarterly with the GST payment.

As for the ones that are poor, they still have heat their homes, and pay for transportation, and anything related to transportation, and therefore are the least likely to afford it, as I truly don't believe for a microsecond that these carbon taxes are revenue neutral once everything is factored in. Not only that, the Liberals have already decided to reduce the amount that residents in provinces would be getting back from their initial promise.

What I would prefer to see: higher taxes on large vehicles at point of sale, surcharges on destinies where flights/cruise ships are used. Getting meaningful carbon tax dollars on discretionary spending, not on essential spending. If you can afford a $10,000 cruise every year, you can afford the taxes, though I do see how this would be next to impossible to implement.

The point about the rebate being yearly is very good. From a political point of view, also, it would probably have been better to add it into the Canada Child Benefit payments. Then people would see the carbon tax money coming back, and would have it every month. As it is, everybody just got a slightly larger tax refund (or smaller amount owing) than previously. I agree entirely that paying more through the year and then getting it back at the end of the year is not conducive to good cash flow, especially for those at the lower end of the economic spectrum.

Re: your last paragraph, this is exactly the kind of complicated nonsense that we should be moving away from. It’s easy to say “higher taxes on large vehicles”, but now you have to define “large”. Then somebody says “but I need it for my farming” so you put in an exemption. Then somebody else points out that there is obviously no way to move their large family so you put in an exemption for families with at least 4 kids. Then somebody else says they only have 3 kids but one of them is in a wheelchair. And so on and so on forever. Pretty soon your carbon strategy is as simple as, and works about as well as, municipal land use zoning.

By contrast, a carbon tax simply imposes an estimate of the true cost of burning oil on doing so. If particular activities are worthy of subsidy (e.g., carrying wheelchairs for kids who need them), they should be subsidized separately, regardless of whether the expense is related to the carbon tax or not.

Also, I don’t believe in any exemptions whatsoever. What I mean by this is, for example, that the choice of whether to live in rural Ontario or in downtown Toronto is a personal choice, so the rural dweller should get no special carbon tax consideration; the fact that they are now paying the full price of (I suppose) burning more fuel because they live outside the city is just another factor in how they choose to live their life. Similarly, farms should get no special breaks. Farms are businesses, and if they’re only economically viable if they get to pollute for free, then they’re not really economically viable and should shut down (or find a way to modify their operations).