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Mark Cameron: Brown's carbon tax a win-win
Saturday, 2 December 2017 - 10:30am
BY MARK CAMERON, Special to the Toronto Sun
Patrick Brown’s new platform has been said by some to represent a shift to the centre or left for the Ontario Progressive Conservatives.
But at its heart it’s a textbook piece of conservative economics – a revenue neutral carbon tax that cuts taxes on work and wages while increasing the cost of greenhouse gas emissions.
Brown would eliminate Ontario’s complex cap and trade regime, and its $1.9 billion per year in spending on various environmental programs.
He would replace this with the federal government’s benchmark carbon tax, and use all revenues from the carbon tax to sharply reduce other taxes.
Brown’s plan is the purest example of a revenue neutral tax since British Columbia’s Gordon Campbell pioneered the concept in 2008.
Naturally, there are questions. Will it really reduce emissions? Is it truly revenue neutral? Will it hurt lower and middle income households? Will it harm Ontario’s economy? So let’s answer them one by one.
To assess emissions reductions, environmental economist Dave Sawyer of EnviroEconomics forecasted Ontario’s emissions under both the current cap and trade system and the federal backstop. The forecast shows a $50 per tonne carbon tax would reduce emissions in Ontario by 11 megatons in 2022 – six megatons more than cap and trade.
Brown promises his plan will be revenue neutral. That is, it will reduce other taxes by at least as much as the carbon tax will bring in.
The PC platform’s numbers (vetted by former parliamentary budget officer Kevin Page) appear to add up.
Most of the $12.3 billion in tax cuts over four years would be paid for with $10.3 billion in carbon revenue – the plan would cut taxes by more than it brings in.
The largest measures are broad based tax reductions going to almost all households and businesses in Ontario.
The two lowest provincial income tax rates would be cut by 10% and 22.5%.
The Ontario Sales Tax Credit will increase by $100 to help lower income households.
Ontario’s small business tax rate will be cut from 3.5% to 2.5%.
These broad based tax measures amount to $10.3 billion, the same amount carbon revenues would bring in.
There are also $2 billion in tax cuts targeted to specific groups – ranging from a tax break of up to 75% for child care expenses, doubling the caregivers’ tax credit, tax relief for the carbon intensive greenhouse industry, even a tax credit for buying snow tires.
Canadians for Clean Prosperity prefers to see carbon taxes offset by broad based tax cuts that help all taxpayers, but fortunately these “boutique” tax credits are a smaller part of the tax reductions and the plan would be revenue neutral even without them.
Brown wisely promised that the Ontario auditor general will verify that every dollar collected in carbon tax is returned to households and businesses as tax cuts.
Some are concerned carbon taxes hurt lower and middle income families who pay a higher proportion of their income for gasoline or home heating.
But the PC plan gives its biggest tax breaks to lower income households.
An analysis by economist Trevor Tombe showed the benefits are distributed across income groups with the lowest income households getting the largest boost.
The PC plan protects Ontario’s industrial competitiveness by adopting output based allocations for large industrial emitters.
his means that industries like cement or steel will receive rebates on their tax bill for meeting emissions performance standards.
This means Ontario’s large industries won’t be at a disadvantage compared to US or Asian competitors.
The PC’s carbon tax swap is a win-win for the environment and the economy.
The carbon tax will reduce Ontario’s emissions more than cap and trade.
Returning every dollar as tax cuts provides relief to households and businesses from increased energy costs and will boost consumer spending.
An output based approach for large emitters will keep Ontario industries competitive.
Political strategists will debate whether Brown’s platform is more progressive than conservative.
But whether it’s right, left or centrist, cutting taxes on the things we want – like work and income – by increasing taxes on things we don’t want – like carbon emissions – is simply smart.
— Cameron is the executive director of Canadians for Clean Prosperity