A Green Party initiative to shift taxes towards environmental goals would most likely hit low-income families the hardest, economists said, especially if governments decide to go ahead with reducing income tax and increasing energy consumption taxes.
At a public forum held recently at the St. Lawrence Centre, panelists debated the pros and cons of such a tax shift.
The Green Party website explains that the new tax hopes to reduce emissions by shifting the tax burden on to energy consumption, from income tax. It assures that this tax does not mean additional income for the government, calling it “revenue neutral,” because the money collected would be returned to taxpayers. Other taxes may be reduced or the government will directly pay the taxpayers.
The panelists included founding editor of Corporate Knights magazine, Toby Heaps; CEO of Carbonzero, Katherine Holloway; research director for C.D. Howe Institute, Finn Poschmann; and research associate for the Canadian Center for Policy Alternatives, Hugh MacKenzie.
Despite heated debate, the panel managed to agree that low-income families would be paying the highest price if the government were to implement a tax shift because those families spend a larger proportion of their income on energy bills, as compared to high-income families.
The disproportion would warrant some sort of tax rebate. Heaps said that for many families it’s currently a question of whether to eat or whether to heat their apartments. This rebate would provide a good solution, he said.
“Half of the tax money collected should be given to low-income families to provide them rebates,” Heaps said.
In British Columbia, after the provincial government implemented a carbon tax, they sent $100 cheques to all the people in B.C. as a rebate.
Besides the rebates, the tax shift could create jobs, said Holloway, whose Carbonzero organization supports carbon off-setting and fighting against global warming.
“There would be more employment because corporations could maximize labour and minimize the use of resources, creating jobs,” Holloway said.
Heaps agreed. “Union jobs are being decimated everyday because we’re not riding into the 21st century economy. It’s exuberantly irrational to continue this way economically.”
Heaps said he wants to see half the money going back to the poor and the other half go into retooling the economy. However the C.D. Howe’s Poschmann said that this would never happen.
“Governments are mean and stupid and they have a veracious appetite for money,” Poschmann said. “They are addicted to revenue.”
Poschmann said that if the income tax shifted to an energy consumption tax, then taxes on other things would have to increase to compensate for the goods and services that the city needs.
The Canadian Center for Policy Alternatives’ MacKenzie said that what seems like a sensible policy can do damaging things.
“The green tax shift makes us lose sight of why we have taxes – to raise money for public services, not to influence behaviour. We’d be taxing bads, not goods,” MacKenzie said.
However, Heaps said that the government needs to earmark the budget so that it gives back to low-income families.
Both British Columbia and Quebec have effectively implemented such carbon taxes.