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April 28, 2019

The Canadian Carbon Tax: Trudeau's unfair tax

The Canadian Charger

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Making people pay more for energy to reduce consumption and to encourage conservation is a good idea but it is important that the costs are shared in an equitable fashion and that the poor and middle-class Canadians do not pay more than their fair share.

Prime Minister Trudeau promised the carbon tax revenues would be returned to many households through various rebates. One key component of the federal carbon tax is that it’s supposed to be revenue-neutral. All the taxed money will be distributed back to the provinces from which they were generated. The provinces will in turn rebate about 90% the revenues back to individual taxpayers. The rebates are anticipated to exceed the increased energy costs for about 70% of Canadian households.

But the new carbon tax will increase the price of anything that uses fossil fuels.

The heaviest burden for climate change regulation costs falls on people – especially low-income groups – and not corporations because corporations ultimately pass on those costs to people. Because carbon tax will raise the price of fuel required to grow and transport our food, grocery bills will rise too.

While everyone will pay, poor households spend a third more of their incomes on fuel, heat and groceries than rich households.

Higher income people spend proportionately more of their income on services, which usually have lower than average carbon emissions per unit of output.

Due to the increased cost of living associated with the carbon tax, lower income people will have to make hard choices between the cost of transportation methods to and from work and school, heating their homes and providing their children with tutoring or enrolling them in extracurricular activities such as hockey. And will they have the money required to maintain their homes in good condition to save on heating bills?

In 2016, Canada's Fraser Institute measured energy poverty in Canada and found that when you add up the costs to power the home and cars, 19.4 per cent of Canadian households devoted at least 10 per cent or more of their expenditures to energy.

Annually, the carbon tax will cost $1028 per person or $4112 for the average family of four, according to the Canadian Taxpayers Federation.

If Prime Minister Trudeau was as concerned about average Canadians as he so often claims to be, why wouldn't he make carbon tax a percentage of income tax as a way to make carbon tax fairer?

He could also follow the example of Malaysia, which puts the carbon tax only on luxury and fuel hungry cars. The service centers have AI cameras which photograph the cars and determine the price of gas according to the model of car, so owners of certain cars pay more.

Why didn't Prime Minister Trudeau also increase the carbon tax on second and third cars in one home when many Canadians have to take public transit?

The federal carbon pollution price will start low at $20 per ton in 2019, rising at $10 per ton per year until reaching $50 per ton in 2022.

For example, a Manitoba family will receive a $336 rebate in 2019 compared to its increased costs of $232. A similar family in Saskatchewan will receive $598 compared to its higher costs of $403. In Ontario, families will receive $300 to offset its $244 in carbon taxes. And in New Brunswick a $248 rebate more than offsets the average household cost of $202. The rebates will more than double by 2022 as the carbon tax rises, and the net financial benefit to households will grown over time.

The amounts vary from province to province because each jurisdiction relies on different amounts of fossil fuels, meaning there will be more or less revenue per person generated from the tax. The payments in each province − which will increase as the price per tonne rises − will be based on the number of people in a household and paid to one tax-filer.

Meanwhile, the industrial sector is responsible for the most carbon pollution – 40 per cent by some estimates – yet these companies will not be subjected to the carbon tax, but rather to an Output-Based Allocations system (similar to cap and trade). This means industrial emitters will be covered by a different system and will be taxed on a portion of their emissions, based on how efficient they are relative to industry peers. This is meant to protect industrial competitiveness while still providing an incentive for companies to reduce emissions.

Moreover, it depends on whose statistics one is to believe in determining the actual cost of the Canadian government's carbon tax. Using Stats Canada data on household energy consumption, University of Calgary economist Jennifer Winter calculated the cost of carbon tax to an average family in Alberta of $1,111, in Saskatchewan of $1,032 and in Ontario of $707.

Prime Minister Trudeau promised the carbon tax revenues would be returned to many households through various rebates, but people are worried about an increase in gasoline and heating bills and the higher price of everything.

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