The battle over the carbon tax rose to new heights on March 21 when the Conservatives, supported by calls from a majority of provincial premiers, failed to bring down the government with a non-confidence motion to stop the April 1 hike.
But, amid the political wrangling, what’s the bottom line on the carbon tax?
Most Canadians are likely familiar by now with Tory Leader Pierre Poilievre’s call to “axe the tax,” saying the charge is making people poorer. Provincial leaders also cite the affordability crisis when asking Ottawa to reconsider its policy.
But the Liberal government counters that most Canadians are getting more back in rebates and that dropping the tax would mean the end of these much-needed government cheques.
“The price on pollution delivers and our carbon rebates put more money in the pockets of 8 out of 10 Canadians,” Finance Minister Chrystia Freeland said when she appeared before the House of Commons finance committee on March 21.
The Conservatives have also used the “8 out of 10” figure cited by Ms. Freeland, but the other way around as they criticize the carbon tax.
Citing figures from the Parliamentary Budget Officer (PBO), Tory MPs say 80 percent of Canadian households are worse off financially because of the carbon tax. This led one Tory MP to challenge Ms. Freeland on whether she trusts the PBO.
“Do you have faith in the parliamentary budgeting officer?” asked Alberta MP Jasraj Singh Hallan, his party’s finance critic, during the March 21 committee meeting.
“Certainly,” Ms. Freeland replied.
PBO Analysis
In an interview with The Epoch Times, PBO Yves Giroux discussed the various claims made by the Liberals and the Conservatives on the carbon tax.He said the Liberals are right in claiming that about 80 percent of households get more back from the tax, though it varies by province. However, that’s only true when you consider the tax directly applied on fuel purchases, the tax indirectly paid when buying goods with an embedded energy component, and the GST on the tax, minus the rebate.
Mr. Giroux said, in that sense, Canadians on a net basis do “benefit from the flows in and out of their pockets off the direct tax.”
Mr. Giroux said the carbon tax, like any tax, has an impact on the entire economy. It reduces economic activity in some sectors, such as oil and gas and transportation.
Mr. Giroux said that when taking into consideration the negative economic impacts, the 8 out of 10 figure, or 80 percent, is flipped the other way around.
“Once you take these into account, then it’s the reverse 80 percent—about 80 percent of the households are worse off with the carbon tax than without,” he said.
‘Redistribution System’
While the carbon tax’s main objective is to encourage reduced hydrocarbons consumption by imposing a financial toll, Mr. Guilbeault also told CTV the tax was “exactly” designed as a wealth-redistribution scheme.“So the rich pay more for their carbon consumption and their carbon pollution, and we’re supporting, through the transition, middle-class Canadians and low-income Canadians,” he said.
Asked for his comment, Mr. Giroux said he doesn’t think the tax was designed to achieve that specific objective but can have that effect.
“The moment that you have a carbon tax that’s returned, or for which the proceeds are returned to households, on an equal per capita basis, it can be akin to a redistributed system, but not purely redistributed,” he said.
This is because higher-income households, which tend to have bigger houses or may drive more, might not necessarily pay more taxes, Mr. Giroux said. They might live downtown and walk to work, or reside in luxury condos that don’t require much fossil fuels to heat, and thus would not pay much in carbon taxes. He said lower-income families that live in poorly insulated houses or that may need to drive long distances to work might end up paying more.
“It’s true that overall, on average, it tends to redistribute incomes from higher-income households to lower-income households. But it’s not true in all situations,” said the PBO.
The study concluded that the scheme has led to only a 0.3 percent rise in the price of food, and a 0.2 percent rise in the price of clothing. It said eliminating the tax won’t result in major savings.
April 1 Hike
The carbon tax hike from $65 per tonne to $85 per tonne on April 1, a rise of 23 percent, represents an increase of about 3 cents per litre of gasoline and 4 cents per litre of diesel in provinces where it applies. By 2030, the tax would add over 37 cents to a litre of gas.That’s if the Liberals are still in power. While the Conservatives have not yet been effective at changing that policy, facing a fully hostile House of Commons, their popularity has soared, with polls placing them easily in majority territory.
Amid an affordability crunch in recent years that have seen heightened inflation followed by higher interest rates, the Liberals appear to now be taking a political toll from the policy.
“We’ve heard clearly from Atlantic Canadians through our amazing Atlantic MPs that since the federal pollution price came into force, … certain features of that pollution price needed adjusting to work for everyone,” said Prime Minister Justin Trudeau in announcing the pause on Oct. 26, 2023.
He also accused his political critics of being “short-term” thinkers.
