The federal government’s plan to hike carbon taxes contradicts earlier assurances and will hinder economic recovery, say critics.
Prime Minister Justin Trudeau and several Liberal ministers made the surprise announcement on Dec. 11, a day after Trudeau met with the provincial premiers.
Philip Cross, senior fellow at the Macdonald-Laurier Institute, said it’s a bad time to announce tax hikes when Canada’s GDP is still below the pre-COVID level in February.
“We’re still in deep trouble economically. The last thing we need is a punitive hike in gasoline prices. And it wouldn’t just be gasoline prices—the carbon tax applies to all forms of fossil fuels,” Cross said in an interview.
“You already have many premiers of the country complaining about the CPP [Canada Pension Plan] premium hikes that are about to take effect in 2022. So just as the economy is struggling to recover from this massive shock in 2021, we start layering on various tax hikes.”
Cross said that the carbon tax increase “is going to be painful for a lot of people” but that reigning in the federal deficit might mean more tax increases.
“To put a dent in the $400 billion, you’re going to have to start talking about GST hikes or increases in the average personal tax rate for the middle class. That’s the only way you can deal with this,” he said.
As recently as mid-August, Trudeau insisted tax increases were not in the offing.
“No, the last thing Canadians need is to see a rise in taxes right now,” he told reporters at a press conference. “We have work to do and we are not going to be saddling Canadians with extra costs.”
The carbon tax will reach $50 per tonne by 2022 as originally scheduled, then increase by $15 per tonne per year until 2030. Canadians currently pay 2.3 cents per litre of carbon tax on gasoline, but this will rise to 39.6 cents per litre by 2030. Carbon taxes in provinces without their own emissions reductions plans will rise to $170 per tonne by 2030.
In a Twitter post on Dec. 11, Saskatchewan Premier Scott Moe said, “Justin Trudeau and Catherine McKenna lied to Canadians. Just before the last election they vowed that they would not raise the carbon tax.”
McKenna, then the environment minister, said in August 2019 that the federal government had “no intention” of increasing carbon taxes beyond $50 per tonne.
Moe vowed that Saskatchewan “will continue fighting this ineffective and unconstitutional carbon tax,” as it awaits a response from the Supreme Court of Canada on its legal challenge to the tax.
Current environment minister Jonathan Wilkinson insisted that the federal government would consult provinces before implementation of the proposal. He said a carbon tax is “by far the most economically efficient way to reduce emissions,” as quoted in a Dec. 11 article by the Regina Leader-Post.
Aaron Wudrick, federal director for the Canadian Taxpayers Federation, sees no evidence of austerity in the government’s approach.
“There’s absolutely nowhere that they’ve looked to save money,” he told The Epoch Times. “Government employees haven’t taken a dime in pay cuts. So you’ve got a government that loves to spend, but they literally can’t find anything in a half a trillion dollars of spending that they could save a dollar on.”
Wudrick called the carbon tax announcement a “stunning betrayal.”
“[They] just imposed a hike that’s going to see the carbon tax go up by 466 percent over the next 10 years. It’s really going to hurt us,” he said. “This is the absolute last thing people need right now.”
The federal plan includes a commitment to give rebates to residents of provinces where they’re collected. Current rebates vary between provinces and household sizes. Households can expect average rebates of $439 this year in Ontario and $883 in Saskatchewan, based on federal estimates.
Wudrick doubts the premise of rebates or that they will fully refund carbon taxes over the long term.
“It’s magic math with these guys—they tell [us] we’ll all be better off with the rebates. Well then, set the tax at a million dollars a ton and we’ll all get rich.”
Nelson Wiseman, a professor at the University of Toronto, said the Liberals are “playing to their base” with this policy announcement, even though they “really got hammered” in 2008 for a platform that called for carbon taxes.
“There’s going to be blowback in places like Ontario. In Western Canada, people who drive longer distances are unhappy,” he said. “People who use transit, though, it’s fine by them, and that’s why there’s more support for this … in the cities where the Liberals are strong.”
“I think it’ll become an issue in the next election,” he added.