An update on this.

Last week’s national elections in Canada were bad, but not horrible, news for supporters of carbon tax shifting. And they give me a little comfort about the provincial carbon tax shift already in place.

To review for our American readers, Stephane Dion, leader of the center-left federal Liberal Party (not the same political hue as the provincial Liberals), ran on a platform that included a proposal for a carbon tax shift. His plan was similar in its outlines (but not in all specifics) to that now implemented in British Columbia by Premier Gordon Campbell and his provincial center-right Liberal government. It would have levied a small but rising tax on fossil fuels (with rates on the fuels that varied in proportion to their climate impacts) and returned all the revenue to citizens and businesses through progressive reductions in income taxes. A classic tax shift.

The Liberals lost seats in the federal Parliament, especially in British Columbia, and the tax shift was one of the big issues in the campaign. So, clearly, the carbon tax isn’t as popular as I would have hoped in the province.

My three theories about why:

    1. Distrust of government. Opinion research in BC shows that many taxpayers do not believe their income tax reductions will compensate them for their carbon tax increases. Plenty of economic research shows they are mistaken, but taxpayers’ distrust of government prevents them from believing it. Worse, opportunistic politicians (such as the provincial New Democrats) can easily play on these fears
    2. Disbelief in Economics 101. Opinion research I saw in the late nineties from parts of the United States suggested that many citizens do not believe in the economic principle of “price elasticity of demand.” That is, they do not believe that when the price of energy goes up, people use less of it. (Whether the continent’s recent experience with high gas prices changed their minds, I do not know.) So the premise of tax shifting—make bad things more expensive but return the proceeds in economically equitable ways through tax reductions—just does not make sense to them.
    3. The Asymmetry of Losses and Gains. A bunch of economic and psychological research now shows that people are more averse to losses than they are pleased by gains. The $10 you lose is worth more to you than the $10 you gain. As a consequence, the carbon tax looms much larger in voters’ minds than the income tax rebate.

    Back to the politics: Clearly, Dion’s plan didn’t win him any votes. On the other hand, did it lose him any? Or many?

    Vancouver Sun analyst Don Cayo doesn’t think so.

    I tend to agree. The economic crisis and concerns about leadership styles ultimately decided the election. The carbon tax doesn’t seem to have mattered as much. The outcome of the race mirrored the distribution of the electorate in opinion polls taken before the race began and before Dion announced the carbon tax shift plan.

    The left-of-center New Democrats are attacking Gordon Campbell’s provincial carbon tax shift in the provincial elections, too. And polls show the attacks are making some difference. But ultimately, I am hopeful. (Certainly, more hopeful than Tyee commentator Tom Barrett.) Four reasons:

      1. The carbon tax has been in place now for almost four months and the impacts have been about what you’d expect: not much. It’s a slow-moving policy; that’s one of its key features. Fuel prices have dropped more from market forces in the past four months than the carbon tax raised them. By the time BC holds provincial elections, even more time will have passed. The sky won’t have fallen.
      2. The federal election’s focus on the carbon tax may have released some of the electorate’s angst.
      3. Other issues will seem much more important to voters as the economy falls off a cliff.
      4. The New Democrats’ frontal assault on the carbon tax, while it may have gained them support in some circles (especially rural voters, I understand), has undoubtedly lost them support among environment-minded voters. Many greens will likely peal off to the Liberals or the Green Party. Splitting the left helps Gordon Campbell stay in office, and helps preserve the carbon tax shift as provincial policy.

    So the good news is that I read last week’s federal vote tally as an electoral shrug on carbon taxes. Tyee editor David Beers does too. That’s not especially good news, but it’s not awful either. It’s not likely to attract a swarm of enterprising leaders to carbon tax shifting as a way to kickstart political careers. But it won’t completely scare them off, either.

    I suppose it’s another of the universe’s unfairnesses, considering tax shifting’s extraordinary merits as public policy. But so it goes. As Winston Churchill said, “Democracy is the worst form of government except for all those others that have been tried.”