In 1998, shortly after Sightline (then, Northwest Environment Watch) published Tax Shift (pdf), Gordon Campbell, then BC’s opposition leader, invited me for a sit-down to discuss the book. He had read it and said he loved it. At the time, the New Democratic BC government was gearing up to do a pilot tax shift, inspired by the book. It was also about to be routed in provincial elections, to be replaced by Campbell’s Liberals.
Campbell said, “In our first term, we’re not going to shift taxes. We’re going to lower them. But in our second term, we might.” I didn’t put much stock in his words.
Maybe I should have.
Today’s Globe and Mail reports that Campbell’s Finance Minister Carole Taylor is seriously considering introducing North America’s first real carbon tax, paired with reduced income taxes. She calls it a “tax shift.”
But here’s a point worth mentioning—One of the benefits of tax shifting has been that you could target the worst taxes—the really regressive ones, like sales taxes—and replace them with taxes on pollution or resource consumption.One potential problem with this tax shift, though, is that it targets the income tax. I’m not one to defend the income tax—like every tax, it’s got its issues and problems. But in BC, it’s at least somewhat progressive: wealthier BC residents tend to pay a greater share of their income on income taxes than do the folks in the middle; and folks with relatively little income pay a tiny share of their income on the tax.So this particular tax shift may wind up quite regressive in its effects. Of course, it doesn’t have to be that way—if BC were to use carbon tax revenue to fund a refundable tax credit, the overall effect of the tax shift could be as progressive, or moreso, than the income tax. It just depends on how the rules are written. But unless those decisions are made well, this could be a bit of a mixed blessing.
Well said, Clark.A carbon tax could be offset with an income tax reduction on, say, everyone below the median income. That would mitigate the regressivity of carbon taxes.Or, better, a carbon tax’s proceeds could be distributed through a refundable income tax credit for every resident of the province—basically a flat, per-person dividend like Alaska oil dividends.The net effect of this latter option would be highly progressive, as you say.
Carole Taylor calls it a “tax shift” and I would call her a better “spinner” than shifter! The provincial election being only 1.5 years away, it seems the political spinnings are moving into overdrive. The NDP has finally jumped on the “no longer silent” bandwagon and seems to be supporting Metro Vancouver’s need for better transit and less roads. On a more current note I heard the new leader (?) of the provincial Green Party on CBC Radio yesterday. She suggested that while the Green Party sincerely know what the greenest path to saving the planet is, the Liberals, though sincere as well, are misguided and need to be re-educated on what must really be done to turn the tide on Global Warming. Her approach appears similar to our national Green Party leader Elizabeth May. Don’t have anything to do with the NDP, the Greens sworn enemy. Which is a shame, as it seems that on the surface the NDP and Greens have more in common with each other than either the Liberals or Conservatives.
I finally got around to reading your Tax Shift book, and really want to thank you for a job well done. Great writing, great thinking … the one thing I don’t understand is why these ideas aren’t more popular. Seems to me this could be a political winner …