鈥淧retty amazing.鈥濃�淔labbergasting.鈥濃�淭his is quite jaw-dropping for us.鈥�
Those were some of the offhand reactions from Oregon state legislators on Wednesday after Environment Minister Terry Lake briefed them on sa国际传媒鈥檚 carbon tax.
The subtitle of his address could have been: 鈥淗ow to hike taxes on gas, win an election by suckering the Opposition, secure the green vote and not crater the economy.鈥�
Lake addressed legislators in Salem, Oregon, about sa国际传媒鈥檚 five-year experience with the carbon tax.
It was imposed incrementally starting in 2008 and just reached its final level last summer, which is seven cents a litre on gas and corresponding amounts on all other fossil fuels.
State politicians appeared fascinated that someone could hike gas taxes by about 26 cents a U.S. gallon and live to tell the tale.
鈥淚t sounds like a lot,鈥� said Lake. 鈥淏ut gas prices change in a week by that amount. People still like to blame us for increases, but there are other factors.鈥�
The simple secret to getting it done is the revenue neutrality. That鈥檚 the legislated requirement that all revenue from the carbon tax be offset by corresponding reductions in personal and corporate taxes.
鈥淲e鈥檙e taxing things we don鈥檛 want 鈥� carbon pollution 鈥� and reducing tax on the things we do want 鈥� jobs and success,鈥� said Lake.
The government reviewed the tax over the past year and came out with some startling findings.
It claims a 64 per cent approval rating for the tax, based on one poll.
More importantly, the study found that fuel use in sa国际传媒 has declined, with no appreciable impact on the economy. Everywhere else in sa国际传媒, fuel use dropped after the 2008 economic meltdown, then bumped up again over the past few years. In sa国际传媒, it continued to drop even with moderate growth and increasing population.
鈥淭here is something going on in sa国际传媒 that isn鈥檛 going on in the rest of sa国际传媒,鈥� said Lake.
Apart from the neutrality, the other trick to getting it done was distributing the offsetting tax breaks properly, between business and individuals, and protecting low-income earners.
In the first year, two-thirds of the value of the tax cuts went to individuals. It鈥檚 swung the other way, and this year businesses will get $829 million in tax cuts to make up for the carbon tax, while families get $546 million.
The total cuts ($1.4 billion) are still more than the carbon-tax revenue ($1.2 billion), so it鈥檚 actually revenue-negative for government.
It was introduced with minimal consultation nine months before an election.
The New Democrat Opposition came out against the tax, and Lake said: 鈥淚n many ways it cost them the election. Environmental groups stood up and voted for us. It stood the test of the electorate.鈥�
sa国际传媒 Liberals are committed to standing pat with the carbon tax. But NDP leader Adrian Dix has some changes in mind.
He鈥檚 committed to dedicating carbon tax revenue to public transit in sa国际传媒 Cities have an insatiable appetite for transit funds, particularly Metro Vancouver. So the idea is appealing.
But if that leaves the impression that $1.2 billion in new carbon-tax revenue will flow to transit and green initiatives under an NDP government, it鈥檚 a mistaken one.
Because there are no carbon-tax revenues. The carbon tax system brings zero dollars to the treasury, because of the revenue neutrality.
Dix always delinks his other public tax idea 鈥� raising corporate taxes back up to 2008 levels.
But it鈥檚 directly related to his carbon tax-for-transit idea. Because that鈥檚 the only place from which the money could flow. The corporate tax hike would wipe out carbon-tax neutrality as far as business is concerned.
But that doesn鈥檛 mean the $829 million in business offsets would go to transit and green initiatives.
The corporate tax change is just over half that: $450 million this year.
There are a handful of other business tax breaks lumped together as offsets that add up to the remainder. Those aren鈥檛 on the table.
The NDP now supports the carbon tax. But the question is whether it can survive, if revenue neutrality is abandoned.
