Carbon Taxes Slammed

Promises of revenue neutrality don’t survive contact with the real world.
Promises of revenue neutrality don’t survive contact with the real world.

Hey America,

It’s Canada, your friendly neighbor to the north. You might remember us — there’s a big white wall between our properties. But only in winter.

Anyway, we couldn’t help but notice you seem to be having a bit of bother over carbon taxes these days. At the risk of intruding, we thought we might offer a few neighborly observations. You see, we’ve had the same issue in our house for a few years now.

On your side of the fence, the Climate Leadership Council’s plan — recently backed by 27 Nobel Prize–winning economists and other economic luminaries — calls for a nationwide tax starting at $40 a ton on carbon dioxide emissions, on efficiency grounds. (All figures in U.S. dollars.) It vows that “the majority of American families . . . will benefit financially by receiving more in ‘carbon dividends’ than they pay in increased energy prices.” A tax that pays you sure sounds appealing! But a word of caution: If it sounds too good to be true, it probably is. Up here in Canada, we’ve been burned by the same promise.

Back in 2008, the province of British Columbia similarly proposed a carbon tax in the interests of economic efficiency and as a way to reduce greenhouse gases. The government promised that “every dollar raised will be returned to the people of B.C. in the form of lower taxes.” And for the first few years, it was true to its word. Tax revenue from the carbon tax was used to lower personal and corporate income-tax rates — and economists everywhere lauded the concept. A joint study by Duke University and the University of Ottawa declared B.C.’s plan to be “textbook policy.” Then politics happened.


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