AHA! cried the voices of the right, in unison. Aha! At last, proof of what we’ve been saying all along – proof that the carbon tax is nothing more than a revenue grab, proof that when it said most households would receive more in the federal carbon tax rebate than they paid in the tax, the Liberal government was lying.
The occasion for all of this simultaneous exhalation of air was the release of a report by the Office of the Parliamentary Budget Officer: A Distributional Analysis of the Federal Fuel Charge under the 2030 Emissions Reduction Plan. According to a report by CTV, the study shows that, by 2030-31, “most households will see a net loss, despite the rebate payments offered by the federal government to offset the surcharge.”
It quotes the Parliamentary Budget Officer himself, Yves Giroux, in a statement accompanying the report: “Most households will pay more in fuel charges and GST …than they will receive in Climate Action Incentive payments.” The hapless federal Environment Minister, Steven Guilbeault, was even goaded into admitting as much on CTV’s Question Period. “On average, households will pay more,” he conceded.
Aha! said the editors of the Toronto Sun. Aha! said Rex Murphy in the National Post. It’s all just a “senseless money grab.” Just as we’ve been saying all along.
Only … that’s not what the study says. Far from refuting the government’s claim, in fact it confirms it. In six of the seven provinces where the federal carbon tax applies, the PBO estimates that, even at the $170 per tonne the tax will have reached by then (it was recently increased to $65 a tonne), 80 per cent of households will get back more in rebates than they pay in the tax. The only exception is Nova Scotia, where it is more like 50 per cent. But even in Nova Scotia, the average household is a net beneficiary.
(Wait, what about that sneaky GST you have to pay on the carbon tax – the tax on tax? Does that tip the balance? No: the PBO’s numbers include the GST.)
Whence all the ahas, then? Because the report finds that if you also include the economic impact of the tax (like almost any tax, it has some effect on economic activity), the combined effect will be to reduce household after-tax incomes slightly (1 or 2 per cent) over the next seven years. Not from what they are now, but from what they would have otherwise been – what they would have grown to by then.
Mind you, the losses will fall disproportionately, according to the PBO, on those earning above-average incomes. But still: the average household will see a net loss, or rather a smaller rise in their disposable income than they would otherwise.
Aha! Trudeau lied, people cried!
But that is to rebut a claim that was never made. It was never claimed that 80 per cent of households would see their incomes rise because of the tax – only that they would get all of the tax and more rebated back to them. As in fact they do, and will.
This government has enough actual lies on its record without inventing new ones. There is simply no construction of the facts that supports the “money grab” claim. Indeed, as long as we’re including economic impacts, it is worth noting that the PBO projects a net loss to the federal treasury, taking reduced income tax revenues into account, on the order of $7-billion annually, by the time the tax is fully phased in.
So the aha-ers are just as wrong as they ever were. But there’s a larger sense in which they are even wronger. To say that incomes will be lower “than they otherwise would have been” presumes an “otherwise” in which we do nothing – not only that the tax would not apply, but that nothing else would apply in its place. That scenario does not exist, and no one is proposing it.
The alternative to the carbon tax is not nothing, but something else – subsidies and regulations. And the cost of these, as every study shows – costs that are paid not by “the economy” or “the big polluters” but by households – is multiple times that of carbon pricing.
More to the point, under the alternatives, there are no rebates. Not only are the costs greater than under a carbon tax, but 100 per cent of them fall on households. The rebates are zero.
That’s the proper benchmark, in estimating the cost of the carbon tax: not against some fantasy do-nothing scenario, but against the likely alternatives. Which would have been a more useful, and far less misleading study than the one the PBO produced.