Revenue-neutral carbon tax is not a fairy tale
There is a conservative position on climate change whose chief opponents are other conservatives. It is to tax carbon, not on top of existing programs for reducing emissions, as those on the left would do, but as a replacement for them — and not on top of existing taxes but as a replacement for them. This is the proposal Michael Chong has put before the Conservative party, but the same approach has been suggested by a number of other prominent conservatives.
Nevertheless the idea has been heavily criticized by Chong’s rivals in the Conservative leadership race. Their objections range from the scientifically dubious (climate change isn’t human-caused) to the economically illiterate (prices don’t affect behaviour). But the crowd-pleaser is simply to dismiss the whole premise of the exercise: that any revenues raised would be given back in tax cuts, or in other words that it would be “revenue neutral.”
No less an authority than Kevin O’Leary denounces the idea as “B.S.” Andrew Scheer recites a convoluted story involving Santa Claus and the tooth fairy, while Steven Blaney is content with the logically unassailable “a tax is a tax is a tax.” All rely heavily on eye-rolling appeals to what “everybody knows,” time-honoured slogan of the clued-in and the wised-up. As in: everybody knows there’s no such thing as a revenue-neutral tax reform.
This would be at least conventional, if the politicians in question were in another party: if Conservatives were warning the public that Liberals could not be trusted to bring in one tax without cutting another. It’s somewhat bizarre to hear Conservatives say that of themselves. Surely it would be within the Conservatives’ power to decide whether such a tax were revenue neutral or not. The logic of their position is not only that Chong is lying, but that if he were elected leader, the party would be powerless to pursue any other course.
I can’t think they mean revenue neutrality is impossible: it’s a simple enough matter to cut taxes — simpler, and more popular, than imposing new ones. So instead they must mean it is unlikely. And the evidence for that, presumably, is that it has not been so in similar situations in the past. Why, remember when the GST was brought in — by the Tories, if memory serves — how it was supposed to be “revenue neutral.” How did that turn out, huh?
Andrew Coyne: Revenue-neutral carbon tax is not a fairy tale | National Post