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Adjust carbon tax to lift burden on poor, think-tank says

VANCOUVER — British Columbia’s controversial new carbon tax places an unfair burden on low-income families and needs to be reworked, according to a report released yesterday by the Canadian Centre for Policy Alternatives.

“B.C.’s carbon tax regime is progressive for the first year, although personal and corporate income-tax cuts lead to an undesirable net benefit for the top 20 per cent of households,” the report states. “But as the carbon tax increases, the current regime becomes regressive, a situation the B.C. government must rectify in its next and future budgets.”

Premier Gordon Campbell’s Liberal government introduced the first broad-based carbon tax in North America last summer when it set a levy of $10 per tonne on carbon dioxide equivalent, or 2.34 cents per litre of gasoline. With annual increases, the tax is to rise to $30 a tonne by 2012.

The policy – which has come under attack by the Opposition NDP as a “gas tax” that hurts consumers – is revenue neutral because of refunds to taxpayers through tax cuts and credits.

But the Canadian Centre for Policy Alternatives, a non-partisan research institute concerned with social and economic justice issues, says the policy needs to be changed if it is to be fair and effective.

It states that the carbon tax gives the bottom 20 per cent of low-income families an average net gain of $38 in the first year, but that will turn into a net loss of $47 by 2010-11.

By comparison, the top 20 per cent of high-income families will have an average net gain in the first year of $62 – and that will increase to a net gain of $311 by 2010-11.

The report says the tax becomes regressive for low-income families because a low-income credit is scheduled to increase by only 5 per cent in 2009, while the carbon tax increases by 50 per cent.

“Higher-income households will pay more tax in absolute dollars (because they consume more) but will pay a smaller share of that income to the tax,” the report states.

“If we project forward to 2012-13, these trends would worsen, and the carbon tax … would be clearly regressive, with the bottom [income-earning families] facing a net loss of 1 per cent of income.”

The co-authors, Marc Lee, senior economist for CCPA, and Toby Sanger, senior economist with the Canadian Union of Public Employees, said the result is doubly unfair as higher-income families “usually have a much larger carbon footprint … because of greater levels of consumption.”

The paper also states the government should abandon its decision to make the carbon tax revenue-neutral.

It argues half the revenues collected should be used to increase the low-income credit, relieving the burden on low- to middle-income families, while the other half should be used to fund transit expansion, energy efficiency and alternative technology.

The report, Is BC’s Carbon Tax Fair? An Impact Analysis for Different Income Levels, can be downloaded at:

By Mark Hume

Sourced From Globe and Mail


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