News from British and Canadian Conservatives

Tuesday, September 09, 2008

Green Taxes still don't add up

Liberals on both side of the Atlantic keep banging on about their plans to shift the tax burden towards Green issues, but still don't make any attempt to answer the basic questions about the policy. Is it any wonder that the Canadian Conservatives are currently running ads branding the Liberals as a gamble that isn't worth the risk?

Some questions that need answering:

1) The price of oil and gas has surged in the last couple of years, without any apparent reduction in the use of cars. So why is it that an extra 7 cents on a litre of gas will make the slightest difference to oil consumption and save the environment?

2) Even if the Green Shift policies did work and lead to reduced demand for fossil fuels, where won't that mean that the figures no longer add up? The whole basis of the Green Shift is that taxes on goods and services which are bad for the environment will rise, with those increases offset by reductions in income tax. If the new taxes really do lead to a reduction in demand, a simple glance at a Laffer Curve will demonstrate that tax revenues will decline, meaning that the money to pay for the income tax cuts simply wouldn't materialise.

I think that those who advocate the Green Shift as an environmental policy have a fundamental misunderstanding of the world today, economics and basic human psychology. The idea that raising tax on fuel means that people use it less assumes that people have alternatives and are able to stop using oil, gas etc. That simply isn't the case. Most people are thoroughly dependant upon cars, often to get to work. Therefore, raising the cost of motoring won't mean that they use less gas. Instead, they will be forced to cut expenditure on other items. That may mean making the old car last a bit longer before replacing it with a newer, more fuel efficient model. Or maybe downgrading from the organic corn fed free range chicken to factory farmed hens, leading to greater use of polluting chemicals.

Environmental Issues suffer from the problem of a little knowledge being dangerous in the wrong hands. Calgary City Council is a prime offender on that one. Other times, Green issues are used by certain politicians as a cynical ploy to raise taxes and get away with it. Sadly, I think that the Liberals fall into the second camp.

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