Friday, May 16, 2008

Carbon tax without taxing gas

The Liberals have been a proponent on the need to lower corporate taxes even further. The current budget they allowed to pass combined with a slowing economy leaves no room for further tax cuts or new major government spending programs. Reversing Conservative tax cuts or creating new revenue streams would be necessary for the Liberals to enact their vision for the future. The Liberals have been harshly criticized in recent days on plans to add a carbon tax in the form increasing the gas tax.

The Liberals announced on Thursday that it is their intention to either implement a carbon tax or a cap and trade system. They promised they will not be increasing the gas tax as part of the solution. The tax would be revenue neutral with the proceeds designed to help implement Liberal goals of tax cuts, fighting poverty and improving the environment.

Are the Liberals really going to put a cost on the price carbon without increasing the price at the gas pump? Are they simply going to create a new environment tax on fuel? In his Dion's speech today he gave great praise to Dalton McGuinty for his ability to manage the economy. Perhaps they will take a page from the Ontario Liberal playbook and simply call the tax a premium.

The merits of a carbon tax can be addressed at another time. The Liberal promise not to increase the gas tax is popular but seems to undermine the core of what they want to accomplish. It will be interesting to see how things get sorted out in the details.

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