Maxime Bernier has split with the Conservative Party of Canada on the ground that they are morally corrupt, a mundane fact, applicable almost certainly to every political party in contention for power in the Western world. Still, by creating his own party, the People's Party of Canada, Bernier has an opportunity to add some fresh, and indeed important, ideas to the toxic stew of bad or idiotic policies that constitute the bedrock of mainstream politics in Canada. Tax policy is among the many areas of Canadian national policy in need of re-imagining, and the issue of the carbon tax provides an opportunity to undertake major tax reform.
Economists agree that carbon emissions reductions can be achieved most efficiently by means of a carbon tax. The carbon tax is unpopular, however, because it is seen as just one more government impost upon an already overtaxed populace. Bernier can, therefore, seize the initiative by committing to an overall revenue-neutral carbon tax achieved by raising the basic personal exemption to Federal income tax from $11,365 to $33,300, the latter amount being the median income from employment in Canada. Thus, at a stroke, the PPC would be committed to relieving 50% of the Canadian workforce of all Federal income tax.
In addition, the PPC should commit to paying every low-income worker an amount equal to 15% (the base Federal tax rate) of the difference between their earned annual income and $33,000. As a result of these measures every one of Canada's 18 million workers, whether they are of high or low income, would receive a benefit, either in cash or reduced Federal income tax, amounting to approximately $3,000.
Some will ask why the poor should pay no tax when they are the beneficiaries of many publicly funded services. But the answer to that is obvious: first, the poor do the shitty jobs while the rich reap the benefit of the labor of the poor, so why would one not expect those who are better off to pay most if not all of the taxes; second, even if they pay no Federal income tax, the poor will still pay a large proportion of their income in tax, including gas tax, provincial income and sales taxes, liquor tax, tobacco tax, and all the taxes imposed across the supply chain that must be reflected in the price of everything that a person buys.
As for the cost to the Federal treasury, it would be quite small. The tax reduction on the wages of low income earners would cost the Treasury approximately $27 billion a year, which would be more than covered by the anticipated carbon tax revenue of $35 billion a year. In addition there would be the cost of the tax reduction on the wages of high income earners, another $27 billion a year, leaving a deficit of $19 billion after factoring in the carbon tax revenue. That deficit could be covered, ideally, by cuts in Federal Government expenditure, or alternatively by a 2% increase in the GST, a consumption tax that is already rebated to those of low income.
As for the overall effect of the carbon tax on the Canadian economy, the potential downside is to expose home industry to unfair carbon-tax-free competition from abroad. That however can be avoided by imposing a countervailing duty on all goods from countries without a carbon tax, a trade barrier that would provide Canadian industry significant protection against the intense competition from the sweat-shop economies of the developing world. Also on the plus side, the cut to personal income tax would increase consumer spending and hence stimulate the economy.
Economists agree that carbon emissions reductions can be achieved most efficiently by means of a carbon tax. The carbon tax is unpopular, however, because it is seen as just one more government impost upon an already overtaxed populace. Bernier can, therefore, seize the initiative by committing to an overall revenue-neutral carbon tax achieved by raising the basic personal exemption to Federal income tax from $11,365 to $33,300, the latter amount being the median income from employment in Canada. Thus, at a stroke, the PPC would be committed to relieving 50% of the Canadian workforce of all Federal income tax.
In addition, the PPC should commit to paying every low-income worker an amount equal to 15% (the base Federal tax rate) of the difference between their earned annual income and $33,000. As a result of these measures every one of Canada's 18 million workers, whether they are of high or low income, would receive a benefit, either in cash or reduced Federal income tax, amounting to approximately $3,000.
Some will ask why the poor should pay no tax when they are the beneficiaries of many publicly funded services. But the answer to that is obvious: first, the poor do the shitty jobs while the rich reap the benefit of the labor of the poor, so why would one not expect those who are better off to pay most if not all of the taxes; second, even if they pay no Federal income tax, the poor will still pay a large proportion of their income in tax, including gas tax, provincial income and sales taxes, liquor tax, tobacco tax, and all the taxes imposed across the supply chain that must be reflected in the price of everything that a person buys.
As for the cost to the Federal treasury, it would be quite small. The tax reduction on the wages of low income earners would cost the Treasury approximately $27 billion a year, which would be more than covered by the anticipated carbon tax revenue of $35 billion a year. In addition there would be the cost of the tax reduction on the wages of high income earners, another $27 billion a year, leaving a deficit of $19 billion after factoring in the carbon tax revenue. That deficit could be covered, ideally, by cuts in Federal Government expenditure, or alternatively by a 2% increase in the GST, a consumption tax that is already rebated to those of low income.
As for the overall effect of the carbon tax on the Canadian economy, the potential downside is to expose home industry to unfair carbon-tax-free competition from abroad. That however can be avoided by imposing a countervailing duty on all goods from countries without a carbon tax, a trade barrier that would provide Canadian industry significant protection against the intense competition from the sweat-shop economies of the developing world. Also on the plus side, the cut to personal income tax would increase consumer spending and hence stimulate the economy.
Excellent ideas, but I remember similar ideas being proposed, in Canada and other countries, in the 1980s and all the movement has been in the exact opposite direction. I think now that we are riding this train to the end of the line.
ReplyDeleteIncidentally, the tariffs or fines on carbon cheating countries, I would add in countries that brutalize their work forces, is another source of revenue to the government that would offset personal income tax cuts on both high and low earners. Actually the personal income tax was brought in originally to replace tariffs.
Yes, a sweatshop tariff is an excellent idea. The name conveys what few might otherwise understand, that buying cheap stuff from China or wherever, is great except it puts your neighbor out of work and reduces Canada to its late Nineteenth Century condition as a mere "hewer of wood and drawer of water" plus a producer of icky black stuff.
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