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Taxation Madness

January 3, 2019

The federal government carbon tax on business came into effect January 1. On April 1, it will be extended to consumers. The initial tax will be $20 per tonne, which translates to about 4.4 cents a litre at the gas pump.

In a news item about the tax, one commentator noted there is opposition to it. (Opposition? To a new tax? Who would have guessed?) The commentator also reported that 2019 is a federal election year, so the tax will become an election issue.

So far, business as usual. But what is mind-twisting about all of this is the reporter's final comment. He said Prime Minister Trudeau would have to convince opponents that "this is not a tax that will make Ottawa rich, but a rebate that will enrich Canadian households."

WHAT? A tax that will make us richer?

No matter what you think about the tax or its goals, claiming it will enrich those who have to pay it requires mental gymnastics that would make Cirque du Soleil proud. Is there anyone out there who doesn't grasp that a tax reduces personal wealth? Yes, the government intends, for now at least, to issue rebates to Canadian households, although how long that will last is uncertain. My guess is until after the election.

I'm no economist, but I'm still struggling to understand how taking money from me, then giving it back enriches me, unless they give me more than they take, in which case, just give me the difference and save the system costs. System costs? Unless we assume that all the people who collect the taxes, account for them, and disburse them are working for free in offices that don't cost money to run, the system itself will take a chunk of the tax revenue.

But let's assume the commentator was correct: that we live in some magical world where the tax enriches us. Then why stop at $20 a tonne? Why not $100 and make us even richer? Why not $1,000 a tonne? We can all retire early. Then when we stop having to drive to work, down go our carbon dioxide emissions. Win-win all around.

Now I can hear the objection that the tax is intended to induce us to reduce our "carbon footprint" and to lower CO2 emissions. Whether the tax will do this, or even whether this is desirable, are topics worth debating. But in the meantime, please feel free to dismiss any politician or commentator who justifies it by claiming it will make us richer as a charlatan.