Monday, 25 July 2011

The HST in trouble: why do we hate consumption taxes?

In British Columbia, a referendum is being held on the Harmonized Sales Tax, or HST, which has boosted the effective sales tax on most goods and services in the province. The previous system of a Provincial Sales Tax (PST) and a federal Goods and Services Tax (GST) was a bit confusing, but lower.

There has been considerable grumbling about the way that the BC HST came to be, and in fact led to the resignation of Premier Gordon Campbell. But process concerns aside, most of the unhappiness over the HST is really about unhappiness with higher taxes. The next sentence might ordinarily be, "of course, nobody likes higher taxes." But why? Would taxpayers really prefer, for example, to see their government default rather than pay higher taxes? In the case of the absurd stubbornness of the Tea Party Republicans in the US, how many rich people -- say, households with more than $250,000 in gross income -- would actually object to higher taxes from repeal of the Bush tax cuts? Certainly, they be better off paying higher taxes than having their federal government default. But, I suppose, Tea Party activists would reply that the alternative is not default, but reduced spending.

But do we really want reduced spending? Do Americans know that the decades-old Reading is Fundamental literacy program, government spending that has leveraged private support, and costs the American taxpayer a measly $25 million per year, has been thrown under the bus? Are we really so adamant about getting rid of such government "waste"?

This is British Columbia, of course, and probably the childish theatrics of Washington DC do not extrapolate well to Victoria, BC. But undoubtedly the same anti-tax sentiment cuts across both Americans and British Columbians, and in both cases, cuts across political party lines. Much of the HST-bashing has been at the behest of the left BCNDP, as opposed to the right Tea Party. But there is a populism in both cases that plays to what I think is a pathology about taxes.

Public opinion polls generally ask voters to make false choices, like choosing between higher taxes and lower taxes. Because polls intrude upon the private time of respondents, the nuances of public policy choices are omitted, so the condition of lower taxes -- less government programs -- is omitted. And taxes are the most conspicuous targets of opportunistic politicians, because it is so easy to conceal the tradeoffs of paying taxes. Ask yourself this: if it was put to American voters whether they would be willing to pay 8 cents per year to continue Reading is Fundamental, would most Americans vote for it? Of course they would. Everybody loves programs, and everybody hates taxes.

The question I have for opponents of the HST is this: what exactly would you propose to make up for the lower government revenue? Would it be higher income taxes, or less government programs? And tax whom higher, or cut which government programs? Be specific. See? It's not simple, is it?

Friday, 22 July 2011

What do Tony Abbott and Carole James have in common?


Residents of my home province of British Columbia remember Carole James as the former leader of the British Columbia New Democratic Party, the opposition party now for over a decade. Her scowling, smug demeanor is believed widely enough to be a reason for the BCNDP's failure to return to power that she was ousted recently on favor of Adrian Dix. Of course, it could also just be the refusal of the feel-too-much-think-too-little BCNDP to grow up that has kept it from governing. It was Carole James at the helm of the BCNDP during which then-Premier (that's Canadian for "Governor") Gordon Campbell instituted the controversial BC carbon tax. Back to that in a moment.

Tony Abbott is the leader of Australia's opposition, the main threat to the government currently headed by Prime Minister Julia Gillard. The fact that his firebrand, feel-too-much-think-too-little conservatism makes him an implausible leader for Australia has given Gillard the political room to institute a carbon tax. It is true that Gillard needed to do something anyway because her Labour Party governs only with the cooperation of Australia's Green Party, and they have demanded that Gillard do something about climate change.

So the two major non-European carbon tax proposals of the last several years have been instituted when the opposition is weak. Notice also that in one case the opposition has been too far left -- the BCNDP -- and in the other case the opposition has been too far right -- Tony Abbott and his knaves.

Perhaps there is a correlation between extremism and opposition to carbon taxes. After all, conservative Canadian Prime Minister Stephen Harper and Canadian NDP leader Jack Layton have ganged up on Liberal party leaders that have proposed a federal carbon tax. Looks like centrism and pragmatism are so last decade in Canada.

Wednesday, 20 July 2011

American Electric Power IS the canary in the coal mine..

Used to an industry, coal mining, in which canaries were exploited for their sensitivity to dangerous air, it might be a little ironic to suggest that American Electric Power has become the canary in the most gaseous, noxious, and foul environment of all: climate debate.

Last week AEP announced it will abandon plans to capture carbon dioxide emitted from its relatively new (31 year-old) Mountaineer coal-fired power plant in West Virginia. Having already sunk $100 million private dollars into the CCS project, and expecting $334m more federal dollars, it was a surprise, and yet it wasn't a surprise that AEP backed off. The reason is that it gave up on a childish Congress coming up with any climate plan to price carbon, which CCS needs desperately to be economical.

AEP CEO Michael Morris, originally a lawyer, is one of the most forward-thinking power chiefs in the world. To turn around the biggest carbon dioxide-emitting firm in the world and make it approach the next century as if it will be a carbon-limited one, is like turning an aircraft carrier around on a dime. For the head of the company that could absorb the largest cost of all from carbon pricing to call for carbon pricing, is not just forward-thinking, it is, incredibly, the right thing. A puerile Congress could use someone like Morris.

Sunday, 10 July 2011

Australia's carbon tax -- go get 'em, Julia, we're right behind you....

Is it possible to feel sorry for a prime minister who, by most accounts, stabbed her colleague Kevin Rudd in the back to get her job? Well, yes, if you have a soft spot for anyone outside of Europe who proposes a carbon tax, which she has. The fact that she has run out of almost all other political options does detract a bit from the political courage of posting a carbon tax. She, after all, has promised the Green Party something on climate change, and cap-and-trade has already died a Kerry-Lieberman death in Australia.

Australia's A$23 per ton carbon tax is expected to generate about A$28 billion in revenue, about A$9 billion of which has already been earmarked for high-emitting and trade-exposed such as aluminum smelting, steel, and pulpmaking. Coal mining companies will get about A$1.3 billion. The tax level, already higher than historical trading prices in the European Union Emissions Trading System, is planned to rise by 2.5 percent per year, plus inflation, and switch into a cap-and-trade program in 2015 (I guess nobody is talking about that because too much can happen before then).

The volcanic politics of carbon taxes always makes for great politico-watching. A group called the Energy Collective reports that 8000 in Sydney and 10,000 people in Melbourne rallied in favour of the carbon tax, which is more than opposition leader Tony Abbott can claim. Actually, the world should thank Tony Abbott for being such an implausible leader, which is needed for Julia Gillard's move. Sound familiar? It was the then-nonexistence of a British Columbia NDP that gave then-Premier Gordon Campbell the room to maneuver to put in the BC carbon tax. Doesn't that tell us something? That children at both the extreme left and right have opposed the two significant carbon tax programs in the last three years.

Good luck, Julia. We're right behind you....