June 9, 2008

Conservative Attack Ads Help James

Carole James should pay careful attention to the latest attack ads launched by the Conservative Party of Canada which take direct aim at Dion's promised carbon tax. Unlike Gordon Campbell's carbon tax, Dion has yet to flesh out the details of his proposal. Nevertheless, the Tory ad says: "Have you heard about Stéphane Dion's tax trick? It's a permanent new carbon tax that would drive up the price of everything: gas, electricity, you name it. Better not fall for this trick!" Just in case the ad campaign isn't getting enough attention, Dion raised it in question period and posted a response on the party's website saying: "Liberals have repeatedly stressed that the Liberal Plan will be revenue-neutral and no new tax will be imposed on gasoline." You can't say that about Gordon Campbell's carbon tax.

On July 1st the carbon tax, rammed through the legislature after closure was used to cut off debate, will increase gas by 2.41 ¢/L, but it doesn't stop there. That's just the teaser to get the tax in the door. Bill 37 (2008: Carbon Tax Act) provides annual increases in the tax through 2012, when it rises to 7.23 ¢/L, and a section requiring three year carbon tax plans for further increases after that.

The Tory ads are focused on southern Ontario. It will be interesting to see if they are placed in the BC market (besides the Internet), or if Harper will try to play nice with Campbell by sending different messages to different parts of the country. Surely, if their characterization of the Dion carbon tax is anywhere close to the truth, then the Harper Conservatives must also join hands with the BC New Democrats and condemn Campbell's tax.

BC's Bill 37 defines the carbon tax as revenue neutral "if the dollar amount of the carbon tax collected in a fiscal year is less than or equal to the estimated dollar amount of the reduction in Provincial revenues in the same fiscal year as a result of revenue measures." In other words, Campbell could give another big corporate tax cut and as long as the tax grab from the carbon tax was less than the corporate tax cut, the carbon tax would be revenue neutral even though it involved a massive shift in who pays how much tax. The tax shift in the first year of Campbell's carbon tax is not that blatant, but families in the north already know that they are on the short end of the stick, and schools, hospitals, municipalities and others know that they will pay more with no offsets to make the tax neutral for them.

The idea of the carbon tax comes from economics 101; make energy more expensive so people use less of it. The reliance on the price mechanism has problems beyond the question of fairness. It might not have much effect on greenhouse gas emissions until people are really hurt. Decreasing the amount of something that is consumed by raising the price depends on what economists call the elasticity of demand. If demand is relatively inelastic, a big price increase might have a small effect on the amount consumed. You can be sure that the Campbell government has no idea what the price elasticity is for the dozens of types of energy it is taxing with its carbon tax. The fight at the pumps is not based on esoteric arguments about price elasticity. The Harper government knows that politics works by getting right in the face of drivers by running ads right at the gas pump that criticize Dion's carbon tax. Carole James needs to take a lesson from those ads and let people know that she's not afraid of Campbell's cheering team at the Suzuki Foundation and elsewhere, and that she is on the side of BC families. She can click on the Conservatives website to see how to do it.