The Ecofiscal Commission and Polluter Pay
From iPolitics, here is my constructively critical take on the first discussion paper of the new Commission chaired by Chris Ragan. In a nutshell, polluter pay is a good idea, and it is good to see such a mainstream crowd endorse the principle, but the principle of recycling the increased revenues to personal and corporate income tax cuts is not such a good idea. In fact it is bad environmental policy because we need a strong fiscal base to fund subsidies and public investment to undertake major transitions.
Thanks Andrew for taking this on. This commission is a rerun of the CD Howe Institute approach that Stephane Dion picked up. Let carbon pricing replace policy debates and decisions about public transit, a national transportation company, nationalizing resources, refining petroleum in Alberta, retrofitting buildings, green municipal planning, and other measures which would change the way we live. Automatic mechanisms of self-correcting market pricing will save the planet? Hardly.
The principle of ability to pay gets replaced and then eliminated from income tax reform discussions which is why the ad hoc green approach is so popular with the corporate sector and its friends.
There are three kinds of green policy: fake green, regressive green and progressive green.
FAKE GREEN: bring in token carbon pricing to take the target off the backs of tarsands corporations so they can build more pipelines and export more bitumen. This is the stated policy of Trudeau Jr. It involves a huge moral hazard and externality: gambling with people’s future with the risk of dangerous and inevitable dilbit spills. As Stiglitz might say, people are subsidizing the tarsands’ goal to boost profits by upgrading and refining outside of Canada.
REGRESSIVE GREEN: the is neutral carbon pricing. As the neocon EcoFiscal think tank says: â€œEcoFiscal policies generate revenue that can reduce harmful taxesâ€; â€œWe need a better fiscal [read: tax] system, not bigger governmentâ€. Neocons once on board the climate science denial bandwagon now embrace Global Warming as a means to cut taxes for the rich.
The fact is the top 20% makes over 50% of the income and pays over 60% of the income taxes. They make most investment and corporate income and pay most of those taxes. So the lion share of any across-the-board tax cuts go into the offshore bank accounts of the insatiably-greedy rich.
EcoFiscal’s polluter pay model is geared towards gouging the middle class with consumption taxes. High water bills. High electricity bills. High road toll bills. Etc. Except for businesses who will pay a discounted rate to “remain competitive.” This neocon approach is to make everything a scarcity. It will significantly raise inequality, hollow out the middle class and kill democracy.
PROGRESSIVE GREEN: This is big democratic government green that will get the job done right. Like Republican president Dwight Eisenhower who raised taxes on the rich to 90% to pay for an interstate highway system. We need big government investments in green energy paid for (subsidized) by taxpayers not ratepayers. The goal is to get people to use the electricity grid, which becomes greener, as an alternative to dirty energy.
Big government investments are also required in mass transit, home retrofits, electric car rebates, and ultra-high-speed internet (wired and wireless) that will reduce high-energy consumption travel.
Big government progressive green takes a proactive approach rather than waiting forever for fickle market forces to transform society. It brings back progressive taxation, redistributes wealth, invests in human capital and physical infrastructure, lowers inequality and restores democracy.
Small government is the problem. Returning to the democratic economy of the post-war Keynesian era â€” with a focus on green â€” is the tried-and-true solution.
A carbon tax can be made progressive by returning revinues equally to each person.
It can be made more progressive and raise revinue for the government by making that returned revinue taxable as income tax.
I like big government, but dealing with global warming is too big even for big government.
Every individual should be able to make thier own decisions and sacrifices on how to reduced thier greenhouse gas emissions. A carbon tax gives them the flexiblity to do that.