Saturday, September 27, 2008

The Green Shift

"Pay for what you burn, not what you earn."

Was that so difficult? Is this Green Shift really so complicated? It's all moot now as there is not a snowball's chance in hell that Dion is going to have the opportunity to bring his environmental policy to life. We're fighting now to avoid a Harper majority - or at least I hope that is our priority, rather than worrying about the NDP's ascendance.

I disagree with environmental policy that lowers income tax and raises consumption tax. Income tax is progressive, meaning people pay a higher percentage of tax when they make more money, and consumption tax is regressive, meaning poorer people pay a higher proportion of their income in tax.

We should instead be making income tax more progressive by creating tax brackets with higher tax levels at the upper end. Currently the highest tax bracket ends at about $125,000. There should be at least one, and possibly two, marginal brackets above that.

Another part of the Green Shift that I disagree with is that it doesn't affect gasoline prices. The reasoning may have been political, and it may have been that the market is driving up gas prices enough. But it seems to me that high gas prices in Europe have fueled environmental initiatives, and low gas prices in North America have kept us in a fairyland that promotes wasteful consumption.

In my town, Kitchener-Waterloo, we continue to build far-flung subdivisions that can never sustain efficient transit. Just this week a new giant shopping mall was announced that is in walking distance of virtually noone. We are planning a ridiculously overpriced Light Rail Transit system that will be a giant white elephant, destroy Waterloo UpTown, and probably not result in one person giving up their car (as they'll still need to drive to the LRT stops).

Outside of Toronto Ontario has shabby public transit. We don't have decent intercity rail travel. We build houses that require air conditioning, despite being in a cool climate. We just aren't serious about reducing our dependence on coal generators and oil.

Another case in point - The Bay renovated their store in the Conestoga Mall, and wanted to put up wind generators. City Council at first refused and then finally agreed with a number of conditions. (They're up now and look fabulous.) But why worry about any noise or "sight pollution" in the mall? It's surrounded by a giant parking lot and wide roads. City Council should be requiring wind generators in malls, not trying to block them.

And don't get me going on the shameful waste of green rooves. For over a million dollars and a lifetime of maintenance headaches, you can get a few square meters of native grasses. They put on a green roof at Waterloo City Hall and then cut down all the trees around the building to house their new air conditioning units.

Sorry - this stuff makes me really mad, but we need to make energy more expensive or we're never going to get serious about conserving it. If we make it more expensive through taxes, we'll have revenue to help buffer the hardship caused by it. If we let the market raise prices on its own, we won't have the tax revenue to use as a buffer. What we need is higher taxes on energy. Period.


Anonymous said...

Yappa: fyi the NDP installed a green roof on their HQ just last week, I saw it on the Ottawa news.

One of my big concerns with carbon tax was its revenue neutrality and that it would limit tax revenue and therefore limit the ability for govt to pay for green initiatives.

Couple that with continuing the massive corporate tax cuts and the elimination of the Income Trust tax and the LPC platform looks less and less financially sound assuming the really planned on implementing all the promised progressive programming described in the platform document.

Yappa said...

Hi anonymous at 1:46 -

I agree with you completely. The ironic thing is that the Green Shift has been unfairly, but effectively, slammed for being a tax grab - when in reality it would be a better policy if it really was a tax grab. Oh well.

I didn't understand the promise to elminate the income trust tax. I haven't looked into it deeply enough to be sure of myself, but wouldn't that just be a windfall for some people, while others already lost money and got out of income trusts? A wise philosopher once said that tax fairness is more about stability than absolutes: that most of the unfairness comes from changing taxes.

ch said...

Income tax itself is neither progressive or regressive - it all depends on its structure. Canada's is reasonably progressive and the Green Shift makes it somewhat more progressive by cutting the lower brackets more and increasing credits for those with the lowest income.

Any carbon pricing is regressive and so something needs to be done to correct for this. Perhaps the Green Shift formula could be improved, but it is a huge improvement over the NDP plan which doesn't undo the regressive nature of cap and trade at all.

Yappa said...

Hi ch -

I guess I should have said that "our" income tax is progressive.

But isn't using the extra tax revenue to help people a way to compensate for the regressive nature of an energy tax? Then the money could be better targeted, such as towards providing transit for people who can no longer afford cars or providing more freight lines to replace trucks. (Obviously more thought and expertise has to go into this.) Cars are enormously expensive - giving people the means to avoid having to own them could raise the standard of living, even.

ch said...

Hi Yappa, you need to do both. Transportation mainly helps people in cities and a very ambitious retrofit program will still only benefit a small fraction of people in the first few years. The US government studied this problem extensively and decided that credits and tax cuts were the most comprehensive method for protecting lower income families and individuals. You want ongoing incentives for retrofits and transportation as these will evolve as industry adapts and finds new solutions. You can't do everything up front or even in the first few years, so money then to pay the increased costs is most important.

Typically, any carbon tax or cap and trade would be adjusted after 3 or 4 years and the balance between funds and incentives/infrastructure would then be adjusted too. I would fret less about the precise details, provided the lowest income are protected, and more about getting started as soon as possible. Any plan can be improved over the years, but nothing is going to change until we get started -- and time is running out.

Yappa said...

Hi ch -

You obviously know a lot more about this than I do, but one other concern is that the policy only works if it gets people to change their habits, so you have to be careful how, and how much, you compensate. For example, a lot of relatively poor people live in the country because real estate is cheaper, but they drive long distances on a regular basis.

A similar issue concerns school buses. In Ontario we currently squander resouces on busing kids to faraway schools when they have schools in walking distance. Do we want to provide a subsidy for that practice?

These aren't very popular decisions, and since I'm affluent and live within walking distance of everything I need, I don't know how much I should be saying about them.

ch said...

A carbon tax gets industry to change their ways because they are always looking at the bottom line. For individuals it is believed it has to be at least $30/ton to get a significant number of people to change. I think it will keep our economy stronger by ramping up (starting at $10 or $20) instead of making an abrupt change and it allows people to get used to it and plan for changes.

For climate change, one would prefer to have as many people as possible living in cities, but farming, forestry, mining, etc. is done outside of cities. I think the compromise of giving extra incentives to rural areas is good. You want them to change and conserve as much as possible, but also have to recognize they don't have the options available in cities.

On school buses, we should be thinking harder about the fossil fuel use. Our gasoline prices are almost half of European prices and consequently our decisions are different. We need to start tilting the balance to recognize the cost of emissions. When one starts thinking about funding all different kinds of schools (religious or otherwise) one needs to think that this will likely require more school buses. I'm not saying there is a right or wrong (more choice in schools, etc) just that emissions should factor into the equation when pros and cons are considered. Sweden has buses that run on garbage. We are not anywhere near looking for those kind of solutions.

sharonapple88 said...

Thought you might enjoy reading about the Danish islan of Samsø, a community that in a decade went from putting 11 tonnes of carbon in the atomosphere to exporting renewable sources of energy. Oddly, they managed it without direct government subsidies to fund it. (I'm just in awe of what they managed to accomplish.)

Geekwad said...

Just a couple points of clarification.

Malls and large plazas cannot possibly have enough people within walking distance to support them. Not without much more population "intensity" than anything we manage around here. Still, a valid point, but one that could also be aimed at, oh, say, our entire Region. Really sucks to be car-less around here. Public transportation in KW has massive shortcomings that leave the taxi companies as a defacto essential service.

Re: the wind turbines at the Bay; I think you are casting the city in an unfair light. It was not about sightlyness or noise. It was standard bureaucratic operating procedure. The Bay applied for a "variance;" that means that they wanted an exception made to a building bylaw to allow them to build their towers. The city replied that a variance could not be issued, because there was no relevant bylaw to vary *from*. The bylaws did not address this case. What the Bay was asking for was essentially nonsense, but the city gets painted as being anti-green. (Purple?)

Bert said...

As far as taxing higher brackets more:

A young woman was about to finish her first year of college. Like so many others her age, she considered herself to be a very liberal Democrat, and was very much in favor of 'the redistribution of wealth.'

She was deeply ashamed that her father was a rather staunch Republican, a feeling she openly expressed. Based on the lectures that she had participated in, and the occasional chat with a professor, she felt that her father had for years harbored an evil, selfish desire to keep what he thought should be his.

One day she was challenging her father on his opposition to higher taxes on the rich and the addition of more government welfare programs. The self-professed objectivity proclaimed by her professors had to be the truth and she indicated so to her father. He responded by asking how she was doing in school.

Taken aback, she answered rather haughtily that she had a 4.0 GPA, and let him know that it was tough to maintain, insisting that she was taking a very difficult course load and was constantly studying, which left her no time to go out and party like other people she knew. She didn't even have time for a boyfriend, and didn't really have many college friends because she spent all her time studying.

Her father listened and then asked, 'How is your friend Audrey doing?'

She replied, 'Audrey is barely getting by. All she takes are easy classes, she never studies, and she barely has a 2 .0 GPA. She is so popular on campus; college for her is a blast. She's always invited to all the parties, and lots of times she doesn't even show up for classes because she's too hung over.'

Her wise father asked his daughter, 'Why don't you go to the Dean's office and ask him to deduct a 1.0 off your GPA and give it to your friend who only has a 2.0. That way you will both have a 3.0 GPA and certainly that would be
a fair and equal distribution of GPA.'

The daughter, visibly shocked by her father's suggestion, angrily fired back, 'That wouldn't be fair! I have worked really hard for my grades! I've invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!'

The father slowly smiled, winked and said gently, ..... 'Welcome to the Republican party.'

Yappa said...

Hi Bert -

Thanks for the anecdote. I recommend Robert Nozick's "Anarchy, State and Utopia" to you. He invents a lot of great analogies - like arguments for income redistribution are like arguments that you should put pebbles in the running shoes of athletes to slow them down to the average speed. I enjoyed the book but I don't agree!

I'm an affluent person with no dependents who pays a huge amount of tax and I'm happy to do it. I don't want to live in a society with ghettos and high crime rates. I want a thriving artistic community good public services. All that takes tax revenue. Our top tax rate is not so high that anyone is greatly inconvenienced by it. In fact, just the opposite is the trend: wealth is becoming more and more concentrated.