TAX SHIFTING INITIATIVES

Making Polluters Pay Benefits The Rest Of Us

December 27, 1999
Editorial
The Vancouver Sun

Late last month Environment Minister Joan Sawicki and Finance Minister Paul Ramsey released a joint discussion paper on possible provincial taxation reform. Ms. Sawicki's participation will make sense shortly; Mr. Ramsey's is obvious as the paper outlines how government can lower taxes and still make the same amount of money.

The answer is simple enough -- lower them in one place and raise them somewhere else. This is called tax shifting, and by definition it pleases Peter, who is shifted from, and riles Paul, the shiftee. The real question is how to make Paul put up with it.

Enter the environment. Tax-shifting is usually done as a means of rewarding good environmental behaviour and punishing bad. A "polluter-pay" system is where those who pollute most pay higher taxes and the money is used to: (a) clean up the mess and (b) reduce taxes for someone else. This is what the two ministers have been looking at, fortified by the findings of that discussion paper, written by members of the Simon Fraser University department of economics and school of resource and environmental management. Drawing on European experience, the authors saw many advantages to adopting the method here.

"This is called tax shifting, and by definition it pleases Peter, who is shifted from, and riles Paul, the shiftee. The real question is how to make Paul put up with it."

In Italy, the rather large problem of discarded plastic bags was addressed with a rather large tax; their use fell off. The paper suggests similar surcharges here for wasteful packaging and inefficient production, really an expansion of the green taxes BC already has, such as the retail eco-fee on housepaint, tires and car batteries or the disposal fee on drywall. Since introducing tax-shifting, Sweden's results have exceeded expectations. A nitrogen oxide fee expected to reduce emissions by 20-25 per cent reduced them by more than 50 per cent in four years. Carbon dioxide has also been cut dramatically.

For BC, the paper proposes a surtax of $500-$1,000 on high-consumption vehicles with those revenues rebated back to the owners of more efficient cars. And this is where the "but" comes in. The plan is intended to be revenue neutral, with the surcharges and rebates balancing out. But applying just half the strategy is a temptation some governments are unable to resist, as in Finland. After only two years, the government stopped telling the public where the additional revenues had been taken in and where they had been correspondingly doled out again, lumped the bonus tax-money in with general revenue and devolved the tax-shift into a tax increase.

Jock Finlayson, vice-president of policy and analysis for the BC Business Council, says fear of the same here will need to be assuaged. If that can be done, the only people left to convince will be the two ministers' fellow New Democrats. The same day Ms. Sawicki presented the idea in Vancouver, Premier Dan Miller announced a $100-million subsidy for the oil and gas industry. The idea deserves discussion but they will need their colleagues to listen first.