Guest Post by Willis Eschenbach
I hope against hope that this is my last post on this lunacy. I started by foolishly saying I would write about the benefits, costs, and outcomes of the BC carbon-based energy tax, so I was stuck with doing it. I discussed the possible benefits of the tax in “British Columbia, British Utopia“. To recap the bidding from that post, I showed that if we assume 1) that the BC folks could hold their CO2 emissions steady, with absolutely no increase for 50 years, and 2) that CO2 is the secret control knob that regulates planetary temperature, and 3) climate sensitivity of the secret CO2 control knob is not less than 3°C per doubling of CO2 … assuming all of those things, they’d achieve a 0.003°C reduction in temperature in half a century. Anything less than 100% on any of those, of course, means less than three thousandths of a degree savings.
I followed that with an analysis of the pre-tax and post-tax changes in the motor fuel sales in BC called “Fuel On The Highway In British Pre-Columbia“. Curiously, both total and per-capita road fuel (diesel plus gasoline) have increased since the tax was passed.
Next, I discussed how people are avoiding taxes by legally buying fuel in the Evil Carbon Empire, the USA, in a post called “The Real Canadian Hockeystick.” That just leaves the costs, and that means that once I finish this post I can go back to indulging in real science, or alcohol, or anything but carbon-based energy tax. So here are some of the important costs to individuals, to businesses, to the economy, and to society in general.
The first cost to me in this is the cost to common sense. Making energy more expensive is going in exactly the wrong direction. Forcing people to pay more for energy makes no sense at all. I want to see energy get CHEAPER, not more expensive. I cannot put this too strongly:
Cheap energy is the salvation of the poor farmer, the poor housewife, and the poor in general all over the planet. It is also literally and figuratively the driving force of a developing economy.
This means that anyone advocating policies that add to the price of energy is actively harming the poor, the farmer, the housewife, and the economy. In addition, those advocating increasing the price of energy are slowing economic development in the parts of the planet that need it most.
I don’t care if you say you’re averting rumored harm to the farmer and the poor in fifty years. That does not justify harming the poor today. That’s the biggest cost of the BC energy tax—it increases the price of energy, the very lifeblood of society, hitting the poor the hardest. That, to me, is the height of cruel lunacy and thoughtless destruction. The first and most important cost of the BC carbon tax is the cost to the poor, to the disadvantaged, and to the economy.
The second cost involves the concept of a “revenue neutral” tax. Here’s the official BC government explanation of the revenue neutrality of the BC tax:
The carbon tax is revenue neutral, meaning every dollar generated by the tax is returned to British Columbians through reductions in other taxes. Tax cut measures include income tax credits for low income individuals, cutting the first two personal income tax rates by 5 per cent, providing northern and rural homeowners a benefit of up to $200 annually, and reducing the business taxes.
Clearly, they’ve made an attempt to return the money fairly by apportioning it among businesses, individuals, northern and rural homeowners, low income people, and the like, so each group gets back roughly what they’ve paid to keep the revenue neutral. To understand the problem with this, let me try to disambiguate two concepts—“revenue neutral” taxes, and “sin” taxes.
“Revenue neutral” means you are swapping out a tax on one thing for a tax on another thing, and doing it in such a way that the tax burden stays the same. In other words, the burden of the new tax is offset by reductions in other taxes.
Of course, ideally, a perfectly “revenue neutral” tax would not change any individual’s taxes. Under a perfectly revenue neutral tax change, if you used to pay a tax on A, you would pay the exact same amount now but with the tax assessed on B. In the BC case, for example, where you used to pay a tax on income, instead you’d pay the same amount of tax on energy, based on its carbon content.
Of course, there’s a million practical problems with achieving such a perfectly equitable revenue neutrality, and I’ll get to them. But for now, let’s agree that a theoretically perfect revenue neutral tax would ensure that in the changeover, nobody gained and nobody lost. For every single person, the tax you used to pay on A you’d now pay on B. All of the money paid to the government goes back to the public. Nobody gains, nobody loses, fair and equitable, no increase in anyone’s tax burden, it’s just that the tax is assessed on something else, that’s perfect revenue neutrality… hold on to that thought.
Next on the agenda is the “sin tax”. This is a tax intended to discourage behavior. Take a tax on tobacco as an example, it’s known to decrease the rates of smoking. Why? Because smokers are the losers, it costs them money out-of-pocket. Typically, the funds raised by sin taxes on e.g. tobacco are used on anti-smoking campaigns, or programs to help people quit smoking, that kind of thing.
Now to the puzzler. Consider a hybrid tax, a “revenue-neutral sin tax” like the BC carbon-based energy tax. The problem with such a tax is that if it is perfectly revenue neutral, there’s little incentive to change behavior. By that, I mean, it’s no good to impose a $200 tax on gasoline and then hand the guy $200—he’ll just go spend the $200 on gasoline. So paradoxically, the more just and equitable the revenue-neutral sin tax is, the less it will affect behavior. In other words, in order for a revenue-neutral sin tax to be effective, it needs to be unfair …
In a perfect revenue neutral world there are no gainers and no losers, but you need people to lose so they’ll change their behavior … so you have to make it “not-very-revenue-neutral” to make it work.
The third cost is one of fairness, and this one has huge ramifications. Children I know all over the world have a clear sense of what’s not fair. Despite being revenue-neutral, which the BC plan demonstrably is, the plan is far from fair. By that, I mean that for far too many people, they are either spending more than they are getting back, or less than they are getting back. People look at that, and they don’t like it one bit.
My experience is that most folks don’t mind an equitably shared burden. I pay my California sales tax, 7.5% on most everything, without protest or resentment. I don’t like how some of that is spent, but it’s taxes, everyone pays the same.
But if I knew that three of my neighbors paid no sales tax on anything that they buy, and I was being charged not 7.5% but 15%, it would angrify my blood mightily, I’d resent it hugely. And that’s the BC situation.
One of the ramifications of this is that perceived unfairness greatly encourages people to cheat, in whatever way that they can. If people feel (correctly or not) that the government is screwing them, they’ll be happy to try to screw the government. This is not good for the rule of law.
The fourth cost is the cost to the poor. I give them their own category because the poor are hit the hardest by rising energy costs. Now, the BC plan does at least attempt to address this real issue, through something called the “Low Income Climate Action Tax Credit”, or LICATC … and this provides another example of why “revenue neutral” isn’t. Here are the requirements for eligibility for the LICATC:
You’re eligible to claim the credit if you’re a resident of B.C. and you:
• are 19 years of age or older, or
• have a spouse or common-law partner, or
• are a parent who resides with your child.
Only one person can apply for the credit on behalf of the family.
In other words, if you’re a young BC resident who (like I did when I was young) is living on his own and working at a job at 17, you’re out of luck. If I’d been living in BC, I’d have been paying energy tax and getting nothing back for two long years.
After the two years of paying energy tax, once I turned 19 and was eligible, I could get $115.50 from the BC Government from the LICATC. Now, there’s lots of jobs for which you have to drive a distance. I commuted 45 miles each way for a couple years when I was younger. Someone doing that with an old car, say 15 miles per gallon, might burn six gallons per work day. Two hundred work days in a year, 1,200 gallons. The BC tax is about twenty-five cents per gallon, that’s $300 in taxes I’m paying … and the LICATC gives me $115.50. Once again the poor get the short end of the stick. David Suzuki doesn’t care how much his gas costs, heck, for all I know free gas is just one of the services provided by his adoring female devotees, and he’s got lots of slack in his budget … but the poor have no devotees, and no slack in their budget at all.
The fifth cost is the tax on the tax. Of course, the Government of Canada gets to charge the Goods and Service Tax (GST) on all transactions … including the carbon tax. So while BC doesn’t keep any of the tax money, Ottawa is extracting thirty million bucks per year from British Columbians, charging them money for the privilege of being taxed on their carbon-based energy use …
The sixth cost is the overhead. You can’t run a complex program like a carbon-based energy tax without lots of paper pushers. And when you have paper pushers you need representatives of the porkoisie to supervise them and keep them from being fired. You need people to write the regulations. You need people to interpret the regulations. You need people to make the regulations more complex. You need people to count every molecule of CO2, and I’m telling you, even on a molecular scale those buggers are tiny. You need carbon cops to enforce the tax, and courts to punish people who are guilty of tax evasion. You need people to explain the complex regulations and forms to the poor bastards that have to fill them out. You need cheerleaders to write endlessly optimistic speeches about how well things are going. The list goes on for a while more, and no part of it is cheap, it’s government work …
The seventh cost is the pensions. Every person taking your tax money today and faithfully giving it back to you tomorrow in blessed revenue neutrality will be taking your tax money for thirty years after they retire and not giving back a dime.
The eighth cost is the rent-seekers. These include folks like Sustainable Canada and other organizations for whom this is a grant-raising bonanza. Then there are a host of lawyers, advisers, accountants, consultants, and the rest of the good folk who make their living out of the hysteria surrounding the alarmism and the complexities of the regulations. They produce nothing useful, they are a dead weight on society, but they come right along with the tax, they mate for life.
The ninth cost is the cost of tax avoidance/evasion. I used to work as an income tax preparer. There’s a distinction between tax avoidance (which is legal) and tax evasion (which is not legal). Seems like a bright-line definition … until you find out that in the US, if you adopt a business policy purely to avoid a tax, the IRS says that is illegal tax evasion.
But under any definition there are several costs in this arena of what might be called creative responses to the BC tax. At a simple level, the cost is the money hemorrhaging out of BC into the pockets of American and Albertan gas stations for gasoline. But it’s much worse than that.
Next level up, many staples are much cheaper in the US. So when BC residents come across the line to fill up on cheap gas, hey, might as well buy milk and cheerios and flashlight batteries and all the things that are 30%, 50% cheaper across the border. This is no help to the BC economy at all, quite the opposite.
Next level up, since the tax there has been an increase of 4 million additional vehicle trips across the border per year. This is a huge cost in waste of gas, time, vehicles, and human energy.
Plus I read that there’s now a side industry putting concealed fuel tanks on trucks so that they can haul an extra fifty gallons or so of fuel across on every trip … wouldn’t surprise me.
Finally, in the most general sense there’s a cost to society when you encourage people to be scofflaws. Unpopular taxes which were perceived by the common citizen as being unfair caused a bit of trouble in Boston, as I recall …
The tenth cost is the hours people will spend filling out the paperwork. For example, the poor people, the people at the margin, the people sleeping in their cars or under the bridges, or with their aunties, can get a check from the government for the Low Income Climate whatever Credit, and they merely have to do the following (emphasis mine):
Claiming the Credit
You or your spouse or common-law partner can apply for the low income climate action tax credit when you file your T1 Income Tax Return with the CRA. On page 1 of your return, check the “Yes” box in the GST/HST credit application area.
If you have a spouse or common-law partner, be sure to complete the information concerning your spouse or common-law partner in the Identification area on page 1. Include his or her net income, even if it is zero. Enter his or her social insurance number if it is not on your personal label or if you are not attaching a label.
To receive the credit for your children under the age of 18, they must be registered for the Canada Child Tax Benefit (CCTB). If your children are not registered for the CCTB, complete the Canada Child Benefits Application form (RC66). You can also request the CCTB form by calling the CRA at 1-800-959-2221.
Riiight … grandma who can’t speak, read, or write English will be all over that one, as will the young guy living in his car and paying the BC energy tax while looking for work …
The eleventh cost is official hypocrisy. One surprising thing I found out in researching this is that the good burghers of BC have fields containing evil natural gas … and even more coal. They don’t use much gas or coal themselves, in part because they have plenty of hydroelectric power. So although they personally dislike those nasty black fossils, they are all too happy to make a living selling them … the industry paid $1.3 billion for the use of the resources, and spent $6.7 billion on exploration and development. Total value of the fossil fuels exported from BC in 2010 was nearly ten billion dollars, about a quarter of their total exports. And to my surprise, seven billion dollars of that was from exporting coal. Big coal bucks, in other words.
So the BC folks are not too proud to take stacks of evil coal money, and thus be totally complicit in the extraction and use of fossil fuels, because as long as other people burn the fuels they can wash their hands and feel all pure … dang, you know this public expiation of BC carbon guilt is starting to make more sense.
What I hadn’t realized was that behind the facade of forest green, BC is a big-time coal baron. Funny how sometimes it takes me so long to finally wake up to some important part of the puzzle … in any case, of course they need to rid themselves of that secret shame, so it’s no wonder this particular carbon-taxing scheme could be sold there. They can get rid of their guilt that way.
And here’s the sting in the end of that tale. Any evil fossil fuel produced in BC which is sold outside of BC pays no carbon tax at all! So the big gas and big coal companies, which are producing gas and coal responsible for billions of tons of CO2, are exempt from the BC carbon tax. How ironic is that? The citizens pay the carbon tax, and the coal companies don’t … I never cease to be amazed at the strange contortions of these energy-taxing fools …
The twelfth cost is officials denying inconvenient reality. The so-called “fugitive emissions” (meaning leaks) of methane are a big issue with the radical left who would like to end fracking (and civilization as well, apparently). This has led to the curiously entertaining spectacle of the BC carbon-based energy tax taking “friendly fire” from DeSmog Canada for not accounting for the reality of these methane gas leaks in the greenhouse gas inventory. Gotta love the spectacle of green-on-green violence, not to mention the schadenfreude of watching the BC energy tax being bombarded from the left for a change …
In addition to that unaccounted raft of emissions from natural gas, you need to add in the emissions from all of the fuel bought in Alberta and the US. The official accounting denies the reality of both of those emission sources in the calculations of the effects of the tax …
You know, there are probably more costs from this crazy BC energy tax, but it’s late, and I’ve had it with BC’s attacks on the poor. Those financial and social costs and injustices would be enough to scuttle a plan which actually had some benefits … and since the benefits in this case are meaninglessly small, in a sane world it would have sunk without notice the year before it was implemented. And yet here we are, and the bureaucrats involved are already counting their fat pension checks …
In closing, let me offer up without comment my search of the official BC Government website:
Best regards to all, I’m going to go look at some numbers and do some programming in R and rest my mind …
w.
NOTE: This is one of a four-part series on the BC carbon-based energy tax. The parts are:
British Columbia, British Utopia
Fuel on the Highway in British Pre-Columbia
Why Revenue Neutral Isn’t, and Other Costs of the BC Tax
Discover more from Watts Up With That?
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Willis the way you put things just cuts through all the garbage and gets straight to the issue.
I can see Australia going the same way soon. The idiots in Canberra can’t just use their brains and realise that it’s all a scam.
Willis wrote: “The problem with such a tax is that if it is perfectly revenue neutral, there’s little incentive to change behavior. By that, I mean, it’s no good to impose a $200 tax on gasoline and then hand the guy $200—he’ll just go spend the $200 on gasoline.”
No, there are other alternatives. The $200 could be spent on a hybrid car or diesel rather than a conventional car. (The use of diesel fuel has risen despite the carbon tax on it.) Or spent on living closer to where you work. Best of all, the choice is up to you, not the government.
An average American car is driven about 10,000 miles a year, gets perhaps 25 miles to the gallon and therefore currently costs $1,500 to fuel. If a new carbon tax doubled the current cost of fuel and you received a $125 rebate every month in the mail, would you spend it all on gasoline? Forever? If you drive a old pickup truck, you’d be paying an extra $3,000 per year and only getting a $1,500 rebate. Wouldn’t you changing to a higher-mileage vehicle? If your business truly demanded that you drive a pickup truck, you’d have to pass the added fuel costs onto your customers.
Willis your expose of the lunacy of the BC taxing, mirrors that of the reality of the present Labor governments taxing charade in Australia. It is the economist’s dream, the money churn, just make the money move faster through many hands and it will naturally do good for someone, just needs the addition of a good old Mafia Casino skimmer to cream off percentages as the system leaks under the increasing pressure of maintaining its perpetual motion, the indulgences and spin, to salve belief and, an army of bureaucrats inventing new ever increasing sub taxes and bankers and spinners creating the propaganda.
Where does it end – when the poor are so poor they are no longer useful fools and they become revolting? or dare I say it, start asking questions – why is it so?
eyesonu:
“Sir, I would not call you ignorant. You clearly are not. But you are clearly misguided in what you wrote in the above comment. Face it, you love energy taxes and water taxes. “
I don’t “love energy taxes and water taxes”… I just hate them less than income taxes because they’re less damaging. So if I was forced to choose between a consumption tax or an income tax, I’d go with the consumption tax. Ideally, I’d go with neither (and pay for the government with user fees and property taxes).
“How often would you recommend that I shower or brush my teeth? Should I skip every third day of work?”
I’d recommend you cut back on the car washing, lawn watering or swimming pool filling before cutting back on personal hygiene… but that’s just my opinion. If you’re still short on funds, I’d suggest you try working more, instead of skipping every third day.
“When I’m down to the wire, would you please advise me as to what would make you happy.”
What would make me happy would be if we all simply paid the fair market price for what we choose to consume, rather than insisting that our consumption be involuntarily subsidized by others. TANSTAAFL.
I live in the center of BC so cannot take advantage of crossing the border into the US or Alberta for cheaper fuel. Generally in the interior of BC we have to travel long distances between towns or for general travel so get hit hard by this tax. Natural gas for heating is also taxed and since temperatures in a lot of the interior are subzero in winter we get hit hard unlike Weaver or Suzuki and their ilk who live in LA LA land on the coast.
Thanks Weaver for the tax, you are a charm.
If you are a rancher or miner or oil patch worker with a welding rig, you probably own a one ton truck either in single rear wheel or dually configuration. Those of us who work in the hinterlands have a truck or 4×4 of some sort to get our work done. I have four – a 74 Jeep Cherokee, a 1990 Ford 3/4 heavy duty 3/4 ton, a 2010 Hyundai Sante Fe, and a Dodge Ram one ton dually for hauling livestock, equipment and hay. You won’t see any Prius’s out here on the gravel freeways. (well not in running condition anyway) 😏 Great articles Willis.
Oh yeah, driving 10,000 miles a year would be find for city folk. My dually is a year old and has 16,000 miles on it, then add the miles for my other vehicles and it’s more like 40,000 miles a year – course in my case it’s 50 miles round trip to town which is pretty common around here. My neighbour drives over 100 miles a day to get to work and back in his truck.
Russ R. says:
July 15, 2013 at 2:02 pm
Excellent, and thank you for the clarification.
“Overconsume” is an emotional word. A more neutral way to put your claim is that we consume more than we produce. That’s entirely measurable, both in the short and the long term. In the short term it’s called the “Balance of Trade”. It’s calculated as how much we export minus what we import. Yes, the US has run with a negative balance of trade for a while, meaning we import more than we export.
But that’s not “overconsumption”. We have to spend of our national wealth to pay for the things we import. So in the long run, a negative balance of trade just means that the economy will grow more slowly. So when the imports are coming in that you seem excited about, there is an equal but opposite flow of money going to people in other countries.
Now, how much difference does this make? Well, it turns out that most recently (2012) we produced 96% of what was consumed, and paid for the rest. Here’s the historical record:
As you can see, current per capita GDP is almost exactly $50,000 (in worthless 2012 currency). Of that, we produce $48,000, and the other $2,000 worth we pay for. So no, I don’t think the problem is first world overconsumption.
The problem is third world underconsumption. As I said above, I want to see the world use MORE energy, not less. That’s the only hope for the poor. That’s the only path for developing countries. That’s the only safeguard for the environment. More cheap energy is what we need, not first world pearl-clutching while raising energy prices.
You raised an interesting issue, I always learn something in the comments.
Thanks,
w.
Frank says:
July 15, 2013 at 4:17 pm
Frank, that’s hilarious. A poor guy gets $200 and he spends it to purchase a Prius?
We gotta keep you for the entertainment value alone.
w.
Of course we do have Abbott, he might be using his brain, but I’m really not sure. He just called carbon trading the non-deliverance of an invisible substance to no one. But he still has his own direct action plan, whatever that means. Although I’m sure it’s better than whatever Rudd is going to do.
The only thing that concerns me now is that I think Rudd has a good chance of winning our next election.
Your Point 2 is incorrect. Suppose there are two goods: energy and all other. You put a 10% tax on energy. You also give the individual a tax refund such that he or she COULD consume the exact same bundle of energy and other goods as before. Will the individual consume the same bundle as before? No, because the price of energy relative to other goods has gone up. To maximize utility the individual will substitute away from energy to other goods.
Russ R. says:
July 15, 2013 at 4:27 pm
]
=================
Russ, Stay tuned.
I just dropped back in and will respond in due time. You will not likely be happy. 🙂
richard verney says: July 15, 2013 at 5:56 am
“[ … ] In the 1960s you could buy a FIAT Arbarth with Zagato body with a 1 litre engine. Top speed was just under 130mph, 0 to 60 in about 6 seconds [ … ]”
…
That’s some car you had there, James Bond couldn’t do that in an Aston Martin around then … +8 seconds. http://en.wikipedia.org/wiki/Aston_Martin_DB6
Russ R. says: July 15, 2013 at 4:27 pm
“What would make me happy would be if we all simply paid the fair market price for what we choose to consume, rather than insisting that our consumption be involuntarily subsidized by others.”
…
And, therein lies the folly of your reasoning about carbon taxes … the entire false economy of ‘renewable energy’ and ‘green’ industries that exists only because they are heavily subsidised at the expense of the consumer.
In reply to Tim the Tool man
“Only 15 miles per gallon! If that’s your car, you’ve chosen it particularly badly. Its taxes like these that are supposed to be driving people towards greater efficiency and 15 miles per gallon is just awful!”
I agree with all who took the Tool Man to task for his incredible ignorance of what it is like to be poor. Tim, perhaps you should try it for a few months.
A second point is who gives anyone the right “to be driving people towards greater efficiency..”?
That is the purpose of the free market. When a bunch of elite government bureaucrats and greedy politicians “drive people” to do anything they are abridging the peoples’ freedom and wasting time, money, and peoples lives for their personal enjoyment of tyranny. Less government and free market is the only to help the poor and everyone else. How could you read Willis’ BC articles and not learn anything?
Where it says “BC folks”, it should say “BC government”. The BC folks are split between those who feel no guilt about it and those who rage against it. Your statement is not fair to either group and it would not be fair to blame BC voters either. I did a search to try to find some history. Blame it on ex-premier Gordon Campbell. In September 2007 he announced his plan to save the world with Al Gore and David Suzuki at his side:
http://www.straight.com/news/two-faces-gordo
Oh, and Arnold Schwarzenegger, in May 2007:
http://www.cbc.ca/news/canada/british-columbia/story/2007/05/31/bc-green.html
Votes since then have been more about pro-business versus pro-socialism than carbon tax versus cap-and-trade.
The best example of a country that thrives on oil money but hates CO2 is Norway.
But what if that energy is the energy to get to work? The same amount is needed before and after the tax, so the individual will have to consume the same bundle.
Your point only works when part of the bundle is discretionary. But when the whole bundle is necessary for survival, then your point falls apart. And that is exactly the situation with the poorest people. Which is exactly the point being made about how it penalizes the poor. Then add to that the fact that the added cost of energy will add to the cost of just about everything else. Causing the rest of the bundle to increase also, although probably not by the same amount.
Yeah, you can chose to save up that $200 until you can buy a newer car with better mpg. Of course while you do that your lack of gas for your current vehicle will prevent you from getting to work, so you end up with no job.
Or you can save up that $200 until you can afford the deposit for a place closer to your job. Of course while you do that your lack of gas for your current vehicle will prevent you from getting to work, so you end up with no job.
So you can chose what road paved with good intentions you will take to hell.
Russ R. says:
July 15, 2013 at 4:27 pm
=================
I have only a few minutes before I need to burn energy to get to work. It takes the same amount daily. But first let me cover your suggestions with regards to my municipal water use. My transportation is a 1988 Jeep with much faded paint. No need for washing here. I do not have a pool. I do not water the grass. I do take quick showers daily. I do give the dogs fresh water daily. I turn the water off while brushing my teeth. Please advise where a higher water utility bill would cut my consumption.
As far as fuel. My vehicle requires a given amount of fuel to travel to work. How would an increase in costs change this. I have long ago cut consumption of any recreational fuel use. I’m sure that contributed something to the shrinking of the economy. As far as heating oil goes, my programmable thermostat is set for 48 at night and never has the temp in my home been above 60 throughout the heating season. Think I should squeeze it a little more?
I had hopes for a later model vehicle but “Cash for Clunkers” stopped that.
You complain of paying $100k in income taxes, well I wish I had an income to require that. You seem to be sold on the idea of more taxes and higher costs, just less income tax for yourself. I would agree that there are too many taxes but I’m not sold on more taxes in different forms.
“If you fine a poor guy $200 for using gas to gt to work and then hand him $200, he’ll likely put it into his gas tank because he has to get to work.”
Willis, this is Canada. Give someone $200 and they’ll first go buy a case of 24. (beer that is) Then complain they dont have enough money for gas.
Alberta is now thinking stupid:
Carbon tax floated as an option for covering flood cost: Steward
Former Calgary councillor thinks the unthinkable in the heart of oil country.
http://www.thestar.com/opinion/commentary/2013/07/16/carbon_tax_floated_as_an_option_for_covering_flood_cost_steward.html
If I was consuming more than I produce, I wouldn’t have any savings or retirement accounts.
OTH, my government consumes far more than it produces. In fact, that was a moo point (it’s like a cow’s opinion, it’s moo) because government doesn’t produce, it only consumes. Everything the government spends comes out of somebody else’s pocket. Any fee, tax, service charge, etc., comes out of somebody else’s pocket.
It’s all money that could be spent on something else. Many times, it could be better spent on something else. Our government rarely spends wisely and is a drain on the private economy.
@ddpalmer … you said:
“Your point only works when part of the bundle is discretionary. But when the whole bundle is necessary for survival, then your point falls apart. And that is exactly the situation with the poorest people. Which is exactly the point being made about how it penalizes the poor. Then add to that the fact that the added cost of energy will add to the cost of just about everything else. Causing the rest of the bundle to increase also, although probably not by the same amount.”
I had said:
” Your Point 2 is incorrect. Suppose there are two goods: energy and all other. You put a 10% tax on energy. You also give the individual a tax refund such that he or she COULD consume the exact same bundle of energy and other goods as before. Will the individual consume the same bundle as before? No, because the price of energy relative to other goods has gone up. To maximize utility the individual will substitute away from energy to other goods. ”
This point is completely standard textbook microeconomic theory. Your comment is a factual one: do people actually substitute away from energy when the relative price of energy rises? The statistical evidence here is clear: they do. Russ R was citing numbers for the price elasticity of energy demand earlier on this thread, and that is just one example.
You also restrict your case to that of the “poorest people”. A couple of comments on that: first, what proportion of the population of BC would you classify as “the poorest people”? 5%? 10%? . So the policy can work fine for the overall population even if the “poorest people” do not change their energy consumption. Second, is there much evidence that the poorest people do not in fact respond to price incentives? I’m far from an expert on this, but I don’t think that is the case. I did a bit of quick googling and found this study on Electricity Use and Income: http://www.cpuc.ca.gov/NR/rdonlyres/609BC107-EF3C-4864-AD56-E964884D51AC/0/PPDElectricityUseIncome.pdf
Table IV shows electricity price elasticities by income group: the price elasticity for the poorest quarter of the population in that study is actually higher than for wealthier groups.
Lastly, it may be that you are making a moral argument: that the poorest people SHOULD be protected from the hardship caused by higher energy prices. If so, I am 100% with you on that.
“Your comment is a factual one: do people actually substitute away from energy when the relative price of energy rises? The statistical evidence here is clear: they do. Russ R was citing numbers for the price elasticity of energy demand earlier on this thread, and that is just one example.”
Yes my point is fact and your point is theory. Fact wins. The data Russ R cited covers a large group of people covering vastly different individual economic conditions and then averages their responses.
Meanwhile reality and facts are clearer than statistical evidence(which is just an amalgam of responses), some people can’t susbstitute away from energy without losing their jobs.
“You also restrict your case to that of the “poorest people”.
Well since the article we are comment on specifically mentioned the affect on the poorest people I felt that following the authors argument would be the correct path.
“first, what proportion of the population of BC would you classify as “the poorest people”? 5%? 10%? ”
I don’t know, ask the article’s author. But it seems you feel that if most people can live with the change then screw the poor people.
“Table IV shows electricity price elasticities by income group: the price elasticity for the poorest quarter of the population in that study is actually higher than for wealthier groups.”
And just above Table IV we find this statement:
“The authors report that households with electric space heating or air conditioning have higher price elasticities compared to those without air conditioning. Households without such systems have a price elasticity of almost zero.”
If you have electric heating or cooling you can adjust your usage of them in response to changes in electricity costs. But if you don’t have them then you can’t adjust your usage based on cost.
“Second, is there much evidence that the poorest people do not in fact respond to price incentives? ”
From your own cited source, Yes there is evidence that the poorest people do not respond to price incentives.
So, in a similar manner if you make vehicle trips that are discretionary, you can adjust your driving habits based on changes in fuel cost. While if virtually all your vehicle trips are necessary for your economic survival then your fuel usage is set and can’t be adjusted based on fuel cost.
eyesonu:
First off, since I don’t know where you live, I don’t know whether your municipal water is being underpriced and subsidized or not.
I do know that where I live, the municipality owns the water system and for years, the meter prices didn’t come close to covering the system’s operating costs, let alone its capital costs. As such, the utility ran at a loss (paid for by taxpayers), and consumers didn’t think twice about their water consumption, because it was so cheap. The city’s water infrastructure was in serious disrepair, and there were chronic water shortages (with the city begging residents to use less water).
I’ll point out, this wasn’t an ecological issue… I live on the shores of one of the largest freshwater lakes in the world, so there’s no local scarcity of water. It’s merely an economic issue, the cost to treat the water for municipal use exceeded the amount being charged to consumers, resulting in a serious market imbalance.
Then the city smartened up. They’ve gradually raised water rates from $1.23 per cubic meter (1000 liters) in 2004, to $2.86 per cubic meter today. That’s still ridiculously cheap for household use (around 57 cents a day for the ~200L used in drinking, showering, flushing & washing), but it gets rather expensive to refill a swimming pool (around $430 for the 150,000L to fill a 10m x 10m pool to an average depth of 1.5m). The results haven’t been surprising… average household water use has fallen, and not because people are taking fewer showers.
Nobody’s asking people who are using 200L a day to reduce their household consumption further. But I am asking them to pay a fair price for what they’re consuming without being subsidized by taxpayers. The consumption reduction happens at the upper end, where people refill their swimming pools once a month instead of every second week, because they’re having to pay the actual cost of their water.
So, if your municipal water is already being “fairly priced” rather than being subsidized, then I’ve got nothing to say. But if you’re getting subsidized water, and if you’re going to complain that your 57 cents of daily water use is too expensive, you’re not going to get a lot of sympathy from those who’s income taxes are subsidizing your water use. I’d tell you to try producing more if you want to consume more. TANSTAAFL.
A.D. Everard says:
July 15, 2013 at 1:09 am
The sooner people – and I mean regular, ordinary citizens – wake up to this the better. The pushers of these crazy schemes are getting away with it because people are sitting back and letting it happen, and they’re doing that because they don’t know it’s happening the way it is!
Most people just want to be left alone, do their business, they pay their taxes and make a living.