Sunday, October 5, 2008

Carbon Taxes and Health Care User Fees

What do carbon taxes and health care user fees have in common?

The Liberal Party of Canada has announced the Green Shift. A tax shift program where industry is taxed based on the amount of carbon it produces. The increased cost incentivizes' companies to find production solutions with a lower carbon footprint. The additional costs to the citizen are compensated through lower income taxes and tariffs are placed to equalize the playing field for non-Canadian companies.

Not surprisingly, the concept is not sitting well with Canadians. In a time of economic turmoil, it's an inopportune time to suggest a new taxation system.

It raises an interesting contradiction in the Liberal Party platform (as well as the Green Party since the agree with the strategy). The carbon tax is social engineering through taxation. Conceptually, there is little difference between it and health care user fees.

Health care user fees incentivize people not to use the health care system. Where there is abuse and overuse the effect is positive. Where there is poverty and marginalization the effect will be horrific. I wonder whether the same would apply to the carbon tax?

Where companies are operating with willful disregard to the amount of carbon produced, in markets where the margins are thick and the competition weak there is no excuse for not lowering emissions. Where technology is lacking, margins thin and competition fierce the carbon tax will cost jobs.

Without taxation, we cannot be strong as a nation. If we hand over the basis for taxation to whatever elected officials declare the latest cause do we run the larger risk of wild fluctuations in revenue? One could equally argue that taxation should be based on homeland defense, obesity, crime rates or any other key issue.

The larger question is do we, as Canadians, want to leverage our tax system to the vacillating opinions and priorities of elected officials.

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