Thursday, May 08, 2008

On wedge issues

The Globe and Mail reports that the Libs are laying the groundwork for a carbon tax/tax shifting proposal to be their policy centrepiece in the next federal election. What's most interesting about the framework being discussed now, though, is that it provides just as strong an opening for the NDP as for the Libs in drawing a distinction from the Cons' status quo:
Stéphane Dion is poised to unveil a carbon-tax scheme and attempt to neutralize any political damage by offering corresponding personal income tax cuts of between $10-billion and $13-billion to working Canadians, senior Liberal sources say.

The Liberal Leader wants this major environmental policy to be the centrepiece of the party's election campaign platform, according to the sources, and is anxious to reveal it this summer to give Canadians a chance to digest the idea before a federal election.

The plan, according to sources, would shift the 10-cent federal excise tax on a litre of fuel at the pumps into a broad-based carbon tax that would also apply to other fuels, such as for home heating. Sources say that the plan would not add more taxes to gasoline.

But the key is that the money raised – estimated as much as $17-billion – would be returned to middle-class and working Canadians in personal income tax cuts, making it revenue neutral. There could be corporate tax cuts as well.
Let's note first the most obvious critique of the plan, as it would necessarily impose a burden on either individuals or businesses who currently rely on carbon-based fuels and don't have the money sitting around to compensate with new equipment. My initial hunch is that the divide would likely break down along urban/rural lines, with city-based Canadians likely having far more alternatives available (and thus likely coming out ahead in the shift), while rural-based ones would face far more difficulty in adapting.

Now, the Libs could conceivably try to tweak their proposal to avoid this result. But for those of us who want to see Harper removed from office, such a dividing line could prove to be a feature rather than a bug.

After all, the NDP likely wouldn't mind targeting a campaign message toward those who would stand to be most directly harmed by the Libs' plan. Having already taken up the cause of pointing out how gas-price gouging affects Canadians, the NDP would be well-positioned to emphasize that its price-regulation proposal would reduce the costs of the same fuels which the Libs would plan to tax. And on the balance, the NDP would stand a strong chance of gaining more from the Cons by campaigning on more affordable supplies in rural areas than it would lose to the Libs in the cities.

Meanwhile, the Cons would have little option but to argue for a status quo where high fuel prices serve only to pump money into the oil and gas industry. At best, they might try to counter by cutting existing gas taxes. But the NDP could bash that as simply putting more money in the pockets of oil companies, while the Libs would presumably respond by emphasizing the environmental implications of actually encouraging more energy-burning.

In sum, a ballot question based on fuel prices - with the Libs' platform appealing to those who don't use many carbon-based fuels, while the NDP holds the promise of a more affordable approach for those who do while pointing out different means of reducing our emissions in the long term - could easily leave the Cons bleeding support from all sides. And that's the kind of shifting that many Canadians would be glad to see.

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