Monday, August 25, 2008

A lead balloon

The Cons' latest trial balloon looks to me like one of the more bizarre moves in recent political memory, as the Harper government is apparently looking at countering the Libs' carbon tax plan with a tax cut which makes little sense in political or policy terms:
Senior members of the Conservative government have discussed a possible $1-billion cut to a tax on diesel fuel, sources say...

The tax in question is the four-cent excise tax charged per litre of diesel. In the most recent fiscal year, the levy generated over $1 billion of revenue for Ottawa. Eliminating that tax would benefit the biggest users of diesel fuel, namely city-run bus services, railways and trucking outfits...

(T)he proposal has been met with opposition from the Department of Finance, which is reluctant to give up a stream of revenue, particularly as the economy has lost steam and Ottawa's budget surplus is down significantly from last year. Moreover, a spokesman for the Prime Minister's Office has denied that such a cut in the works. "It is not true," said Kory Teneycke.
It's worth noting that the article doesn't focus much on the use of diesel fuel by individuals, particularly in rural areas. Which strikes me as odd, since that seems to be the support base which the Cons would be looking to boost by proposing a diesel tax cut - though of course the Cons likely wouldn't want to admit any need to shore up what's been their most reliable source of support.

That said, it's hard to see how the Cons could justify even suggesting the idea otherwise, as a focus on the effects of an incremental change in the price of shipping goods would seem to be a sure loser politically.

After all, any reduction in consumer prices resulting from such a cut would depend on the oil industry, the shipping industry and retailers all choosing to pass along any reduced costs rather than taking profits for themselves - which is what makes such a cut a poor measure from a policy standpoint. Needless to say, there's little reason to think any of them would hesitate to take as much of the gain as possible.

What's more, even if any of the cut did manage to filter through to consumers, the effect would take at least some time to work its way through the supply chain. Which means that any potential benefit for consumers at large would be a remote possibility in both likelihood and time.

Meanwhile, the immediate costs to Canada would be obvious. After a summer where there's been plenty of attention to the possibility that the Cons have already mismanaged the country into a deficit, a move to drain another billion dollars from the federal treasury could only make Harper look even more reckless when it comes to Canada's finances.

So would Harper put forward a low-reward, high-risk strategy solely for the sake of drawing a stronger contrast to the Libs' carbon tax? If so, that can only signal that the Cons are even more bereft of ideas than any of us had already suspected. And even the fact that Con sources felt the need to try the idea out speaks volumes about just how little the Cons have to offer.

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