The carbon tax, not always progressive

The carbon tax is a progressive tax, even if the government does not return some to the less well-off taxpayers. This statement by Alberta Premier Rachel Notley is incorrect, the economists consulted said.

The Alberta leader was questioned at the meeting Tuesday by Jason Kenney, who said that “low-income people will continue to pay more for the energy they consume,” compared to the richest.

The premier said that the carbon tax “is actually progressive even without refunds (paid by the province to low-income households), because those who earn the most burn more carbon.” The tax applies to gasoline, natural gas and other fuels.

“That’s not right,” says University of Calgary economist Trevor Tombe.

According to him, it is true that the better-off tend to pay more tax, because they consume more fuel: they buy more products whose manufacture and transport generate pollutant emissions, they have larger houses to heat and they often have a second car.

Someone who earns twice as much does not consume twice as much fuel. A little more, but not twice more.

Trevor Tombe, Calgary Professor of Economics

If we look at the proportion of tax revenues, it’s different: in 2018, Albertans paid less than $30,000 a year spent about 1% of their income on the provincial carbon tax, compared to only 0.4% of their revenues. % for households earning more than $ 150,000, he explains.

The Director General of the Ecofiscal Commission of Canada, Dale Beugin, who also studied the Alberta data, says the tax is “slightly regressive”.

The expert report that proposed to the Alberta government the implementation of the carbon tax had also pointed out that a carbon price, “imposed without protection for low-income consumers, would be regressive”.

This is why the implementation of the carbon tax, from January 1, 2017, was accompanied by a refund whose amount varies according to the income of taxpayers.

The discounts are progressive

All households earning less than $95,000 receive a refund. For those with incomes below $60,000, this rebate is generally higher than the cost of the carbon tax.

The Alberta tax is currently $30 per tonne of carbon. It will increase to $40 in 2021, then $50 in 2022. Even though the provincial government plans to use the additional revenues for its general expenses, “the refunds will stay in place,” said Environment Minister Shannon Phillips.

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