Not only will it not be revenue neutral, it will bring in revenue the B.C. Liberals will come to depend on (h/t to Dan)

When Finance Minister Carole Taylor introduced the provincial budget in February, I questioned how the government could call it balanced when it clearly showed spending in excess of revenue.

My suggestion that the answer could be found in rising debt elicited an angry call from a finance department official who explained that I had omitted revenue from Crown corporations.

Since the government conveniently omits Crown corporation debt when it calculates ratios based on "taxpayer-supported" debt, it seemed reasonable to me to ignore the revenue as well.

Nevertheless, I'll 'fess up to the error because, even though debt is indeed rising, the government is more heavily dependent on Crown corporation revenue than debt to avoid a deficit. Simply put, the deficit would be $755 million this year and just under $2 billion in each of the next three years without Crown corporation revenue.

To balance the budget, Victoria extracts $2.7 billion a year in dividends from the Crowns, including $400 million from BC Lotteries, more than $300 million a year in electricity sales to the United States and, if the projections are accurate, up to $1.9 billion in fuel taxes, including the brand new carbon tax everyone seems so proud of.

Ah, but wait. The carbon tax can't be used to balance the budget, it's supposed to be revenue neutral.

Now, Graham Whitmarsh, head of B.C.'s Climate Action Secretariat, is the nicest guy you'll ever meet and may believe with all his heart that every dollar the government collects in carbon taxes will be returned to taxpayers through tax reductions. He assured The Vancouver Sun's editorial board of this conviction on a recent visit. He seemed at a loss, however, when asked how municipalities will cover their increased costs other than through tax increases.

Port Coquitlam, for example, estimates that the carbon tax will add $821,000 to the cost side of the ledger over the city's five-year economic plan. It intends to pass on that cost to residents through a phased-in 1.75-per-cent property tax increase. Municipalities need to heat buildings and operate fleets of cars and trucks, incurring carbon costs that must be recouped through higher taxes or municipal service fees.

This kind of tax increase doesn't appear to be included in the province's estimates.

I've been poring over a slew of spreadsheets on taxes, incomes, emissions, consumption patterns and government finances provided by Aldyen Donnelly, president of WDA Consulting Inc. and GEMCo (Greenhouse Emissions Management Consortium), and haven't found many winners in the numbers. After the first year, when the $100 climate action credit creates a positive spin, the new tax regime quickly turns negative for most taxpayers and small businesses despite future increases in the credit.

In fact, it appears that taxpayers will contribute $3.8 billion more to government coffers by 2012 than they would have in the absence of the carbon tax and, because it is the most regressive form of taxation, the lowest-income households will bear a disproportionate share of the tax burden.  Read rest...

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