In Short : Phil Tank draws a parallel between the promise of the Goods and Services Tax’s (GST) demise and the skepticism surrounding the implementation of a carbon tax in Canada. This commentary likely reflects public discourse on tax policies and their perceived impact.
In Detail : As Conservatives promise to axe the carbon tax, it’s worth remembering the pledge to Canadians to eliminate the hated GST in the 1990s.
To hear Conservative Leader Pierre Poilievre explain it, often to rallies of enthused supporters, axing the carbon tax represents a simple task.
Upon the tax’s elimination, inflation will magically disappear and the affordability crisis will abate.
But nothing’s ever that smooth. As popular as it might be to campaign on getting rid of a tax, governments never easily relinquish sources of revenue. That’s why taxes are rarely reduced or eliminated.
So it’s worthwhile to remember the last time a Canadian government got elected on a promise to eliminate a tax. That would be the Liberals under Jean Chretien, who promised the hated GST (goods and services tax) would be history once they were elected.
The GST was introduced three decades ago by Brian Mulroney’s Progressive Conservatives. On Jan. 2, 1991, the day after the new tax took effect, the front-page headline in the Saskatoon StarPhoenix read: “You can’t hide from GST.”
It mattered little to most that the seven per cent GST was not really a new levy; it replaced the 13.5 per cent manufacturers’ sales tax.
But the manufacturer’s sales tax was hidden and people could see the GST every time they made a purchase. Chretien rode taxpayers’ anger to a majority government in 1993 in an election that reduced the PCs to two seats and ultimately destroyed Mulroney’s party.
But three years after Chretien was elected, he admitted he could not find a way to eliminate the hated tax and apologized for breaking his promise. The Chretien Liberals also reneged on a promise to scrap the North American Free Trade Agreement.
Despite critical broken promises, Chretien was rewarded with two more majority governments before his own party pressured him to leave.
Yet one key difference between Mulroney’s GST and Justin Trudeau‘s carbon tax is that the Liberals campaigned on carbon pricing, so they can claim Canadians voted for it. Trudeau regularly refers to the tax as a price for pollution.
Another difference is the carbon tax represents a new levy that did not exist prior to its introduction, as opposed to a shift in tax policy like the GST. It’s also a new source of government revenue.
But, as it stands right now, the carbon tax collects a fraction of the revenue of the GST, which accounted for about $46 billion or about 11 per cent of federal government revenue in the 2021-22 budget.
The carbon tax generated $6.3 billion or about 1.5 per cent of revenue in the same budget. More than half of that or $3.8 billion was returned as rebates to taxpayers.
As for a potential Conservative government led by Poilievre eliminating the carbon tax, it might not be that simple.
If affordability is really the goal, how do you justify ditching a tax that returns more than half the money collected back to people?
The federal government says 90 per cent of money collected on fuel charges is returned as rebates.
Those rebates underline why Saskatchewan Premier Scott Moe’s carbon tax revolt may be fizzling.
Saskatchewan’s government now suggests it may pay the carbon tax to the federal government through other sources of revenue, even though it is no longer collecting the carbon tax on home heating to protest the cynical exemption for home heating oil.
So much for the outlaw province.
As for Poilievre’s suggestion that killing the carbon tax will significantly reduce high food prices, the Bank of Canada says the levy contributes only about 0.15 per cent to overall inflation.
Moreover, Poilievre also suggests spending under the Liberals is another factor fuelling inflation. Presumably, then, a Conservative regime would spend less and perhaps even try to balance the budget.
But eliminating a source of revenue like the carbon tax makes it tougher to reduce spending without deep cuts to services — and, no, defunding the CBC would not be enough.
Poilievre may well ride carbon tax hostility to victory, but driving a stake through its heart could prove more difficult.