BC Liberal leadership candidate George Abbott – photo: PNG
I was winding down a vacation and catching up on news from home when I learned that BC Liberal leadership candidate George Abbott was proposing to put the continuation of B.C.'s carbon tax to a referendum ballot. Abbott, as I saw it, was putting tax policy to a vote. As much as we all cherish our democracy, taxation policy by referendum has been very problematic – especially in jurisdictions like the State of California.
George Abbott is a strong candidate for Premier, but this issue is a showstopper for me. I responded by saying his proposal would not allow me to personally support his candidacy. To his credit we've now heard back from George, and below is his response.
I recently read your editorial posted on January 9 regarding my proposal to add a question on the carbon tax alongside the HST referendum.
Obviously, I was disappointed you disagreed with my position on the matter. In hopes that you may reconsider that position, or at least pass this response along to your readers, I wanted to offer my response to the five points you raised.
1. “We already had a referendum on B.C.'s carbon tax – it was the 2009 election campaign”
In 2008, we introduced the carbon tax. I supported that tax, I voted for it, and I stood for it in the 2009 election – an election that BC Liberal government has won. Some have argued that represented a mandate for the carbon tax among other things, and that is why as a government we remained committed to that program.
But let’s be clear on the program and the mandate. In 2008, the commitment was to introduce and escalate the carbon tax over five years – starting at around 2 cents a litre with the intention to hit a peak level of around 7 cents in 2012. After that time, government would have to make a decision – does it keep increasing that tax indeterminately, or should there be a review period?
So what is the mandate for the carbon tax beyond 2012? That is not clear. What I do know is that we have a significant opportunity to pursue and define a renewed mandate for this program using a rare tool that is now right in front of us – the HST referendum vote, which will hopefully be held as early as June.
Under my commitment, a second question could be added to the HST ballot asking people to make a choice on the following: should the carbon tax continue to grow after it reaches its scheduled peak amount on July 1, 2012, or whether government should hold the tax at that level through 2015 to allow for a full review and assessment of the tax’s impacts and effectiveness. To be very clear, this option does not include eliminating the carbon tax come 2012; this is a question about expanding the tax further.
Some have said this decision is too important to put to the people. Frankly, I think it’s too important not to put to them. Politicians often speak about engagement with the public; this is a case where we have to mean it. It is especially important on issues that clearly affect the quality of life for individuals and families.
I believe that at a time when people are facing a world that is very different than the one in 2008, we need to take these opportunities to ensure that the government’s mandate is the right one. And with this vote, whatever the outcome is, we’ll know that the next phase of our climate agenda will reflect a mandate from the people and from that perspective will ultimately be the right choice. If we truly want to “stand by British Columbia’s carbon tax – full stop” (your words), then I believe that means all British Columbians standing together.
2. “Tax policy by referendum ballot has been the ruin of California.”
While it’s not the only reason, I agree it has contributed. But comparing this commitment to the challenges of states like California and Arizona represents both a total misread of the how the carbon tax works as well as a misread of my commitment.
As a former health and education minister, I would never endorse a system where the government forfeits control over the revenue it needs to support vital social programs.
But the carbon tax is different. It is not a revenue-raising tax; it is revenue-neutral. Under law, it is a tax on fuel that is shifted back to consumers and business through tax cuts.
It does not provide a single cent of revenue to government to support programs. Regardless of the outcome of the vote, virtually nothing will change on government’s ledger. So the comparison with the approach of U.S. states simply doesn’t hold in my view.
Some have since suggested to me that the public makes short-sighted decisions when it comes to taxation (and your post infers that you agree with that). As a blog focused on municipal issues, I’d be remiss if I didn’t point out that the use of referendum is very commonly employed at the municipal level in British Columbia when it comes to large expenditures accompanied by rate increases. Those proposals often succeed.
3. British Columbians income taxes are lower [because of the carbon tax]
That’s absolutely correct – overall income taxes for individuals and businesses are now the lowest in the country because we have taken the revenue from carbon tax and converted it into tax cuts. It taxes consumption and emissions, and gives that back through your pay cheque. It also gives back through a variety of credits targeted at low-income earners and northern residents.
The current fiscal plan has the province continuing to do that through to 2012 when carbon tax hits its peak. Regardless of the outcome of the vote I am proposing, the revenue flowing in from carbon tax at the 2012 level will continue to flow in every year after that to continue to support those tax cuts.
The very important question to the voter is this: after 2012, do they want to see the carbon tax go higher and thus see greater opportunity for more tax cuts? That is the question I want to put in front of people so they can take ownership of the outcome.
I should further note that every individual has a different perspective when it comes to whether they are further “ahead” with or without the carbon tax once the associated tax cuts and credits are compared in their personal situation. In my view, that is all the more reason to ensure that every individual has a say on what’s next.
4. “Cap and trade is coming, but it's a much more clumsy tool for reducing energy consumption”
Both the carbon tax and the prospective cap and trade system are components of a broader climate action agenda government has been pursuing since 2007. And both will remain important components in the years to come. The carbon tax is acknowledged to be a good mechanism to target many emissions at the consumption level while cap and trade can target emissions at the industrial level that the carbon tax does not reach.
But the reality is that a cap and trade system depends upon partners to create a large enough critical mass of consumers and industry to form a true market. In B.C.’s case, that partnership (through the Western Climate Initiative) is still under development and recent reports are showing that most partners are re-evaluating the aggressiveness of their participation based on new economic circumstances. While I firmly believe B.C. needs to stay at that table and push for an agreement, we know we can’t dance alone.
This potential delay in advancing cap and trade puts the trajectory carbon tax in a new light. If we are too aggressive on increasing the carbon tax, we may find we are disproportionately taxing the consumer while the industrial cap and trade approach develops. If we are not aggressive enough, then we lose our leadership position, the opportunity to drive the international agenda, and potentially a huge competitiveness advantage through further broad-based tax cuts. It is a difficult balance to achieve; that’s why I think people need to be part of choosing the path.
5. “The carbon tax will give British Columbia an important international advantage as energy prices skyrocket.”
I agree – if we do it right. Many, like me, supported the carbon tax because it was right for the environment and the economy. And that may continue to be the case in the future. But I also respect that the carbon tax has an impact on every individual, family and business in this province, and that they need to have their say as well.
The carbon tax has represented a fundamental evolution in how government can use taxation to impact activity while still returning benefits in other forms. The question we must now ask is whether it has worked, and whether it will work in the future if we keep increasing it. There is clearly an advantage to be had in adopting this approach to taxation from a competitive perspective, and I have every faith that the public will consider that element as they do all other elements of the carbon tax picture when they vote.
In closing: My colleague, Kevin Falcon, has suggested that there should be freeze on the carbon tax in 2012, full stop. That is an option, but it is a blunt one. And while you may find that approach “more measured” (as you put it), I think it is once again an example of top-down decision-making at a time when we really need to get the public’s feedback on this question.
I suspect we will find that there are many people on both sides of the question, and the public debate followed by a real choice will be an outstanding exercise in democracy. In that spirit, I applaud you for using your blog to advance some of this debate in a thoughtful manner, and hope you will consider the other side in the days and weeks ahead.
Mike, you have framed this debate as a question of “leadership” – and have stated your belief that in this case leadership means making a unilateral decision. At times that may be correct. But there are also times when leadership is about listening, engaging and harnessing the collective wisdom of others.
This entire leadership campaign is ultimately about leadership style. I have staked my campaign on the principles of engagement, transparency and empowerment – and the chance to choose on the next steps with the carbon tax is proof of those principles. Other candidates have taken different paths. Soon enough, it will be time for the members to decide what leadership style they want to see.
- post by George Abbott. For more information on George's campaign visit georgeabbottforbc.ca, and to find out more about the other BC Liberal leadership campaigns visit bcliberals.com. In order to vote for one of the candidates on February 26th, you need to be signed up as a member by February 4th.
George Abbott has also responded to our leadership survey on urban issues, and we'll feature his comments in a post tomorrow.