Alberta should make it’s carbon fee revenue neutral.
A carbon fee doesn’t have to be a “tax on everything.” Rather than grow government spending, making the system revenue neutral means all revenue generated by the fee would be used to offset other taxes through tax cuts and credits. All money is returned directly to Albertans.
Thanks to modelling from EnviroEconomics, we know that a fee of $30 a tonne could generate $3.9 billion in tax cuts for Albertan taxpayers and job creators. As the fee increases, so does the amount of money refunded. By 2030, a revenue neutral price on carbon could inject $11.5 billion into Alberta’s economy. By getting carbon pricing right and using the revenues to lower taxes, the government has an opportunity to not only change behaviour but make Alberta’s tax system more efficient, and ease the burden on Alberta’s businesses and households.
Carbon tax done right should translate to tax cuts.
In order to ensure the least possible harm to Alberta’s economy while still reducing emissions, the province should focus on redirecting carbon tax revenues in a way that is broad based and focused on easing the burden on Alberta households. Corporate taxes should be reduced to ensure a more competitive economy, and low-income individuals or families and rural and northern communities should receive credits to offset increased costs.
The following is one scenario for possible tax reductions that could be offered by 2020 when the revenues from a carbon tax at $40 per tonne could reach $5.2 billion:
Reduce Corporate Income Tax from 12% to 9%: $1.7 billion
Reduce Small Business rate from 3% to 2%: $200 million
Replace top four Personal Income Tax rates with 11.5% rate on taxable income above $100,000: $600 million
Reduce 10% Personal Income Tax rate to 9% and increase personal exemption to $20,000: $1.6 billion
Low income credit of $300 / adult and $75 / child – $1 billion Rural / northern homeowner benefit: $200 million
Total tax reductions across the economy: $5.2 billion
Alberta should steadily increase its carbon fee.
Albertans know that their economy can’t flourish unless measures are taken to curb the province’s carbon emissions. That’s why we are proposing a system that would significantly reduce emissions and help Alberta get much closer to its 2030 targets than current policies and projections.The policy proposal we have modelled would achieve a significant reduction in greenhouse gas emissions, while also producing significant revenues, which we recommend be recycled into tax cuts to stimulate the entire Alberta economy.
