A motorist removes a gas pump nozzle after fueling up at a gas station in Vancouver, B.C., on Tuesday July 1, 2008, the day the provincial carbon tax went into effect.Darryl Dyck/ The Canadian Press
" I am open to considering using the carbon tax to support regional initiatives, such as public transit."
Premier Christy Clark, outlining her plans for B.C.'s controversial green tax on fossil fuels.
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Premier Christy Clark has said she will "follow the path that has been laid through 2012 on the carbon tax." In other words, the tax on a litre of gas will increase by more than a penny on July 1, going up to 5.56 cents a litre from the current level of 4.45 cents, and will increase as high as 6.67 cents a litre next year.
Ms. Clark has also indicated her government has not yet decided what will happen after 2012, but she was willing to consider using carbon tax revenues for public transit.
However, Ms. Clark is offering money for transit that she does not have.
Revenue from the carbon tax has gone entirely toward specific tax measures since it was introduced. And the money has not been nearly enough to pay for the tax cuts that have already been announced.
If Ms. Clark intends to earmark carbon-tax revenue on transit or anything else, she will have to either roll back previously announced tax cuts or continue to hike the carbon tax to finance the tax cuts and whatever government programs she wishes. Alternatively, she may be counting on revised forecasts projecting higher tax revenues as the economy continues to pick up.
B.C. introduced the innovative carbon tax on July 1, 2008, in an effort to nudge consumers toward more environmentally responsible choices and reduce their reliance on fossil fuels. The measure was not supposed to be a tax grab. The government promised that revenue from the tax on carbon would go back to taxpayers through tax cuts. None of the money was to be spent on government programs.
As a result, carbon tax revenues are now paying for a substantial package of personal and business tax measures. School taxes for industry and farms have been reduced. The corporate income tax rate has been cut to 10 per cent from 12 per cent. The small business corporate income tax rate will drop to zero by 2012 from 4.5 per cent. Some personal tax rates have been reduced by 5 per cent.
Revenue from the carbon tax has also funded a $200 benefit for rural and northern homeowners, and a low-income tax credit that is now set at $115.50 for an adult and $31.50 for each child.
However, revenue from the carbon tax has not been enough to cover those tax cuts, according to the B.C. government's annual budget and fiscal plans.
The carbon tax brought in $542-million in 2009-10, which was $187-million less than the lost revenue from tax cuts in that year. The carbon tax is expected to bring in $950-million in the current year, which is $191-million less. Projections for 2012 - the final year of the "path" that Ms. Clark has decided to follow - show the carbon tax is expected to bring in $1.17-billion, which is $328-million less than the revenue lost from the tax cuts.
Ms. Clark says she is willing to use carbon tax revenues on something new. If the revenues are still intended to cover tax cuts as well, Ms. Clark may require a significant hike in the tax rate to have money left over for transit or other purposes.