This was good news not only for the environment but for nearly everyone who pays taxes in British Columbia, because the carbon tax is used to reduce taxes for individuals and businesses. Thanks to this tax swap, British Columbia has lowered its corporate income tax rate to 10 percent from 12 percent, a rate that is among the lowest in the Group of 8 wealthy nations. Personal income taxes for people earning less than $119,000 per year are now the lowest in Canada, and there are targeted rebates for low-income and rural households.
The only bad news is that this is the last increase scheduled in British Columbia. In our view, the reason is simple: the province is waiting for the rest of North America to catch up so that its tax system will not become unbalanced or put energy-intensive industries at a competitive disadvantage.
Over dinner tonight, Milton Friedman's name came up, and I commented that in about 1978 and again in 2006, a few weeks before his death, Milton Friedman called land value taxation the "least bad" tax, but never lifted a finger in the intervening years to help promote it.
The carbon tax is another good, and wise, and just, tax.
How many economists will put their shoulder to getting it enacted?
How many will simply hang out in their ivory towers?
What would a British Columbia-style carbon tax look like in the United States? According to our calculations, a British Columbia-style $30 carbon tax would generate about $145 billion a year in the United States. That could be used to reduce individual and corporate income taxes by 10 percent, and afterward there would still be $35 billion left over.
Why on earth should the privilege to pollute OUR air be be given away for free, or for less than the social costs it imposes on us? Who benefits from such a system?