the blog quebecois

OTTAWA - Stéphane Dion is poised to unveil a carbon-tax scheme and attempt to neutralize any political damage by offering corresponding personal income tax cuts of between $10-billion and $13-billion to working Canadians, senior Liberal sources say. The Liberal Leader wants this major environmental policy to be the centrepiece of the party's election campaign platform, according to the sources, and is anxious to reveal it this summer to give Canadians a chance to digest the idea before a federal election.

The plan, according to sources, would shift the 10-cent federal excise tax on a litre of fuel at the pumps into a broad-based carbon tax that would also apply to other fuels, such as for home heating. Sources say that the plan would not add more taxes to gasoline.

But the key is that the money raised - estimated as much as $17-billion - would be returned to middle-class and working Canadians in personal income tax cuts, making it revenue neutral. There could be corporate tax cuts as well.

Think about this for a bit. The rationale behind collecting a carbon tax is to mitigate the alleged damage caused by emitting greenhouse gasses. Therefore you would expect the revenues collected to be directed towards research and implementation of such things as fuel-efficiency, carbon sequestration (burying underground the CO2 produced from such things as energy production and utilities), alternate energy sources, etc.

These may be or may not be good ideas; my bet is on the latter. What would be unquestionably a bad idea would be to try and meet our elusive (and impossible) Kyoto targets by buying hot-air credits on the ridiculous "carbon markets" that they're proposing. Handing over untold billions of dollars to Russian and Chinese kleptocrats in exchange for their promises not to build things -- the competition is young, but that's possibly the stupidest concept of the century.

But never mind all that. Assume that every last dollar remains here, fighting nasty climate change. Do you see a little problem?

Namely that the Liberals are promising to make the tax "revenue-neutral," which means that they're lying (again!). If they truly intend to give income tax breaks of an equivalent value, then they've just blown a $17-billion hole in federal revenues. Where will they find the money to cover it? From health care? The military? Provincial transfer payments?

My guess is none of the above. They'll announce big, showy tax cuts and then proceed to scrape every nickel and dime of it back through user fees, new levies, handling charges and the like.