The Great Irish Carbon Tax Experiment

Interesting report in the New York Times today, about a carbon tax scheme in Ireland and how it’s going. I suspect more than a few politicians, both in Canada and the U.S., will want to look at this, so here’s a few points in summary:

• It’s definitely a vote-loser for whichever administration brings it in. The Irish coalition government that brought it in, got voted out of power last year.
• It’s definitely a revenue generator. Because it’s essentially defined as a form of consumption tax, it’s brought in a whack of cash to a government in sore need of deficit reduction.
• It most definitely does not help the poor. The government had to bring in a subsidy program for low-income homeowners, to help them defray the cost of the tax.
• People learned to live with it. This is probably the one thing that gives hope to carbon tax proponents and causes its critics to gnash their teeth. Yes, a few industries are grumbling and complaining, and certainly more than a few citizens are suspicious of just where all that carbon tax money is going. But, by and large, people learned to accept the rate, and adapted their lifestyles in order to reduce its impact. There was no tax revolt, only a sense of satisfaction from its proponents that the tax is doing what it’s designed to do.

This is one of the reasons why I don’t believe a sustained attack on the NDP over alleged plans to introduce a carbon tax are going to work. Most people understand that a tax, once introduced, is very, very hard to get rid of; the most one can do afterwards is keep the rate to a reasonable minimum.

The carbon tax scheme, depending on how it’s designed, will in all likelihood go like the GST: big complaints from the opposition and interested parties, followed by loud protests over its implementation, followed by a change in government over how badly it was managed, followed by the realization of the incoming new government that the tax would be difficult if not impossible to get rid of, followed by years of learning to live with it, followed by grudging acceptance.

There’s also one other significant difference between Ireland and Canada, in that Canada is a federal system. The federal government, no matter who’s in power, will in all likelihood argue that the provincial level is the more appropriate one for a carbon tax scheme.

The one sure thing is that, because of its revenue potential and because people are still making noises about the environment and climate change, the idea of a carbon tax is not going to go away any time soon. Which is why it’s a good idea to keep an eye on Dublin and how their finances are going.