Federal carbon tax revenue could bypass provinces and go directly to taxpayers

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Prime Minister Trudeau and Environment Minister Catherine McKenna at COP21. Photo by Environment and Climate Change Canada, via Flickr. CC by 2.0.

Ottawa may circumvent provincial governments that don’t have their own carbon pricing schemes and give federal carbon tax revenues directly to individuals and businesses. While the government has promised to return the levies to the provinces they came from, a draft legislative proposal released Monday indicated that they could either go to provincial coffers or directly to citizens.

“I thought that language was interesting, in that it provides the federal government with what appears to be a great deal of flexibility in precisely how they recycle those funds,” University of Calgary economist Trevor Tombe said. “They’re restricted to put the revenue back in the province, but not necessarily into the hands of the provincial government.”

The federal carbon tax will only apply to provinces that don’t have their own. While more than 80 percent of Canadians will be covered under provincial initiatives, Saskatchewan Premier Brad Wall has promised to challenge the federal government in court if it tries to impose a carbon tax there. Additionally, New Brunswick’s plan to offset its carbon tax through an equivalent cut to the existing gas tax won’t meet the federal requirement, Environment Minister Catherine McKenna has said.

Some argue that decisions about how to distribute that revenue are best left to the provinces, however. “Different provinces have different needs in terms of the share of low-income individuals, for example,” Tombe said. “Poverty rates are not uniform, so different provinces will take different approaches.”

Read the full article in the National Post.

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