Unfortunately for the pro-carbon tax crowd, the new Fraser Institute study shows that the BC provincial government had to bend the truth as the carbon tax receipts grew
Fraser Institute Study Shows British Columbia Carbon Tax Is NOT Revenue Neutral
In the U.S. debate over a federal carbon tax, one of the key arguments is that the receipts from a new carbon tax could be used to reduce other taxes, thereby limiting the damage to the economy. We at IER have warned that this is a very naïve belief, citing historical episodes of "tax swaps" that gave the worst of both worlds, as well as the plans of progressives to use carbon tax revenues to fund "green" projects.
Until recently, the single best trump card in the pro-carbon tax hand was the case of the Canadian province of British Columbia. The BC carbon tax, introduced in 2008, has been called "the best climate policy in the world" by environmental economists. This is because the BC carbon tax was explicitly designed to be "revenue neutral," meaning that it would only change the composition of taxes, but not the overall level of taxation. In short, the revenue raised from BC's carbon tax was supposed to offset other taxes, so that the measure would function purely as a way to limit greenhouse gas emissions, rather than acting as a general tax hike.
