As the Pacific Ocean quenched the setting sun just west of Victoria on May 29, 2008, NDP leader Carole James, leader of the Opposition, stood in the legislature and voted ‘Nay’ on the third reading of Gordon Campbell’s Carbon Tax Act, alongside 29 of her colleagues. Their votes were for nought, subsumed by the 41 ‘Yeas’ voiced from the government side of the aisle. But James' negative vote stood out, for she was turning her back on wisdom she'd offered on television just over three months earlier.
On Valentine's Day she had said to Vaughn Palmer on Voice of BC: “I think a revenue-neutral carbon tax that really looks at supporting low- and middle-income families, that actually is phased in so people can manage, that provides them with options to make change, then I think it's worth looking at.” That revenue-neutral, slowly rising, supportive carbon tax design was exactly what the conservative Campbell government passed into law, and exactly what she voted against. Between February and May, James had yielded to the populist siren call that equates “tax”—no matter how well designed—with “poison.” “Axe the tax” was very soon to become her party's new mantra.
Sixteen years later, that hackneyed rhyme is stronger than ever. We hear it snarled almost every day from Conservative leader Pierre Poilievre in Ottawa, and repeated by BC Conservative leader John Rustad. Both typically couch carbon pricing as a “tax grab” or a “job killer.” Other anti-taxers take a different tack, claiming that eliminating the carbon tax will magically make citizens instantly better off. In BIV in September, Carson Binda of the Canadian Taxpayers Federation predictably wrote that “scrapping the B.C. carbon tax would mean immediate savings for British Columbians,” asserting that B.C. households with natural gas furnaces would pocket an extra $330 this winter if the only the tax could be axed.
He's wrong. Here's why.
In 2008, Campbell's carbon tax was required by law to be revenue neutral. Every penny of tax revenue had to be returned to taxpayers and businesses. Most of us have forgotten that the Campbell government met that obligation in four ways.
First, personal income tax rates for B.C. were reduced on January 1, 2008, and again in 2009, for the bottom two strata of our progressive income tax system, a measure that benefitted lower-income households proportionately the most. Carole Taylor, minister of finance at that time, insisted on that provision, pointing out to me that it fit with her innate sense of social justice. Second, corporate income taxes were reduced in stages from 12 per cent in 2008 to 10 per cent by 2011. Third, small business taxes—those with annual incomes up to $400,000—saw their tax rate fall to 2.5 per cent from 3.5 per cent on December 1, 2008, a striking net decline of 29 per cent. Fourth, low-income families began receiving direct cash subventions on July 1, 2008, payable quarterly. Every one of these tax reductions or support measures was fully funded by carbon tax revenue. And here's the kicker, the piece that axe-the-taxers ignore: Personal income tax rates in B.C. have never gone back up since the 2008 and 2009 carbon-tax-supported reductions. Small business taxes have never gone back up. And direct cash subventions for low-income families are higher today (currently $1,008 per year for a family of four with combined taxable income under $57,288 per year) than they have ever been, again supported by carbon tax revenue.
So, when the Taxpayers Federation claims that B.C. residents will save hard-won dollars should the carbon tax be axed, they are ignoring half of the revenue expenditures equation. Erasing the carbon tax will cut the revenue flow from that stream to zero. How then will the personal income and small business tax reductions that have prevailed since 2008 be funded? Will those taxes jump back up and eat into our paycheques, or will axing simply increase the provincial deficit? None of us would benefit from either of those options. And how will the cash subventions be sustained that today support low-income folk, the cohort that typically gets back from the carbon tax revenue pool significantly more than it puts in? The silence of the Canadian Taxpayers Federation on those questions in failing to look at both sides of the revenue-neutral equation is the tell that reveals its classic snake-oil salesmanship: "Our elixir will cure your ills. Just ignore the side effects."
In the current political realm, Poilievre and Rustad have been able to sell their elixir successfully because they are not being held to account. Have any of us ever heard Poilievre utter the word “rebate” in the many, many speeches in which he's thundered “axe the tax?” Has Rustad ever been asked which income tax rates he'd increase, or which low-income subventions he'd cancel were he to axe the carbon tax? And adding to that, what on earth was David Eby thinking when he announced on September 12 that he too was ready to jump onto the axe the tax bandwagon?
It's a basic truism that in the fractious world of climate politics, smart policies succeed only when they are accompanied by political acceptability. We achieved that in B.C. in 2008 by guaranteeing that almost no one would be out of pocket: Carbon tax revenues were required to be returned to taxpayers. When the federal Liberals adjusted our carbon tax model and took it national in 2018 via the Greenhouse Gas Pollution Pricing Act, revenue neutrality was the centrepiece that fostered acceptance, admittedly grudgingly. But the need to tout that central selling point, repeatedly, was quickly forgotten. As salesmen, the federal Liberals failed badly. How many Canadians know today that four times a year—typically via unseen direct deposits—they are getting back more, all or most of the carbon taxes they pay when they fuel up their minivans or pay their natural gas bills? Very few, the pollsters tell us. Better marketing would have cheques mailed out every three months with a "Canada Carbon Rebate" stamped across them in large font. B.C. still sticks (mostly, although in the last decade with less transparency) to its original 2008 tax model for redistributing carbon tax revenue: Direct cash supports to low-income citizens remain coupled with across-the-board income tax reductions that see all taxpayers in B.C. continuing to take home larger paycheques, thanks to the carbon tax.
Regrettably, hardly anyone in British Columbia remembers that income tax rates were decreased in 2008 and 2009. But invisible as those reductions are, the good news is that they are still in place. Thanks in part to Campbell and Taylor shifting our provincial tax burden more onto carbon emissions and less onto earnings, we continue to have for most taxpayers the lowest personal income tax in Canada. A two-income family of four today with a total taxable income of $120,000, for example, pays $1,371 less each year than the same family in Alberta, and $1,251 less than their counterpart family in Ontario. And here's the bonus: Those British Columbians who burn less fossil fuel—EV drivers and heat-pump owners, for example—still pay the same lower income tax as everyone else and have even more net savings in their pockets.
The bad news is that most fossil-fuel consumers in B.C. remain unaware that the carbon levy is actually reducing their net personal tax burden. Does the provincial government ever remind us of that? No. Communication from Victoria on that front has been rare. That same lack applies nationally. Indeed, Shachi Kurl, president of the Angus Reid Institute, has described the pitiful promotion of Prime Minister Justin Trudeau's flagship near-revenue-neutral carbon tax policy as “a failure at the most basic level of retail political communication.” It is largely those failures that for months have underpinned Rustad's malfeasant axe-the-tax campaign in B.C. and allowed Poilievre to misrepresent Canada's carbon tax from coast to coast to coast.
In contrast, Eby's shocking jump onto the axe-the-tax train appeared to represent simple, unprincipled political opportunism, an attempt to blunt the growing success of axe-the-tax efforts prior to the B.C. election.
In June 2008, James also threw down the “axe the tax” gauntlet in a rather blatant attempt to find an issue that “could turn things around for the party,” according to well-known NDP strategist David Schreck. “What they need is something, a ballot box question, that can get voters steamed … [by] voting day," he said. That something turned around and bit James, hard. “Axe the tax” became a spectacular fail over the next 11 months. Environmentalists felt betrayed by the position, and leading economists were stupefied. James tried to mitigate the damage by proposing to replace lost carbon tax revenue with new taxes on “big polluters,” (read, oil and gas companies). But that was just smoke and mirrors; the Pembina Institute described her approach as “eliminating the foundation of the existing B.C. climate plan without offering an equivalent or improved replacement.” Pembina calculated that the 76 per cent coverage of emissions under Campbell's then-young, broad-spectrum carbon tax would be reduced under James' plan to span just a third of B.C.'s emissions.
Why, then, did she do it? As I report in The Carbon Tax Question, it was a simple political calculation. Attacking the carbon tax might have allowed us “to capture some constituencies in rural B.C. … if we just chipped off a few centre votes,” said one NDP insider in an off-the-record interview. Well, it didn't. In the end, James' attack on Campbell's flagship climate policy failed; his centre-right carbon-tax government was re-elected to a third term. Campbell told me that the NDP's axe-the-tax campaign drove some “three or four per cent” of the popular vote to his party, “from people who really didn’t care much about politics but they did care about the environment.” And in B.C., a three-per-cent swing in the vote makes the difference between being a majority government or not.
Eby should have taken note. He could have announced that, if re-elected, he'd restore full revenue-neutral purity and transparency to B.C.'s carbon tax program. In 2017, John Horgan's minority government, then supported by the Greens, erased the legislated requirement to return every penny of carbon tax revenue received to taxpayers, via tax reductions and direct cash subventions. That was a major misstep; now re-elected, Premier Eby could reverse it.
From 2025 on, Eby could redirect every penny of new revenue generated by annual increases in the carbon tax toward increasing direct cash returns to low-income citizens while reducing, every year, personal, small business and corporate income tax rates. It would be a back-to-the-future approach, a re-establishment of Campbell and Taylor's 2008 fully-revenue-neutral carbon tax that two years later was described by Paul Ekins, one of the globe's leading environmental economists and head of the all-party Green Fiscal Commission in the U.K., as a “template for the world.” If Eby was to do this, it would curry wide favour among environmentally oriented voters in B.C. Mind you, heeding history, he would need to communicate his reinvigorated revenue-neutral program clearly, consistently and frequently.
If Premier Eby emulates James’ disastrous axe-the-tax campaign, not only will he hobble British Columbia's positive climate-action momentum—he will mar our hard-earned international reputation as a growing clean-technology job-creating powerhouse. He will have been played by the very climate-change deniers that both he as a left-wing social democrat, and Campbell as a centre-right conservative, spent years confronting.
Premier Eby should throw “axe the tax” where it deserves to go: Into the dustbin of truly bad ideas. Trust that British Columbians do still care about the global warming that is costing all of us. Fight against the blinkered climate policy negligence of the right that will impose increasing hardships on future generations. And never forget that we had a winning internationally acclaimed, fully revenue-neutral carbon tax in the five years from 2008 to 2012, during which our per capita emissions fell nearly 20 per cent relative to the rest of Canada while our economy grew at least as fast as the rest of Canada. Campbell's design worked. By 2012, two-thirds of British Columbians supported it. Let's bring it back, and in so doing, replace snake oil with intelligent policy.
Thomas F. Pedersen is professor emeritus at the University of Victoria, and author of The Carbon Tax Question: Clarifying Canada's Most Consequential Policy Debate, (Harbour Publishing, 2024).
