With the skyrocketing price of gasoline throughout Quebec and persistent inflation, one wonders how the provincial government can help the financial situation of the middle class and the less well-off. The Alberta government announced a few days ago the suspension of the provincial fuel tax following the Trudeau government’s announcement to raise the federal carbon tax to $50 per tonne on 1er next April, and it is clear that politicians here also have a role to play in this difficult period for our portfolio. But what exactly should that role be?
Posted at 10:00 a.m.
Fight climate change, not workers’ income
Let’s get back to basics. When the government of Quebec decided to establish its “Carbon Exchange” and that of Canada implemented the carbon tax, the goal was the same: to encourage consumers to change their behavior by choosing more goods that are more ecological than pollutants. The logic behind carbon taxation – and the carbon exchange – is consistent, and helps to internalize the costs of pollution.
In other words, when an oil company, for example, refines barrels to transform crude oil into different products such as gasoline, it necessarily emits several tons of CO2 in the air. Thus, the fact of producing and consuming oil inflicts a cost on others, by polluting the air they enjoy. It is therefore entirely coherent economically – and ecologically – that the price of a polluting good such as gasoline includes compensation.
This (almost) consensus among economists on the principle of carbon taxation is clear. However, as one can imagine, the theory is often quite different from the practice!
In Quebec, although gasoline consumers are already subject directly and indirectly to these various carbon tax mechanisms, they must also bear the cost of various additional provincial and federal taxes at the pump, not to mention consumption taxes.
For every liter of gasoline we consume, we must pay provincial fuel tax (19.2 cents), federal excise tax (10 cents), carbon tax (11.05 cents from 1er April 2022) and, of course, QST and GST – not to mention that QST and GST are taxes… on other taxes! In addition, for the greater Montreal region, there is also a tax of 3 cents per liter for the financing of public transport, and a minimum price on gasoline for all regions. In all, it’s more than 55 cents per liter right now going into the state coffers.
Let’s stop double taxation
If the Quebec government really wants to help the population while being consistent with its economic and environmental efficiency objectives, it must not succumb to pressure and demand the withdrawal of the carbon tax: it must instead eliminate the taxes two fold.
More specifically, if we believe that the carbon tax and the carbon exchange are effective mechanisms aimed at achieving our various objectives – and I do – then there is no need to add another layer of taxation.
The Quebec government should eliminate the provincial fuel tax, and potentially withdraw the QST temporarily on gasoline to give Quebec families a break.
In terms of public policy, before political decision-makers ask themselves what new action they could take to solve a problem, they should always ask themselves if measures have not already been put in place and if these measures accentuate the problem. With regard to gasoline taxes, that is certainly the case. Overtaxation must stop, for the good of all Quebecers.