Taxes

How, you may be asking, can a story about taxes possibly be interesting? In fact, many Canadians don't complain about the level of taxes we pay, because we feel we get what we pay for, compared to the United States, for example. We have far less crime, health care for all, and many other benefits that we believe are worth paying extra for.

And I agree. That said, most of us do think it makes more sense to shift taxes from income over to pollution and waste: tax what we don't want. We already do this with things like cigarettes, and it seems inevitable that there will be a carbon tax soon.

Now suppose that we decided to make this shift in a big way: in year one, for example, we reduce personal and corporate income taxes, and the GST, by 25%. We make this up by increasing taxes on pollution and waste. That sounds like a big change, and some politicians say we can't do it - that doing so will bankrupt the economy. I say horse-pucky, and it will benefit the economy. In fact, the biggest problem will be getting enough tax revenue as people and companies become more efficient and less wasteful.

Say some of these new taxes go on energy. Suddenly, things like plastic shopping bags cost a bit more - and it becomes worthwhile to buy reusable bags. Or your hydro bill goes up - and it becomes worthwhile to buy that high-efficiency washing machine you've been wanting because it's better for your clothes, your hydro bill, and the environment anyway. Don't forget you're paying 25% less in income tax and GST, so spending more money on efficiency results in more after-tax income in your pocket. And the company making the washer is paying 25% less income tax, so the washer should cost less.

In fact, shifting taxes from income to pollution and waste makes Canada a 'tax haven' for non-polluting companies.

Will prices go up? Perhaps, but you'll also have more take-home pay to buy more efficient products. And I have my doubts that prices will really go up, because our economy is so riddled with subsidies.

Take one example - aluminum cans. If Canadians drink 20 million cans of Coke in one year, then there are 20 million cans that can be remade into new Coke cans. Those cans - the 'raw material' - is right where the can manufacturer wants it, in the final market. Currently, we pay taxes to haul those cans away and recycle them.

Who's really bankrupting the economy?

But does it really make sense that it costs less to:

1. Blaze roads and train tracks to a remote location;
2. dig huge holes in rock with massive and massively expensive equipment;
3. crush that rock and smelt it - using enormous quantities of energy - to extract the metals in the rock;
4. carry that metal many kilometres to be remelted, again requiring tremendous amounts of energy, into cans?

1. Collect empty cans throughout the city, and remelt them into new cans?
2. I've added a Step 2 just to make this look like a comparable list, but in fact this method bypasses Steps 1-3 and part of Step 4, above. And it doesn't even mention how much less pollution would result, and therefore associated health problems, clean-up costs, land recovery costs, and so on.

Does it really make sense that it costs less to extract raw materials from rock than to recycle? I smell subsidy.

This is why the economy will do better if we go green. If we eliminate these subsidies to massive corporations, then suddenly it becomes worth their while to pay you for their raw materials - and the finished products become far cheaper once the infrastructure gets set up.

Eliminating subsidies to pollute

A Mars Bar lasts a few months once it's manufactured. The wrapper lasts 400 years. Mars Inc. could care less, because a) corporations are designed to care about profit first and foremost, and b) Mars Inc. isn't paying the cost of hauling it away from your house, or the landfill costs, so it's cheaper for Mars to pollute than not.

The solution is simple: Charge a high level of tax on waste, including things like Mars Bars wrappers. Mars Inc. will find a way to make that wrapper biodegradeable and compostable in a hurry.

Of course, we could also simply regulate that such products be compostable. Pretty soon, we could get down to three types of household 'waste': compostable, reusable, and recyclable - and then your trash really does become someone else's treasure. Everything you put out at the curb is a resource for someone else, and with everyone doing it - and with no more subsidies to big mining and smelting corporations - you will get paid for your 'trash.' This is already happening now in a small way, with homeless 'binners' collecting recyclable materials from garbage containers and selling them to recycling centres.

Resurrecting the manufacturing sector and the local economy

Suppose we increase energy prices with a tax of 25% on energy. Ouch. The end of civilization, right? Well, gas and oil prices fluctuate wildly and the economy keeps on growing. In fact, every time the price of energy goes up, people and companies get more efficient. When energy prices go up, it makes more sense to hire people to figure out ways to reduce energy costs.

Taking a typical product, suppose that 10% of the final retail price is due to the cost of energy in making and transporting it. (The rest is materials, labour, overhead, etc.) Slapping on an energy tax of 25% will increase that to 12.5% - so the final retail price will go up by 2.5%. And this is assuming that the manufacturer makes zero improvements in efficiency, which seems rather unrealistic.

I've already mentioned one way to reduce energy costs: use recycled materials rather than ripping up half of Canada to extract it from rocks. Making a new tin can from an old tin can takes about 5% of the energy of making one from metal-from-rock. We, the taxpayers, are subsidizing a 95% inefficiency.

Another way to spend less for energy is to spend less for transporting materials all around the country. That is, make things closer to where you want to sell them. We already do this to an extent; Coke has bottling facilities throughout its distribution regions, for example, so they need only truck big drums of concentrate. (And can keep their formula secret.) If we reduced subsidies on oil and transportation, it would cost less to manufacture closer to market. This also brings back some of the identity to ouir local communities; for example, rather than everyone in the world drinking the same thing, we have products that are unique to each region.

And when you manufacture closer to market, that means local manufacturing jobs. These days, smaller manufacturing plants are actually more efficient than huge ones; steel micro-mills are one example. If you combine the efficiency of the smaller plant with the reduced cost of transportation, shouldn't the price of goods go down? Some mega-corporations will say no, but that's because they're invested in old technology and don't want to invest in the newer equipment - or compete with those that do.

The death of taxes

When you look at the billions we spend each year to subsidise old and inefficient industries, it's quite possible that taxes could actually go down over time. For example, Canadian taxpayers donate about 1.4 billion dollars each year to the oil and gas companies. In exchange, they gut Alberta to extract oil from the tar sands, a grossly inefficient and tremendously polluting process, pay Alberta a 1% royalty, pay their executives tens of millions each, and 'lobby' our politicians to keep the whole system going.

That 1.4 billion dollars would buy two solar cell manufacturing plants each year. Let's shut down the tar sands and redirect that money to building solar cell and wind turbine manufacturing plants - let's make Edmonton and Calgary high-tech centres with stable, clean-and-green jobs. Let's sell those plants to the employees, so the government recovers some of our money and the workers become owners.

The oil and gas subsidies (and the mining and steel manufacturing and all the other subsidies) are paid every year, year-after-year - and they go up over time, of course. Redirecting the subsidies to one-time purchases of solar and wind and recycling plants means that the subsidies stop once capacity is reached; they don't go on forever.

Now we have a much more efficient, clean, and green economy that required redirection of subsidies to make it happen more quickly - but not to sustain it. That means as the various industrial subsidies come to an end - so can the taxes required to support them. If it sounds too good to be true, remember that Canada worked this way until the First and Second World Wars. We could possibly get to a 10% flat tax plus taxes on waste.

But what about the jobs?

As mentioned, when it costs more to pollute and waste, it becomes worthwhile for businesses to hire people to help reduce that pollution and waste. However, if we move to clean-and-green energy and shut down the tar sands, what will happen to all the people currently working there? And if most of our 'raw materials' come from recycling, what about the mining industry?

If we move to solar and wind power, there will be plenty of jobs in the solar cell and wind turbine plants. If we recycle rather than mine, there will be jobs in recycling/remanufacturing plants. The economy would be becoming more energy efficient, and could gain jobs in doing so.

Don't forget that manufacturing creates more jobs than does simple resource extraction. As we get back to making things in Canada rather than buying everything from China, we'll create many manufacturing jobs. To use an example from BC, we currently export raw logs, meaning, essentially, that we cut the trees down and ship them out of the country. This is a foolish and wasteful practice. At the very least, if we sawed the trees into lumber close to where it was cut, we wouldn't be seeing the mill closures that are now common. It is true that the lumber would cost a bit more (though would cost far less to transport, because a lot more finished lumber fits on a truck or ship than do whole trees), and therefore we might sell a bit less. However, we wouldn't need to sell as much to employ just as many people because we'd have jobs in sawmills in addition to the jobs as 'hewers of wood.'

However, some people would have to change jobs, and not many of us like changing jobs, sometimes even if the job we are going to is better. The feeling of uncertainty about change can keep people in jobs they hate, that pay poorly, or that are unhealthy for many years. To make this possible, part of redirecting the subsidies means giving some of the money to people rather than corporations. For example, if someone makes a good living now as an oil rigger, pay a similar salary to him for a period of time while he retrains for a new position in a solar cell plant (or wherever). If someone works now in a giant steel mill, pay a similar salary while retraining to work in the micro-mill.

Where has all the money gone...

One of our Canadian values is to take care of each other; we don't mind all paying into a system if we all benefit - or could if we fell on hard times. Our system has become skewed, with billions in subsidies going to major corporations and executives with salaries in the multi-millions - often regardless of company performance. Often, they make more the more people they lay off.

We need to begin redirecting these lost dollars into creating a new green economy and clean-and-green jobs for our fellow Canadians. When we do this, we recover money currently lost to subsidies, meaning taxes can go down if we choose. And pollution is reduced too, because we retune the economy to take into account some of the cost of pollution - and avoid the clean-up and health-care costs that go with pollution.

It's more than money

I have only touched on the economic aspects of redirecting subsidies and taxes, but there is a human and environmental side, too. If you had to choose between a well-paying job that you know…

• is deadly to our life-support system, funnels most of the profits to who-knows-where, is for a corporation that will 'downsize' you if quarterly profits take a dip, and gives you little say or ownership,

or one that…

• benefits the planet, contributes to making your community a better place, is the type of business you'd be proud to have your children work at, and that you own a piece of...

which would you choose? And why on Earth should we believe that the only way the economy will work is with the former? It's just...nonsense.

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