Prime Minister Stephen Harper’s latest attack on the Liberal Green Shift plan:

Conservative Leader Stephen Harper says the proposed Liberal carbon tax would plunge Canada into a catastrophic recession and reignite the battles over national unity.

In a way he is right in his analysis, but in another he is also wrong.

The Green Shift plan in its current form, as thought up by Stéphane Dion, is not a workable solution in my view. It might work if Canada were a different country, perhaps.

A carbon tax is not necessarily a bad thing, but such a consumption tax, and that’s what it is, can be implemented only where taxes don’t already gobble up at least 45% of households’ income.

It would actually be a great thing if the system underwent a major shift, from income to consumption taxation. Most economists agree that income taxes are highly unfair and that consumption taxes should be used instead to fill the government’s coffers.

The Green Shift plan should be discarded for now. It does not benefit the environment and is nothing more than the same old wealth redistribution scheme that is so typical of the far left.

Let’s have a major and thorough reform of the tax system first – personal income taxes should not make up more than the absolute maximum of 15% of a person’s or family’s income and, ideally, would be around 10% or even less. Consumption taxes, such as the GST or a carbon tax, could then be increased or introduced.

In some European countries, for example, the GST, or value-added tax, comes in different rates for specific groups of products, such as 32% for cars and 15% for non-luxury items. Austria, for example, had a 32% GST on cars twenty, thirty years ago – no small wonder, then, that the country made substantial investments in public transit even back then.

But you cannot do both, that is, high income taxes and high consumption taxes. Since our times call for a more careful and efficient use of resources, consumption taxes are the only way to go if we are really serious about controlling behaviour.

So, you want a carbon tax? Fine, but first reduce personal income taxes substantially to no more than 15%.

Here’s what’s wrong about Dion’s Green Shift and his claim that it will be revenue-neutral and result in tax cuts.

The Tax Cuts:
- New universal child tax benefit of $350 per child per year.
- New guaranteed family supplement of up to $1,225 a yerR for low-income families.
- Various tax credits for lower-income workers, disabled people and rural and northern residents.
- Increase in the guaranteed income supplement for low-income seniors.
- Federal corporate rate tax reduced to 14 per cent by fourth year.
- Small-business income-tax reduction of one percentage point.
- Tax incentives for research and green technologies.

Those are not real tax cuts, but special bonbons for very specific, and small, groups of taxpayers — very much like the “tax cuts” implemented by the Harper goverment, which weren’t real tax cuts either. The majority of taxpayers would therefore see their tax burden increase under Dion’s plan, instead of benefiting from an across-the-board cut in taxes.

Sweden, by contrast, does it the right way:

The Tax:
Rate: $159 per tonne of emissions.
Gasoline: 37 cents per litre.

The Tax Cuts:
Tax revenues used to decrease income taxes.

This is the proper way: you use the revenue from the carbon tax and apply it to general, across-the-board income-tax cuts, rather than targeting only very specific groups of taxpayers.

The Swedish model is an example of doing it the right way; Dion’s Green Shift represents the worst possible approach.

Correction: When I analyzed the Green Shift plan at first, I used information obtained from the Globe and Mail. Unfortunately, the newspaper left out crucial information:

A chart in yesterday’s newspaper on Stéphane Dion’s carbon-tax plan omitted the proposal to cut income-tax rates, to 13.5 per cent from 15 in the lowest income-tax bracket, and to 21 per cent from 22 and to 25 per cent from 26 in the middle brackets.

So, based on that, let me propose the following to Stéphane Dion:

Leave incomes up to around $25,000 untaxed and drop the entire bottom tax bracket (15% now; 13.5% under the Green Shift plan), reduce the brackets more substantially (to 20% from 22, and to 22% from 26%), and you might have yourself a deal, Stéphane.

Will you take me up on my proposal, Stéphane?