Carbon Tax – What is it Good For?

By Jason Fittler

There is going to be a lot of political debate around the Carbon Tax unfortunately most of it will be fueled by ill informed people who have an agenda to push as opposed to a sensible debate on the facts and effect.

I fear that people have gotten so lost in the fiction of selling the spin that they can no longer step back and separate fact from fiction any more.

This article is about looking at the facts as set out by the government to take a look at the policy and see how this new tax is going to affect the world climate, Australian climate, Australian business and most importantly Australians.

When looking at the policy of Carbon Tax you need to separate your opinion on Global Warming (Climate Change) from the Carbon Tax. Too many people approach this issue on emotional bases. When reading the Governments policy documents it is clear that it is the Government’s position that the science is settled on this issue. Taking this view point we now need to see if we are getting value for money through this package. Will the dollars that each Australian spends achieve the goals of stopping climate change?

Below are the facts from the government’s policy documents.  Every Australian citizen should read these for themselves, hopefully this article will inspire you to do just that. The facts are;

1.  In 2010 year Australia produced 578 million tons of Carbon, this amount will continue to increase under a carbon tax. The forecast for 2020 is 621 million tons of carbon. The governments plan is to slow the rate of increase, without the carbon tax the 2020 forecast was expected to be 679 tons. Therefore the carbon tax will save 58 million tons of carbon being produced by Australian companies. The target to reduce carbon by 159 million tons will be met by buying 101 million of carbon credits from overseas not from the physical reduction of carbon by companies in Australia.

2.  Per capita Australians are the biggest producer of Carbon at around 27 tons per person; however, Australia only produces 1.5% of the Worlds carbon as such when you look on the world stage we are a very small producer of carbon. One has to ask, will we make a difference to carbon production worldwide given our size and given that the amount of carbon we produce?  Australia’s carbon tax will reduce worldwide carbon by 0.1% per annum.

3.  Carbon Tax will only affect fuel for domestic aviation, domestic shipping, and rail transport, off road and non-transport use of liquid and gaseous fuels. It will not affect fuels used by households, so although they talk about the carbon reductions being like taking 45 million cars off the road in fact they will take no cars off the road. To change carbon emissions we the Australian citizens need to change our habits.  Is this tax doing this?

4.  CPI will increase 0.7% under the Carbon Tax; keep in mind that this is on top of the average increase of 3.5%. As such moving forward the average CPI rate is 4.2%. The government is looking to offset this for the average worker by reducing taxes. The average income is $66,594pa; the tax saving in 2012 to 2014 will be $338.32pa base on the average income. A saving of 0.51%pa, in 2015 onwards the savings will be 0.63%pa. Now keeping in mind that CPI will increase by 0.7% this would mean that the average income earner will be about in the same position. It does however leave no margin for error as such we have to trust that the Treasury has got this 100% correct. I am doubtful that they can calculate the cost increases that closely, time will tell. For higher income earners (people on over $80,000pa) there will be no tax reductions, you will have to pay the full 0.7% increase in CPI yourself. On an $80,000 income this is an extra $560pa; on an income of $180,000 income is it $1260. I doubt that these increases in cost will drive any change in high income earners behavior.

5.  Small business has received no tax cuts; the only offer is the extension of the small instant asset write off. For those non-accountants, this is an accelerated depreciation.  Simply put this has no effect or benefit to small business over the long term. There are two main reasons;            

a.  The small business first needs to make a capital expenditure before they receive any benefit.

b.  The benefit is the same except they receive the benefit over a shorter period of time.

6.  Self Funded retirees, will receive a lump sum payment if they hold a seniors health card in May 2012, some will benefit from the above tax cuts. But those receiving an account based pension will receive no assistance and will wear the full impact of the 0.7% increase in the CPI. Again for the high wealth individuals this will have little effect for the marginal wealth individuals this will most likely mean that they will at some point need government assistance.

7.  Job losses.  The paper provides that more jobs will be created then lost; the catch is that these jobs will be in different industries. I am sure that those who can be re-skilled will be, but those who cannot will lose their job. The figures may stack up but the real world is very different to forecasts and projections, some people will simply lose their job while others will get jobs they did not have prior to the Carbon Tax. The personal affect of someone losing their job and not being able to return to the work force cannot be measured. I guess for these people this is one of those greater good situations.

8.  The 500 big polluters will pay the tax, it is expected that they will pass on what expenses they can. But you must remember in the real world it is never as easy as the models indicate. There will be contracts in place which will need to be reworked in the years to come. Short term some of these will suffer losses to their bottom line. The other issue is that these big polluters will not be named, and as such you will never know how much they have been compensated by the government. No doubt anyone who has superannuation will most likely have money invested in these companies as such given the share markets reaction to the Carbon Tax your investment will or has already suffered.

9.  Off shore investment is another issue which can never be measured. Opportunity costs are hard to calculate and we will never really know how many large companies will change their plans on investing in Australia or what affect this will have on the growth of the nation.

The question now for every citizen of Australia is; are you getting value for your money? Is this tax reducing carbon production and resolving the climate change issue or is this simply another tax? Will the funds raised from this tax truly be put towards better technology for a cleaner Australia? If so can the government provide details of how the funds will be spent?  The government has promised a tax surplus in 2013, will they achieve this through the Carbon Tax?

We are being told it is very complicated, in fact it is not. The above questions should have been asked and answered by the government before the tax was brought in as such they should have the answers available.

As more details come to hand I will make sure that you are up dated, but below is one last thought I will leave you with;