Terry McCrann thinks going ahead with the ETS is bad in the current economic climate:
The ETS is a tax and a tax specifically on energy. If increased taxation is what we need now, why then did the Prime Minister actually hand out $10 billion last week?
It seems to me that the impact of the ETS on overall fiscal policy would indeed be as he stated – if one assumes that all other revenue and expenditure streams are unchanged.
But doesn’t additional taxation coming in from the ETS simply mean that the overall budget position can remain the same just by changing other parts of fiscal policy? Several seemingly obvious options:
- McCrann seems to have overlooked any of the compensation/redistribution elements to the Government’s ETS that would see the money go back out of the public coffers.
- Perhaps the additional revenue could be frittered away/spent on worthless/worthwhile (delete as appropriate based on political ideology) Government initiatives such as keeping people healthy, making people smarter, looking after people who have fallen on hard times, etc.?
- Perhaps another area where the Government collects money could be adjusted so they collect less?
In other words, the ETS is about creating a tax system where companies’ tax burden is determined, to some extent, relative to their environmental impact. On the other hand, fiscal policy is about the overall tax revenue relative to Government expenditure. The two principles appear to be largely independent of one another and yet both within the Government’s control – why assume that they would only act on one without addressing implications for the other?