OTTAWA -- Stéphane Dion is poised to unveil a carbon-tax scheme and attempt to neutralize any political damage by offering corresponding personal income tax cuts of between $10-billion and $13-billion to working Canadians, senior Liberal sources say.
The Liberal Leader wants this major environmental policy to be the centrepiece of the party's election campaign platform, according to the sources, and is anxious to reveal it this summer to give Canadians a chance to digest the idea before a federal election.
The plan, according to sources, would shift the 10-cent federal excise tax on a litre of fuel at the pumps into a broad-based carbon tax that would also apply to other fuels, such as for home heating. Sources say that the plan would not add more taxes to gasoline.
But the key is that the money raised - estimated as much as $17-billion - would be returned to middle-class and working Canadians in personal income tax cuts, making it revenue neutral. There could be corporate tax cuts as well.
Print Edition - Section Front
More Front Page Stories
The policy of a broadly based fuel tax is making some Liberals nervous, because gasoline prices are rising at warp speed and Canadians are being punished at the pumps.
"Just in the short time Dion has mused about a carbon tax, the Conservatives have already preframed the issue negatively in the media," said a veteran Liberal strategist who opposes releasing the plan now.
"Imagine what they will do with the actual material in a sinking economy," he says.
"The issue is Stephen Harper and there is a wealth of material to take him down. Instead, we pass that up to launch a summer of Dion. No wonder Liberal morale is so low."
But without risk there are no rewards, supporters of the initiative say. And in announcing his plan now, Mr. Dion is attempting to grab the "green" ground and attract NDP and Green Party voters.
Senior Liberal sources say he will try to frame the carbon plan as a "revenue shift" or "tax shift," not a tax.
Those who are close to Mr. Dion say he wants to make a daring move because he believes it is right.
"I know Stéphane well enough; contrary to rumour, he's got a really strong spirit, strong will, he's not a coward," says Peter Russell, professor emeritus in political science at the University of Toronto, who has encouraged Mr. Dion to adopt a carbon-tax policy.
"And he may have a sense that boldness at this time is what the country is maybe looking for."
A senior Liberal strategist concurs: "I think he is going to run on it and make it the platform of his campaign. He's a man who believes in what is right. The political side doesn't really interest him."
And that's the problem, according to the insider: The only way to implement ideas in politics is to get elected. Carbon pricing is a complicated issue that the Harper Conservatives will likely portray as just a tax grab.
However, a Canadian Press-Harris-Decima survey released yesterday suggests 61 per cent of Canadians support the idea of a carbon tax on businesses and people, even though an overwhelming majority also favour using taxes to punish or reward green behaviour.
The Tories have repeatedly rejected a carbon tax. They prefer stricter carbon-emission controls for big polluters. The Liberals want to get the issue to the public well before a federal vote to ensure Mr. Dion doesn't get tripped up trying to explain a complicated scheme during the hurly-burly of an election campaign.
Mr. Dion's plan follows closely a proposal laid out recently by Jack Mintz, the former president of the C. D. Howe Institute, who recently moved to the University of Calgary.
Mr. Dion and his supporters repeatedly mention the model, created by Prof. Mintz and Nancy Olewiler of Simon Fraser University, when talking about how to deal with the environment.
The Mintz model would shift the federal fuel excise tax to a broad-based carbon tax, which would raise about $17-billion.
"It's a lot of money and you can cut corporate and personal taxes about 8 to 10 per cent," Prof. Mintz said.
Meanwhile, a well-placed Liberal source says that Liberal finance critic John McCallum and several former Department of Finance officials have worked on the tax-savings portion of the plan.
The carbon tax and other environmental proposals have been tested by focus groups, insiders say.
The Dion Liberals are also looking at the B.C. Liberal government's graduated carbon tax, which is to be returned to British Columbians in tax breaks.
Some federal Liberals who are nervous about the carbon-tax initiative have noted that the Gordon Campbell Liberals did not campaign on their plan.
On July 1, when British Columbians will begin their summer holidays, gasoline prices will rise an additional 2.4 cents a litre. However, other Liberals believe that the relatively positive reception given to Mr. Campbell's ideas will insulate them from future criticism.
And although Prof. Mintz believes in a carbon tax as a way to improve the environment, he doesn't want it to become a campaign debate.
"I wish it didn't become an election campaign issue," he said. "... Right now people don't know which direction to go in ... it's like a horse race right now amongst the governments and they are all jumping out of the starting gate but they are running in different directions."
10