Wednesday, May 18, 2011

Gov must top interfering with art

Last night on the Sun News program Byline, I talked about how art subsidies create both financial and moral costs to society.

I based those comments on my National Post article. Read it here.

When politicians put publicly-funded arts groups on a diet, they can be sure those groups will bite back. Prime Minister Stephen Harper found that out the hard way during the 2008 federal election, when he cut arts funding by a miniscule three per cent.  According to political analysts, the resulting backlash in Quebec may have cost him a majority government.   But even between elections, arts groups across the country clamour for more access to other people’s money, and politicians, fearful of their next trip to the polls, do their best to comply. As a result, billions of hard-earned tax dollars land in the pockets of these groups every year, creating a visible benefit for some – the winners - but an unseen cost for others – the losers.

Read more here.

Tuesday, May 17, 2011

B.C. Hydro high-flyers consume your money

If a company in the private sector pays huge salaries to its workforce instead of investing in infrastructure to serve its customers, the company's share price would go down and it would eventually either go bankrupt or be taken over by a corporate raider.

Organizations in the government sector don't have share prices and don't need to worry about raiders. This means priorities in the government sector are very different from those in the private sector. B.C. Hydro is a case in point.

Read the whole story here.

Saturday, May 14, 2011

Cashing in on climate change - the carbon offset scam

Who would pay $25 for something when other people would only pay 14 cents? Why, the government of course!

The B.C. government is forcing its ministries, agencies, schools and hospitals to pay for the amount of carbon they emit. This was part of Gordon Campbell's plan to have a carbon neutral public sector to stop the globe from warming. But when the BBC and even the Globe and Mail start pointing out we haven't had any global warming since 1998 even though  carbon dioxide levels continue to rise, we know the global warming bandwagon has derailed and it's time for B.C. to jump off.

As we've seen recently, businesses still have time to cash in on global warming, and they are. The government  will send tax dollars to businesses if they lower their carbon emissions, and to companies set up specifically to absorb those funds. The government created a  Crown Corporation to collect other peoples' money already in the budgets of government organizations and distribute them yet again, this time to businesses. It's called the Pacific Carbon Trust.

How does this work? Schools and hospitals pay $25 dollars per tonne of carbon they emit to the Pacific Carbon Trust, then the Pacific Carbon Trust sends that money to companies that have lowered their emissions. The Trust has not disclosed how much it pays to companies for each tonne of reduced emissions. We can only hope it is not more than $25 per tonne.

If the school or hospital wanted to pay only 14 cents for that tonne of carbon, it used to be possible at the Chicago Climate Exchange. Used to, that is, because the Chicago Climate Exchange shut down, in part for lack of interest.

But anyway, taxpayers in B.C. are still on the hook to pay $25 for that same tonne of carbon emissions.

Why?  Because when government spends other peoples' money, it does so for political, not economic, reasons. Would you use your own money to pay $25 dollars for hot air  when you could pay for 14 cents?  For that matter, would you pay for hot air at all? Of course not.

The BC government gave $14 million in 'seed' money to the Trust then paid about $860,000 to offset 34,370 tonnes of carbon emissions. Instead of paying for hot air, what could the government have done with money?  How about reducing the deficit or even to school sports programs? But wait, it gets worse. Instead of funding for students, right now government is forcing school boards to purchase software to measure their carbon emissions. This will cost 42 cents per student for the software alone. But that is only part of it. This also involves hiring people to go around to the schools and do important things like measure the emissions coming out of the old fridge in the staff room.  The government's priorities are all wrong.

How does this benefit business?  Well, if a company like Encana or Shell Oil reduces the amount of carbon dioxide it emits by one tonne, it gets a credit paid to it of some amount from the Pacific Carbon Trust. So in other words, schools send money to companies like Encana or Shell instead of paying for school programs. A fine example of our tax dollars at work.

But wait, Shell Oil received $856 million dollars from the federal and Alberta governments for its carbon capture and storage project. It will capture carbon dioxide in the air then bury it. So, it got tax dollars to create the technology to reduce its carbon dioxide emissions, and now it can also get more money from government for reducing its carbon dioxide emssions. If you've ever wondered why some companies are extremely profitable, here's a good example. Some companies can drill for oil and gas and for tax dollars at the same time.

When the Chicago Climate Exchange was still up and running, carbon offset promoters said the  Exchange wasn't as trustworthy as a government program. After all, bureaucrats work altruistically for the greater public good, right? Just like the managers at ICBC's research facility who were buying salvaged vehicles for themselves using insider information and getting their own cars repaired on the cheap. This scam went on for 10 years before the whistle blew.

While perhaps well intentioned, government spending to stop global warming will do nothing to stop global warming but it will hurt families and children and redistribute tax dollars to businesses. It's time to jump off the global warming bandwagon.

Monday, May 9, 2011

HST - another "hold your nose" vote

I used to get emails from outraged people saying they were going to be forced to pay an extra $10,000 per year because of the HST. I thought - wow, you must get a lot of haircuts, but it wasn't all that funny. It showed how confused people were, and probably still are, about the HST. Now it's true, the HST does hit more goods and services with an additional 7%, but only on about 20% of what we buy. The cost of 80% of what we buy is not affected by the change to the HST. Yes, the HST will take more out of your pocket but unless you put a new roof on your house, not anywhere near $10,000.

To explain all this, the government commissioned a report to lay out the facts about the HST before the referendum.

I would encourage people to take a look at it as it also lays out the many ways the government gouges us. The provincial government alone will take $41.3 billion of our money this year. The HST accounts for about 14%,  personal income tax about 14%, other taxes such as the carbon tax and sin taxes like tobacco and alcohol taxes take another 14%, another 21% is taken from another "other" category of  taxes such as the health tax, and 7% comes from Crown Corporations like BC Hydro and ICBC, which of course, also get their money from you and me.

Then the report goes on to justify why government takes so much of our money away. Government spends on our needs (as if a bunch of politicians and bureaucrats know what we need better that we do).  Where most of our dollars go is to health care and education spending. Health care takes up about 42% of the provincial budget and education about 27%.  While it's true, we all need medical care when we are sick and kids need education, it doesn't follow that we need state hospitals and state schools.

If you've ever wondered why services provided by government get more expensive every year, it's because in a state system, priorities get skewed. In the current state hospital system, we have people languishing and dying on wait lists. Sure we're told we have universal access to health care, but access to a wait list is not access to health care.  We need to address the inefficiencies of the system - not just feed it more money. For example, eye doctors make more than brain surgeons and some school board superintendents make $250,000 per year. In 2010, one assistant superintendent made $600,000. Until this gets straightened out, taxes will continue to rise.

What else does the Dinning report show?

We already knew the average person would pay more with the HST. The report showed the tax is going to take an extra $350 dollars per year out of the pockets of families. We also already knew people with high incomes would pick up the bulk of the HST. The report showed more than half of the HST is paid by families with incomes over $80,000 per year. We also already knew people with low incomes would be better off. The report showed people making less than $10,000 per year are better off under the HST because of the rebate cheque they get.

There was one surprise. The HST is not revenue neutral. Well, maybe it wasn't that much of a surprise. For starters, whenever you hear the words revenue neutral you should worry. It's code for -- government never gets less of your money. Anyway, that's the intention. But we shouldn't be all that surprised when government revenue forecasts are wrong. After all, the carbon tax was supposed to be revenue neutral but turned out to be revenue negative. How did that happen? Because of the recession, people drove less than expected so government earned less in carbon taxes.

The old PST took about $5 billion out of your pocket each year. According to the report, under the HST, the provincial government brings in an extra $820 million per year. So obviously, the personal and business income tax cuts weren't big enough to offset the revenue brought in by the HST.

In the referendum on June 24, we can choose whether to keep the HST or extinguish the HST (get rid of it) and re-instate the old PST/GST system. What it doesn't mean is an end to the sales tax in B.C. 

The report makes a couple of interesting points about this choice. Should people decide to go back to the old PST/GST system, the transition period could take up to two years - so if people think after the referendum the entire system will magically go back to what it was, they need to think again. The government would also have to give back whatever it already received of the $1.6 billion bribe from the federal government. More importantly, if we go back to the PST/GST system, we'd lose all the economic benefits and future economic growth a more efficient tax system would bring. The benefits to business, and therefore job growth and wealth creation in the province, would be lost.

What to do?

The government needs to lower the BC portion of the HST by two percentage points.

Why? Because the tax takes much more money out of our pockets than the old PST. One of the selling points for harmonization was the tax change would be revenue neutral. Let's make it so.

As the report notes, we are only stuck with the HST in its current form until July 1, 2012 unless we can get the Federal government to agree to a change. After that, we can change the rate once per year.

So the obvious strategy is for the government to reduce the rate by one percentage point on July 1, 2012, and another point on July 1, 2013.

The sad reality is, until people are willing to do more for themselves and stop asking the government to solve every problem under the sun, we will be forced to hand over more and more of our income to government. In the meantime, we should have a tax system that is the least destructive to personal initiative and the incentive to work save and invest. For the moment, the HST fits the bill.

The last thing we should do is go back to the PST.