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Parliamentary Budget Officer Sees Most Households Coming Out Ahead from Federal Carbon Price

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Most households in provinces subject to the federal government’s backstop price on carbon will get more money back in rebates than they pay out in taxes, though less than Ottawa projected last year, the non-partisan Parliamentary Budget Officer concluded in a new analysis released this week.

“Most households will receive higher transfers than amounts paid in fuel charges,” stated [1] the report by Yves Giroux, released Tuesday. “However, by now accounting for the carbon cost embedded in the provincial and federal sales taxes, fewer households will be categorized as better off, on a net basis, in comparison with the analysis in the previous report.”

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The C$20-per-tonne backstop price applies in Alberta, Saskatchewan, Manitoba, and Ontario, The Canadian Press notes, and was introduced in New Brunswick before that province adopted its own carbon tax. Federal law calls for 90% of the backstop price to be refunded to households in the provinces where it is collected.

Although the federal tax was expected to be revenue-neutral, CP says it will raise about $100 million in new Goods and Services Tax (GST) revenue by driving up the cost of products. That windfall is expected to triple by 2022/23, when the backstop price hits $50 per tonne.

“Large and higher-income households were also expected to actually pay a cost, as the rebate did not keep up with their consumption,” CP explains. “Part of the reason is wealthier Canadians tend to own bigger homes, own bigger cars, and drive more often. But the rebate also tails off as households have more children.”