Carbon Tax – Some numbers

Recent bickering about the impact of a carbon tax has lead me to take a harder look at the numbers to find out some specifics about what a carbon tax might cost us, and what other taxes we could abolish with the revenue from a carbon tax.

From the Federal Governments climate change website we find that CO2e emmissions from the energy sector (essentially transport, and power generation) for 2006 amount to 400.9 million tonnes. So a carbon tax of $1 per tonne would raise roughly $400 million in revenue assuming no change in consumer behaviour and no change in energy production methods.

From the ABS website we find the revenue for various existing taxes. Total payroll tax across the nation for 2006-07 amounts to $14 286 million.

From the review of Australias tax system website we find the revenue for fuel taxes. Total fuel taxes across the nation for 2006-07 amounts to a bit over $10 000 million.

Adding together these two evil taxes and doing some rounding we find that the combined revenue from payroll tax and fuel tax is close enough to $25 000 million. So to elliminate both these taxes using a carbon tax (a slightly less evil tax), limited to energy only, we would need a tax rate of $62.50 per tonne. This is a tax rate well above what is required to make low emission technologies commercially viable. If we assume a population of 20 million this amounts to a carbon tax of about $1250 each per annum.

The net effect of the above would be that fuel would cost quite a bit less (half as much net tax would apply to fuel) whilst electricity would cost more.

To put this in perspective we currently pay about $15335 per capita in annual taxes across all tiers of government.

16 thoughts on “Carbon Tax – Some numbers

  1. In my paper “exploring a carbon tax for australia” I looked at a $30/t carbon tax being used to replace the fuel tax. That would have lead to a 30c cut in petrol prices. Alternatively, you could use the same carbon tax to pay for a tax-free threshold of $10k and a top marginal rate of 30%.

    Unfortunately, it looks like the most likely outcome is goin to be an ETS (which is worse than a tax) and no other tax cuts. Worst of all worlds. It’s a shame that the Liberals couldn’t look at some of these “lesser evil” approaches.

  2. It’s a shame that the Liberals couldn’t look at some of these “lesser evil” approaches.

    do they even know it exists? Seriously?

  3. From an unqualified point of view, as far as doing tax-check-models go on how much and when, I prefer to listen to you guys who look like you know what you are doing. Staying on the same Liberal line I rather look at the energy-check-models on how much and when, that I can formulate and use to see where I can make a living in the near future.

    The most fascinating thing I see is the creation of a new market. A green market. The time seems now. Now to jump in and get your green tags/certificates/credits and build an account to trade with. Regardless if our countries have started with their capping policies or not. So that could be why the ETS is more favourable than a green price or green market investment because of the lack of infrastructure and Technical experise to implement the alternative. Tax is basically for everybody else, you have heard the Conservative(maybe you know it) line” everybody dies and everybody pays tax” well, yes that is everybody, else.

    Those who prefer to remain sole traders pay large tax just like any salary earner. But society was not built by sole traders or salary earners, so to appease the lot a good business would have to never pay tax. As for our communities who live with incompetant Govenments charity is a rewarding oulet, thus never having to deal with Law makers who get involved with our Economy, regardless of their “smart” terms like Fiscal(which is a private term for business) and monatary( which is also a dicount belonging to business princples).

    No I believe this green market will get us out of the way of Nationalised bank balances and back to business. Let the lazy watch TV!

    Pricing the carbon is in action. That is good for me, atleast.

  4. “Unfortunately, it looks like the most likely outcome is goin to be an ETS (which is worse than a tax) and no other tax cuts. Worst of all worlds.”

    Gee, what a surprise!

    Prior to the election, I remember being told – because of my opposition to a carbon tax – that I had my head in the sand, and that rather than “crying about it”, I should face reality and push for a least-worst solution (namely, a carbon tax instead of ETS).

    I just “wasn’t being pragmatic” and needed to understand the reality of politics. In my opinion, anybody who seriously believed a new tax would be introduced, without the government keeping it’s other taxes in place was delusional, and doesn’t understand the reality of politics 🙂

  5. Fleeced — even a carbon tax without offsetting tax cuts would be better than the ETS. And it would be politically easier to get tax cuts mixed with a new tax. And politically easier to remove the tax later.

    The probabilities were 90% of ETS, 7% of a carbon tax, 2.99% of a revenue-neutral carbon tax and 0.01% of the government doing nothing. I think we should all be trying to stop the ETS.

  6. I think we should all be trying to stop the ETS.

    No arguments there… and if we were in power, we might ultimately be willing to support a carbon-tax as a compromise. But we’re not in power, and as long as we’re not in power, we need to make a stand. We do this for at least three reasons.

    1. You might be willing to compromise if you gain power, but you should play your cards close to your chest. If we shift ground before we’re even elected, then we’ve got less to bargain with if/when we do.
    2. Even should we fail to get elected, people already in power – but opposed to an ETS – will seem “less extreme” by comparison.
    3. Don’t “concretise the myth”, It’s much easier to campaign on “No new taxes” than on specifics. Keating showed how this strategy works against the GST – you could basically re-dub his old ads against carbon tax (or ETS) and it would doom them to failure.

  7. Fleeced – your notion that we should “take a stand” is grand standing as if we here actually hold some negotiating power. I’d suggest you get over it because we don’t. The only power of significance that any of us here might actually have is the capacity to promote ideas to a small but engaged audience. And if the LDP wants political power via preferences then it’s champions will need to learn to talk turkey and dance with the devil.

    I think we should abolish income tax but I don’t lose sleep when somebody promotes income tax reform such as 30/30.

  8. “Fleeced – your notion that we should “take a stand” is grand standing as if we here actually hold some negotiating power. I’d suggest you get over it because we don’t.”

    You seem to have comprehension issues, Terje – my point was the opposite: That we should take a stand precisely because we don’t have power, and are not in a position to compromise.

    I think we should abolish income tax but I don’t lose sleep when somebody promotes income tax reform such as 30/30

    Likewise – but 30/30 is not a new tax. Supporting a new tax, when you know full well that government nature is to simply take it as an additional revenue stream with no offsets, is folly.

  9. Do you think the introduction of the GST was a bad reform?

    A carbon tax need not be a new tax. It could merely be a broadened, modified and renamed fuel tax.

  10. Do you think the introduction of the GST was a bad reform?

    Not as such, but nor do I think it was implemented particularly well. Weren’t you all complaining at the last election how the tax take revenue had actually increased under Howard (even excluding the GST?)

    At any rate, a carbon tax is not a GST – it isn’t being suggested as a basis of tax reform, but of behaviour reform… and as much as you keep on preaching it as the former, it simply isn’t how it will happen – you’re giving government an additional method of taxation.

    A carbon tax need not be a new tax. It could merely be a broadened, modified and renamed fuel tax.

    Yes, it could be, but it won’t. Indeed, getting petrol levy reduced (as part of the “broadening”) has even less chance of success than reducing other taxes.

  11. The GST was excluded from the tax growth calculation because it is a federal tax that notionally replaced taxes that were both state and federal. We were given John Howard the benefit of the doubt.

    This discussion is fun but largely academic. As it stands we are getting an ETS.

  12. To TerjeP

    The idea built society and employed emplyees to do so, a mistake in saying “appease the lot” I meant ; to appease the lot, they, as sole traders or salary earners take on the responsibility of running a business, say Jonh Doe CC. or Ltd. Less of a burden on Governments if every employee became a registered business and hired out their services also paying less tax. Ultimately should you prefer not to sponsor a Government that goes War on you or your neighbours you could use fiscal on the supply-side of your business, which in turn showns an investment in your business continually and a growing market that never saturates. say like food vs human population.

    But rather pay the tax if you do not have the responsibility to run a business and sponsor corrupted Governments in your civil service.

  13. To TerjeP

    I retract all my comments, please ignore my unqualified replies, after careful investigation I realise that it belongs to “fairy tale suggestions”. My real attitude is based on hard work not what I have regurgetated so far.

    I do still find the Global warming issue a real valuable lesson.

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