Taxation Policy

Of the Green Party of Canada

[2005]

1.0.1 Taxation

1. Introduction

The Green Party believes that taxation is a tool that should be used to achieve policy objectives. Resource use taxes and land value levies should be used to provide incentives to businesses and citizens to conserve energy and resources and to use land more efficiently. The belief is that businesses and people will modify lifestyles and purchasing habits to avoid taxation.

When in power, the Green Party will begin a partial, gradual, revenue neutral tax shift from income, consumption and business taxes to resource use taxes, pollution taxes and land value levies. This proposal will not encourage or discourage economic activity but will reduce sprawl and reduce industrial throughput. Industry, which follows the path of tax resistance, will retool to take advantages of reduced taxation on green technologies and processes.

As taxes are shifted from business and personal incomes to resources and land, tax reduction should begin by raising the basic personal and business exemption. Tax changes would be most evident in business planning and major purchases, and for individuals, when buying or renovating major items such as a house, car, major appliance, etc., when lifecycle costs are most likely to be taken into account.

2. Terms and Assumptions

Green Tax Shifting: moving the source of government revenue from "earned" income (labour, business activities, farming) to "unearned" income (use of land or resources), otherwise externalized costs (pollution), and the use of community-owned features (billboards, magnetic spectrum, air waves). Tax shifting is revenue-neutral and not a tax reduction or tax increase.

Resource use Taxation: levies on the use of fossil fuels, minerals, metals, aggregates, water, trees to encourage conservation, and levies on pollution into air, soil, water to equal the damage done (know as pigouvian taxes).

Land Value Taxation: a yearly charge on the surface area of land irrespective of improvements, buildings or use of the land within a specific zoning. Since land values are community-generated, a percentage of the economic rent produced by land should accrue to government general revenue.

Economic Rent: the wealth generated by a resource monopoly in excess of the cost of production minus a reasonable profit, or wealth generated by land ownership in excess of the purchase price plus interest costs minus a reasonable profit.

3. Concise Policy Points

1. It is better to tax "bads" rather than "goods".
   
2. Taxes should be designed to conserve resources and energy.
   
3. Taxes should be designed to increase employment.
   
4. Distributive taxes are preferable to re-distributive taxes.
   
5. Resource taxes should be applied early in production process.
   
6. Taxing unearned income is preferable to taxing earned income.
   
7. Green tax shifting is revenue-neutral, not a tax break or tax grab.
   
8. Resource use and community-generated land value taxation are fairer.
   
9. Green taxation increases international competitiveness.
   
10. Business and consumers should pay for what they take, not for what they make.
    
11. Taxing community-generated land values is beneficial.
    
12. Taxes should encourage local, sustainable, value-added production over imports.
    
13. Taxes should reduce monopolies and encourage wider ownership.
    
14. Taxes should be applied only once.
    
15. Income taxes and business taxes are green-neutral and should be minimized.
    
16. Income and business taxes do not reduce economic inequity.
    
17. Consumption Taxes are green-neutral and should be phased out.
    
18. Resource use and land value taxation will reduce size of underground economy.
    

4. Explanation of Each Policy Point

1) It is better to tax "bads" rather than "goods". The GPO would employ selective "eco-sin taxes" to discourage a wide range of grey production processes and lifestyles and reduce taxes on greener manufacturing technology and lifestyles. People should have the option to avoid taxation by choosing greener products and lifestyles.

2) Taxes should be designed to conserve resources and energy. Rather than taxing jobs and profits, taxes should be moved to resource use and energy consumption to reward conservation. The community should benefit from the use of commonly held resources. Using resources is a privilege, not a right, and the user should pay for the privilege. Resources must also be shared with future generations and other species.

3) Taxes should be designed to increase employment. Moving taxes onto resources and land and off of incomes will make people less expensive to employ and materials and energy more expensive. Products that tend to use fewer resources and less energy and require more skilled labour will avoid taxation. The resulting value-added production will generate more jobs and more highly skilled jobs than resource intensive products generate. Local sustainable production, short run niche production, and skilled trades and crafts receive a bias as the full costs of transportation and mass production are internalized.

4) Distributive taxes are preferable to re-distributive taxes. If wealth is distributed more fairly in the first place less re-distribution will be necessary. By moving taxes onto resource use and land values, the poor, who generally own less land and use fewer resources, will be subject to less taxation, thus requiring less redistribution. Taxing land value but not the use of land will reduce taxation on higher density housing, thus lowering housing costs for lower-income citizens, and reducing another need for wealth re-distribution.

5) Resource use taxes should be applied early in production process. Resources should be taxed as they enter the manufacturing process in order to green all aspects of the manufacturing process from extraction to the finished product. Increasing taxes on resource and energy use will encourage efficiency, innovation, reuse, repair, recycling, and used material recovery.

6) Taxing unearned income is preferable to taxing earned income. The tax shift to resource use and community-generated land values will distribute income more fairly without dependence on income and business taxation to redistribute income. Taxing unearned income (resource use, land values) and not earned income (jobs, profits) will reduce the rich-poor gap since the rich are always in a better position to capture unearned or windfall income by their ability to hold assets in excess of their needs.

7) Green tax shifting is revenue-neutral, not a tax break or tax grab. The collective amount of tax paid by businesses and individuals will not change, but greener businesses and consumers will enjoy tax relief. Greyer businesses and consumers will incur higher taxes. Studies show that 50% of businesses and consumers will be unaffected or only slightly affected by tax shifting, while roughly one quarter will realize tax reductions one quarter will be taxed more.

8) Resource use and community-generated land value taxation are fairer. Resource use and land value levies are much simpler to collect and harder to evade than taxes on incomes and on business profits. Moving to resource use and land value taxation will reduce the size of the underground economy as there are far fewer points of taxation. Also, the difficulty of evading these taxes will reduce the problem of overseas tax havens.

9) Green taxation increases international competitiveness. Moving taxes off of domestic labour will reduce labour costs in Ontario and therefore reduce out-sourcing by businesses seeking cheap labour in other countries or provinces. Border tax adjustments can be set to account for price differentials, particularly related to energy, that would otherwise affect imports and exports.

10) Business and consumers should pay for what they take, not for what they make. Businesses should not be taxed for hiring people or for earning a profit, but should be charged for using resources and polluting the planet. People should not be taxed for earning an income or purchasing products but should be charged for the value of land they own and the resources used in the products they buy. Using resources, owning land, and polluting are privileges granted by communities, and businesses and consumers should be charged a fee for these privileges.

11) Taxing community-generated land values is beneficial. Since the community around it, not its owner, creates the value of land, the community should receive the benefits it has created. The owner is entitled to a fair profit but not to windfall profits that rightfully belong to the community that generated the wealth in the first place. Under LVT the specific use of the land will not be taxed, only the land itself, within the existing zoning. Community-generated land value taxation encourages the efficient use of land, reduces sprawl, reduces speculation, tends to reduce land prices and improves land use patterns.

12) Taxes should encourage local, sustainable, value-added production over imports. Culturally unique products and services will be given price advantages by green tax reform over mass production and imports. When sale prices include the true costs of products, services and distances traveled, production will advantage local, sustainable production.

13) Taxes should reduce monopolies and encourage wider ownership. When an individual or a business controls or has exclusive rights to resources or strategic parcels of land, this person or business often reaps windfall profits, which is unfair to the larger community. Since the value of resources and the value of land are created by the community, when individuals are granted access to them, they should pay a fair price for this privilege. Land value and resource use taxation aims to ensure that the wealth generated by the value of land and resources that rightfully belong to the community accrue back to that community. With the recapture of windfall profits by the community there is reduced speculative incentive for individuals or companies to monopolize resources or land beyond their immediate needs.

14) Taxes should be applied only once. Rather than taxing the same wealth repeatedly through personal income, business income, sales, re-sale, interest, capital gains, property transfer, inheritance, taxation should only be levied on land values and on resource use. An exception would be pollution taxes to encourage closed loop manufacturing.

15) Income taxes and business taxes are green-neutral and should be minimized. Income taxes and business taxes are counterproductive since they tax a "good" not a "bad". Since jobs are desirable we should not tax employment. Since we want businesses to be successful we shouldn¹t tax businesses. Income taxes are a disincentive to employment since they make people expensive to employ, and business taxes are a disincentive for people to start businesses and make them successful.

16) Income and business taxes do not reduce economic inequity. Since labour bargaining is based on net pay, not gross pay, the amount of income tax paid is irrelevant to labour negotiations. Salaries of employees and CEOs are simply raised to the level necessary to ensure net pay reaches the desired level. Employers and businesses simply pass on the extra costs on to consumers. The rich-poor gap will be narrowed more effectively by moving taxes off of incomes and onto resource use and land value since wealthier people who choose to spend their money on grey products and lifestyles will be taxed heavily while people with lower incomes will have the option of avoiding taxation by greener living.

17) Consumption Taxes are green-neutral and should be phased out. Sales taxes are unhelpful in moving to a green society since socially useful and ecologically sound products are taxed equally to socially or ecologically detrimental products. Instead taxes should be applied as early as possible in the manufacturing process in order to green more aspects of the manufacturing process.

18) Resource use and land taxation will reduce size of the underground economy. Roughly 20% of the economy is underground where people and businesses avoid taxation through illegal behaviour that is both costly to fight and not fair to those who pay their taxes. Resource use and site value taxation are simpler to administer and more difficult to evade since there are far fewer points of taxation and assessments are less problematic.