Swings and roundabouts: Greens' carbon tax

The Green Party carbon tax plan announced at the weekend had hidden traps for households who were promised they would be better off under the plan, Polson Higgs tax partner Michael Turner said yesterday.

At the party conference on Sunday, Green co-leader Russel Norman said the Greens would phase out the Emissions Trading Scheme and introduce a charge on carbon returned to all households as a climate tax cut on the first $2000 of income.

The Greens had previously been strong supporters of the ETS but were now calling the scheme ''National's failed emissions trading scheme'', despite staunchly defending it in the past.

Mr Turner said a climate tax cut, while having a nice ring to it, seemed to be an indirect way of reducing the tax burden on households.

''Unfortunately, this would appear to be giving with one hand and take with the other policy.

''While households will receive a tax break, they presumably will face higher costs, due to polluters passing on the new charge in the cost of the goods and services.''

The Green plan showed New Zealand households would be $319 better off every year under the policy.

However, Mr Turner said the policy ignored higher charges to businesses leading to price rises for things like power, freight and cartage - all items households used and bought.

The 1% reduction in the company tax rate was likely to be a point of debate.

While a drop in the company tax rate helped companies, by leaving more after-tax profit for reinvestment - when those companies distributed profits - a lower company tax rate helped non-residents shareholders because New Zealand residents continued to pay tax at their marginal rates.

''Accordingly, the Greens must hope the reinvestment is designed to offset the charge on polluters. In all, this looks a lot like Robin Hood reinventing himself - taxing businesses more through the carbon tax and farming it back to households through a tax cut,'' Mr Turner said.

University of Otago political scientist Bryce Edwards said the new climate change switch positioned the Greens well for the upcoming election.

''By moving just a little bit more towards the centre, and by reinforcing their growing reputation for pragmatism and mainstream credibility, the Greens are well placed to differentiate themselves from a more crowded electorate market to the left.''

The Greens were also just as capable of making pragmatic U-turns as any other political party, he said.

The party had defended the ETS, even while others pointed out the problems and shortcomings of the scheme.

''In a brazen U-turn, the party is now making strong criticisms of it and campaigning on replacing it with a carbon tax.''

The fact the Greens were suddenly focused on climate change again was also something of a turnaround, Dr Edwards said.

At the last election, the Greens hardly mentioned the issue, instead focusing on ''jobs, rivers, kids''.

This time it appeared climate change was to be the main campaigning weapon.

The proposal
 • A goal of net carbon neutrality by 2050

• Establishment of an independent Climate Commission

• Phasing out of Emissions Trading Scheme

• Initial price on carbon of $25 a tonne on CO2 for all sectors except agriculture. Dairy emissions will pay $12.50 per tonne and forestry will be credited at $12.50 a tonne.

• First $2000 of income will be tax free and a 1% company tax cut.



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