Carbon Tax Announced

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So what is the carbon tax and what does it really mean? I won’t be getting into the debate as to whether or not climate change is caused by humans or whether or not carbon, which is vital to human life, is the causing the change. In theory the carbon tax is supposed to increase the cost of doing business for big polluters as a means of encouraging them to pollute less.

Less carbon emissions = less cost = more profits.

The formula seems pretty simple but not so. The concern held by Government (and rightly so) is that the polluters will simply pass their increase costs onto their customers who will pass it on down the chain until eventually the end consumer (you and I) pays for it. In other words, those businesses and others throughout the food chain work out how much to charge their customers by the following formula

Costs + profit margin = sale price.

Assuming the second model is adopted the end result is consumers pay more for everyday items such as food, electricity etc, the Government collects a lot more tax and business profits don’t really change.

It seems pretty clear the Government is of the view the second model will eventuate as they have announced as part of the carbon tax package significant changes to personal income tax and how it is calculated. These changes are designed to compensate some taxpayers for expected price rises in goods.

The data released yesterday suggests there will be many taxpayers who will be better off under the carbon tax than they are now. However, this assumes estimates prepared by Treasurer as to just how much prices will rise are accurate. It would seem families earning over $100,000 per year and singles earning of $85,000 per year are going to be worse off.

It seems to me that despite a variety of other tax measures and Government benefits deeming $150,000 gross earnings per year as a family as being “wealthy” the carbon tax now considers the number is really $100,000.

Data released by the Australian Bureau of Statistics in May (accessed on their website today) indicates the average annual wage is $66,981.20 which would mean the “average” family earns around $133,962 per year.

I am pretty sure I saw our Prime Minister saying yesterday that the average family will not be worse off. How can this be if the marker for where families start being adversely affected by the carbon tax is some $34,000 below what the average family earns?

If the Government expects the cost of the tax to be passed onto consumers then just where and how will carbon actually be reduced?

If the carbon tax was solely about the environment then why isn’t 100% of the revenue raised by the tax being put into research into more efficient ways to do things and/or infrastructure such as solar farms, wind farms etc?

Is there really incentive for ordinary everyday Australians to change their habits?

One has to ask the question whether or not the carbon tax is really about saving the environment or just a clever way of redistributing the wealth of the nation with changes to income tax without appearing that way?

Troy Pearce

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