A major business association has called for the Canadian government to lower its taxes on gas to help struggling companies. But while it’s easy to sympathize with businesses hurt by costly fuel and while this may seem like a logical solution, this is not the way to deal with the problem.
On Sept. 13, the Canadian Federation of Independent Business, which professes to represent 105,000 small- and medium-sized businesses in Canada, sent an open letter to Prime Minister Paul Martin.
The letter said high gas prices were the top concern of the majority of companies surveyed by the federation. It encouraged the federal government to help.
Their most extreme request is for federal and provincial governments to lower fuel taxes. This is the wrong way to go.
It’s like complaining that cigarette taxes are keeping you from smoking. Our society has a bad habit, a gas addiction. Simply feeding the habit is not going to help us.
The long-term solution to our gas problems isn’t about how to maintain our present gas consumption; it’s about how we can use less.
Finance Minister Ralph Goodale was recently quoted from a press conference arguing that lowering the gas tax wouldn’t be of much help to consumers in the long run.
A tax-break could bring down the cost of gas for a while, but those savings would quickly be lost in the competitive fuel market.
Eventually, the price would go back up to what it is now and only the big oil companies would save money, Goodale said.
This would leave the government with less gas-tax revenue — revenue currently used to fund things like city transit systems that lessen our need for gas.
Goodale’s argument has merit according to Philippe Crabbé, a professor of economics specializing in natural resources at the University of Ottawa.
He compares this situation to the cost of mortgages: In the U.S., mortgages are tax deductible, but not in Canada. But Crabbé says economists have long argued that it’s the U.S. developers who are profiting from these savings, not home-owners.
Crabbé adds that there are also some long-term benefits to high fuel prices. As gas gets more expensive, more businesses will try to find alternatives to fossil fuels, and interest in alternative energy will increase.
To some extent the government is already on the right track, using its money to encourage conservation, not consumption.
The Department of Natural Resources offers grants to energy efficient homes and businesses. Environment Minister Stéphane Dion has endorsed this line of thinking in comments to the press this month, as have the provincial energy ministers.
The problem with allowing fuel prices to increase while investing in conservation is it doesn’t provide any short-term relief. Sure, it might convince us to start weather-proofing our homes, or to buy compact cars instead of SUVs, but not everyone has these options.
People in the transport industry, for example, have no real alternative to fossil fuels. As fuel costs go up, they’ll either have to cut back their business or raise prices, passing their hardships down to their clients.
But without such hardships, what will encourage us to lessen our dependence on oil? What will convince us to invest in alternative energy? Both consumers and business people must understand that the answer to our gas troubles cannot be more gas.