P.E.I.'s 4 Liberal MPs to Premier Dennis King: Lower your own gas tax

P.E.I.'s four Liberal members of Parliament have made a counter-proposal to Premier Dennis King's request that Ottawa reduce its carbon tax: They've told the premier to lower his own gas tax.

"If your preoccupation is with affordability, then we respectfully suggest that you are targeting the wrong tax," the MPs wrote in a letter to the premier dated April 15, and recently shared on social media.

In March, King wrote to Prime Minister Justin Trudeauseeking a pause in the latest step-up of the carbon tax, which kicked in April 1.

"There are serious affordability challenges being faced by many Islanders," King said in the letter.

While noting that carbon tax rebate payments "help to offset" the impact of that tax to Islanders, the premier said "adding to the cost of gas and diesel continually drives up the costs to goods, services, and food for Islanders."

The four MPs and the premier agree on at least one thing: What the carbon tax costs Canadians is to some degree offset by the rebate payments they receive from Ottawa.

"There is, as you know, a provincial gas tax of 8.5 cents per liter[sic]that is not rebated to Islanders," the MPs wrote in their letter to King. "Is there a reason that this tax has not been paused?"

In an interview, Malpeque MP Heath MacDonald noted other provinces have given residents a reprieve on provincial gas taxes, and P.E.I. could do the same.

"Put your money where your mouth is," he said. "That's a switch that the province has the opportunity to reduce if they wanted to do that, they could."

Four different taxes are applied to fuel prices in P.E.I.: the federal excise tax, a provincial tax, the carbon tax and the harmonized sales tax (HST). Revenue from the collection of theHST is split between the federal and provincial governments.

Prince Edward Island's provincial gas tax is 8.5 cents per litre on gasoline and 14.2 cents on diesel.

It used to be higher. The province lowered the tax to offset the increase in prices when the carbon tax was first implemented in 2019.

As of last year, when P.E.I. was administering its own carbon pricing program, the province was continuing to list the offset of gas taxes as one of the largest expenditures of carbon tax revenues.

P.E.I.'s gas tax is budgeted to bring in $26.5 million in revenue for the province this fiscal year.

In the last full fiscal year in which the province administered its own carbon tax, the tax brought in $31 million in revenues, according to the auditor general. About $6.7 million of that was directed back to low-income households in the form of provincial carbon rebates.

According to the federal Department of Finance, the average Island household will spend $628 on direct and indirect costs associated with the federal carbon tax this fiscal year, including cost increases related to the tax being applied on shipping things like groceries.

At the same time, Ottawa says the average Island household will receive $801 during the fiscal year in federal rebates, resulting in an average net benefit of $173.

The four MPs said they had not heard back from the premier's office abouttheir letter.

A spokesperson for Dennis King told CBC the premier has nothing more to add to the debate.

The prime ministerresponded in writing in March to King and the other premierscalling for a pause on further increasesto the carbon tax. In the letter, Trudeau wrote that his government is open to working with provinces and territories to establish their own carbon-pricing plans, so long as they meet or exceed the national benchmark for emissions reductions.

"We are always happy to work with you on fighting climate change and will continue with the Canada Carbon Rebate a federal measure that helping us reach our climate goals while putting more money back into the bank accounts of eight out of every 10 of your constituents," Trudeau wrote.

Meanwhile, federal Conservative leader Pierre Poilievre was in P.E.I. last month promising to scrap the carbon tax to make life more affordable for Canadians.

Yet nearly 500 economists have signed an online open letter stating, among other things, that carbon pricing is having a negligible impact on inflation in Canada.

P.E.I. premier asks Justin Trudeau to pause the upcoming carbon tax hike

6 months ago

Duration 10:40

Power & Politics speaks to P.E.I. Premier Dennis King about why his province is urging the federal government to pause an upcoming increase to the federal carbon tax.

Lowering either the provincial gas tax or the carbon tax would run counter to the entire purpose behind carbon pricing: trying to makepollution more costly, thus providing a financial incentive for consumers to choose options that are less harmful to the environment.

But since the carbon tax was implemented in 2019, increases in fuel prices have been providing that incentive regardless of carbon pricing.

The maximum price for self-serve gasoline was 115.9 cents per litre on March 15, 2019, in the last pricing adjustment made in P.E.I. before the implementation of carbon pricing two weeks later.

Last week, the maximum price was set at 184.5 cents.

Of the overall increase of 68.6 cents per litre, the carbon tax amounts to just 17.6 cents. The rest can be chalked up to global market factors, primarilythe Russian invasion of Ukraine.