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Carbon tax whacks poor in three years: CCPA

British Columbians with low incomes will benefit from the carbon tax in its first year, but will pay more by the scheme’s third year, a new study concludes.

The impact of the tax and its offsetting income tax cuts will become increasingly unequal unless the provincial government increases payments to low-income earners, the study says.

The study, by Marc Lee, senior economist with the Canadian Centre for Policy Alternatives, and Toby Sanger, senior economist with the Canadian Union of Public Employees, takes a detailed look at the fairness of the controversial tax.

The carbon tax scheme, which took effect July 1, recycles all carbon-tax revenues through personal and corporate tax cuts and a low-income tax credit.

“In year one, about a third of the revenues go to the low-income credit,” said Lee. “That’s good news. That’s a good, well-designed policy.”

But while the carbon tax will increase steadily over the next five years, the low-income tax credit is scheduled to increase only once – by five per cent in July 2009.

That means those in the lowest income group will end up paying an average $47 a year more than they get back in tax cuts and credits by the third year.

At the same time, those in the top income group will end up an average of $311 better off in year three.

Read an in-depth feature in today's Tyee.

Tom Barrett is a Tyee contributing editor.

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