Municipal governments will have no choice but to raise taxes once the territory’s planned carbon pricing is implemented, the NWT Association of Communities has warned MLAs.
At a public review of legislation introducing carbon pricing, Sara Brown – chief executive of the association – said “all residents will pay” if the plan goes ahead unchanged.
The NWT is not using the federal backstop carbon tax. Its own plan, which the territorial government has called a “made-in-the-North solution,” was due to start in July but was delayed by a legislative backlog.
The relevant legislation is now being prepared for mid-August, its last chance to pass into law before the fall’s NWT election. The NWT government says many households will actually make money, not lose it, once rebates and offsets are factored in.
On Thursday, a committee led by Kam Lake MLA Kieron Testart examined the draft legislation and heard a submission from Brown on behalf of the NWT’s community governments.
Many of the NWT plan’s provisions are designed to return money raised by the carbon tax to residents – most people will get a full rebate on the tax when it comes to heating fuel, aviation fuel is excluded, and there is a cost-of-living offset provided to residents which will eventually equal between $260 and $300 per person each year.
However, Brown said her members – the NWT’s municipal governments and Designated Authorities – won’t enjoy all of the same exemptions, will therefore suffer financially, and will have to pass that cost on to their taxpayers.
“Municipal governments are not going to be revenue-neutral in this process,” Brown told the committee.
While municipal governments will be granted a heating fuel rebate and enjoy the benefit of an aviation fuel exemption, Brown said, “there is no equivalent to the cost-of-living offset accorded to individual residents.”
“When we asked why, and how that was going to be dealt with,” she claimed, “we were told, ‘You’re just going to have to increase your taxes.’ Which means it’s not revenue-neutral to anyone.
“That has to be passed on, whether it’s increased user fees or property taxes or a drop in services. All of our residents will pay.”
The territorial government had no minister or representative present in a speaking capacity at Thursday evening’s meeting, meaning Brown’s claim that communities were told to increase taxes could not be immediately corroborated.
“Communities are already underfunded to the tune of 37 percent,” Brown continued, alluding to a funding shortfall first identified in a 2014 report which documented a gap of some $40 million between what was required, and what was received, by the territory’s municipal governments.
“They do not have any resilience to absorb these sorts of increases,” she said. “We would be passing those taxes on to our residents.”
Brown did, however, take time to carefully state her organization’s broader support of carbon pricing in principle.
“We generally are supportive of the carbon tax,” she said. “We encourage that all this money is recycled into sustainable projects.
“But it not being revenue-neutral will impact on all citizens of the territory.”
Testart responded by expressing thinly concealed frustration at what he perceives to be the committee’s lack of teeth – its inability to force the territorial government into meaningful change regarding the finer detail of carbon pricing.
“We are left in the uncomfortable position of having minimal influence over the details of carbon pricing that northerners care most about,” Testart said.
Now set to begin on September 1, NWT carbon pricing will – if it passes into law – introduce a tax on fuels at an initial rate of $20 per tonne of greenhouse gas emissions, rising year-on-year until it reaches $50 per tonne in 2022.
However, the territory has claimed many households are set to actually make money from the plan.
Applied to a household featuring a couple with children, the NWT government argues its cost-of-living offset could mean the household pays around $350 extra per year through carbon pricing – but receives $750 back from the cost-of-living offset. In other words, the household gains around $400 annually.
Some MLAs have expressed skepticism that this net income will be realized in practice, while others have used this figure to ask why a carbon tax is being introduced in the first place if, in their view, the rebates and offsets financially reward families for doing nothing to change their behaviour.