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The Words We Use are Less Important than Selecting the Best Way to Price Carbon Pollution

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I am enjoying an email discussion with Lynn McDonald about carbon pricing. Lynn is uncomfortable with the terms “FEE” and “DIVIDEND.” She doesn’t like the ferm “fee” because it seems like we are afraid to support taxes. She worries about “dividend” because a dividend is a return on stocks owned – it is corporation language, not the language of civil society. She suggests instead the term “rebate.”

I only care about the terms because they matter prolitically. The term “Dividend” was chosen – not by me – to emphasize that people get the revenues from the fee back – a purely political formulation. The definition of dividend is a bit more elastic than Lynn thinks, however.

A dividend is usually defined as “a payment made by a corporation to its shareholders, usually as a distribution of profits”. In fact any country, province or municipality is a corporation – ie “a group of people authorized to act as a legal entity”. Municipalities are corporations under provincial corporation law, as are non-profits. Provinces , however are are sui generis (self created) and hence they cannot be incorporated under their own corporate law. They are corporations in the broad sense, but not in the narrow sense. If a Province returns tax revenue to the people, that really is a dividend in the broad sense.

But honestly I don’t care about the language. Like Lynn, I would prefer to call the “fee” a tax, and I see nothing wrong with taxes. In this case, there is a strong argument that the tax should be understood as a fee-for-service. When Conservatives are circulating a petition against a carbon tax, as they are in Ontario right now, it might be useful to emphasize the moral argument – that this is a fee for garbage removal and that they are promoting a disgusting policy of letting people get away with dumping their wastes for free.

There is some evidence that conservatives are vulnerable to moral arguments, and there is other evidence that they can be motivated by feelings of disgust – and the term “fee” lets us use moral and psychological pressures on them. That is all purely political manipulation, of course.

It is necessary to fight for the idea that taxes are good, but probably not in the case of a carbon tax. The revenues are not being collected as a contribution to the public good, but rather as simple restitution for the sins of polluting. People have to pay for the mess they make. this is a fundamental principle of our legal system. When we fight for taxes lets pick our ground more carefully.

As for “dividend”, the key is that the term is is a representation of a specific form of revenue-neutrality that has distributional, efficiency, political and administrative advantages. I don’t see a better term. I tend to say “your share of the revenue collected” or “your carbon check” to make it more vivid when I am speaking.

The key, however, is to focus on the positive effects of the Fee and Dividend or the tax and rebate compared to the inevitably less efficient, more costly and more corrupt cap and trade system. We will have to explain our terms no matter which ones we choose, and the Conservatives, the lawyers and the stock brokers are likely to attack us no matter what words we choose.


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