penny wise pound foolish

Stephen Harper threw his two cents into the election fray yesterday. And, if implemented, his plan to cut the excise tax on diesel and aviation fuel…

Stephen Harper threw his two cents into the election fray yesterday.

And, if implemented, his plan to cut the excise tax on diesel and aviation fuel by pennies will cost Canadians more than a few bucks.

It’s counterintuitive, sure, but it’s important people realize how such cuts play out.

Remember, the excise tax is money that Ottawa collects on fuel sales.

It represents a redistribution of wealth.

The money flows into general revenue, and is used to pay for federal services — meat and airline inspections, the military, the arts, research grants, roads, bridges, transfer payments to the territories — from which all Canadians benefit.

When you cut taxes, the federal government is poorer and less able to respond to national crises.

When you cut fuel taxes, the problems are even more complicated, which is why most premiers and prime ministers — including Harper — have resisted doing this.

First, the money rarely gets to the public.

Prices may drop momentarily, but oil, transportation and food companies often snap up the vacated tax room. In the end, the public is no better off and the federal government is financially weaker.

Second, once the tax is dropped, it becomes politically difficult to raise it again, especially in an era of constantly escalating oil prices.

So it’s better to leave the money in Ottawa’s hands than in Exxon’s.

Third, cheaper fuel encourages consumption and makes industry and the public more likely to be wasteful.

And these days, with the ice caps and glaciers melting and scientists around the globe warning about the changing climate, the last thing we need is to encourage people to continue wasting energy.

Better to keep prices higher, forcing the creation of new energy-efficient technology, conservation and innovation.

This week, a group of 70 prominent Canadians, including four former prime ministers (Kim Campbell, Joe Clark, Paul Martin and John Turner), former premiers, CEOs, academics, artists and aboriginal leaders suggested just that.

Ottawa must do more to combat climate change and make the nation more energy efficient, said the non partisan group.

While Harper has moved the nation away from voluntary initiatives and Liberal Leader Stephane Dion has been honest with Canadians about the need to pay for the pollution they cause, there is much more to do.

“There is still a huge gap between what the scientists tell us and what our politicians are willing to do,” the group says in a statement. “Our leaders know the true severity of the problem and what it would take to put us on the right path — we need them to level with Canadians about the urgent need to eliminate emissions and what it will take to do so.”

The formation of the group suggests a concensus is forming about the need to act to curb pollution.

The group favours a carbon tax or a cap-and-trade system — forcing Canadians to pay for the energy they choose to use.

Harper’s odd fuel tax cut directly contradicts this approach.

Delaying action on energy efficiency and climate change will cost Canadians billions.

In the face of that, Harper’s