Labor's Carbon Tax is really a redistribution of income scam

Julia Gillard's freakish political contortion, the likes of which have probably never before been seen in Australian politics, of breaking an election promise to not introduce a carbon tax, bowing to the radical Greens and then introducing a carbon tax can have no other outcome than increase the size of the Australian deficit and reduce employment.

Let's assume that the amount raised from power companies by the carbon tax each year is $10 billion.

There are a number of groups that will be especially hurt by an increase in power prices - those at the low end of the income spectrum, trade exposed industries whose position against overseas competition will be damaged and small business, which seems to be a forgotten factor in the conversation so far.

It's clear that the government can't compensate all groups affected so let's assume that they distribute the money to low income earners. Note that they are on record as saying that the money will not simply go into Treasury coffers so let's also assume that it joins the short list of promises kept by this government since being elected in 2007.

The tax is introduced in 2011 and low income workers rejoice as they see the effects in their bank balances. They then feel the pain when they get their utilities bills but, being conscientious with their money and in no way tempted to buy more grog or smokes or stick it in the pokies or back something to beat Black Caviar*, they pay what they owe. So there's no impact on them.

Power companies now have an incentive to reduce the amount of CO2 they produce, which is the whole point of the exercise and so they invest in clean technologies that have the effect of reducing CO2 emissions to zero thus fulfilling the government's ambition.

Can you see the problem?

At this point the government will raise no money at all from taxing so-called 'carbon pollution', the cost of power will not be reduced due the investment made by power companies that needs to be paid for meaning that low income households will still need financial support to meet their utilities bills.

So the government now has a $10 billion hole in its budget. Is it going to fill the void by raising taxes or by increasing the deficit? Either way, the impact on employment is negative.

And while all that has been going on our trade exposed industries have been shedding jobs at a terrific rate to countries that are not bound by the onanistic impulses of the climate brigade.

So let's give all of the money to trade exposed industries instead of low income workers.

The government gets stuck in the same cycle. When the power companies clean up their act the government will need to maintain support for trade exposed industries otherwise there'll be a massive loss of jobs in a short time frame to overseas competitors. Not a palatable outcome for any politician.

And all the while small business is getting hammered and is shedding jobs.

So here's Labor's dirty, little secret. I'm going to shout it at you so that you can take it in.

Labor's carbon tax CAN ONLY WORK IF POWER COMPANIES NEVER REDUCE THEIR CO2 OUTPUT.

The government knows this, of course, which is why it's just a great, big, redistributionist scam but it also knows that its allies in the mainstream media won't point it out to the voting public any time soon.

The result will be that the tax will be in place before an emissions trading scheme is introduced, which the government expects will continue to provide the revenue it needs.

And bad luck to the people who lose their jobs because of it.

* I don't live in this world, either, but the good folk who create government budgets surely must.

(Nothing Follows)