Angry in the Great White North

From the Globe and Mail:

NDP leader Jack Layton is calling for an investigation into the price of gas.

Mr. Layton, who was in Montreal Saturday, accused oil companies of being responsible for the escalating cost of gasoline.

Mr. Layton is demanding that the government launch an inquiry to determine whether or not multinational oil companies are colluding with each other.

So let's break down the cost of gas. I'm using the Canadian Automobile Association as a source, since they are advocates for drivers, not for gas companies, the government, or environmentalists.

First, there is the federal excise tax. It is 10 cents on the liter. Note that it is not a function of the cost of gasoline. If I buy 50 liters at fifty cents or a buck-fifty, I still pay five dollars off the top. It's not so much of a tax as a cover charge to get into the gas station.

Now you'd think you're not getting much for paying the excise tax. The government disagrees. Apparently the government is doing you some kind of favour. Why else would they charge 7% GST on the excise tax? That's right, a tax on a tax. So now I'm paying $5.35 extra for my 50 liters of gas, regardless of the actual price of gas.

Then calculate the GST on the gas you buy. For if I buy 50 liters at $1.00/liter, I pay an extra $3.50.

Then calculate the provincial gas tax. This is not the general sales tax, but a special tax on gasoline. In Ontario, it is calculated like the federal excise tax, charged on each liter. That amount is 14.7 cents on the liter, or another $7.35 for my 50 liter purchase.

And yes, the 7% GST is charged on that too. So add 51 cents to the total.

If you're really lucky, you live in Vancouver or Montreal, where a mass transit tax is charged on each liter -- 1.5 cents in Montreal and 6 cents in Vancouverstan.

So my $50 dollar purchase now costs an additional $16.71, or an effective tax rate of 33%. That's if gas is $1 a liter. If you buy 50 liters of gas at $0.50 a liter, it's actually worse. The $25 for gas has $14.96 added to it (because the excise tax and the provincial sales tax are calculated per liter), or an effective tax rate of 60%!

In other words, even if the price of gas were to drop, even if Jack Layton was able to somehow force the oil companies to charge less for their product, the flatness of the tax calculation means that we, the consumer, would not enjoy so much of a drop in the price of gas. The government would continue to pull in just about the same amount, since we'd still be buying just about the same amount of gas in liters. Actually, if Jack Layton succeeds, we'd be driving more, which means more revenues for the government through the per-liter gas system.

But Jack Layton blames the collusion from big oil. Maybe if the different levels of government didn't need so much money, it wouldn't charge so many taxes, or change the system to charge us on how it costs us to drive.

I wonder if anyone can think of something that could be cut from the government budget. I don't know -- no wait! Here's $4.6 billion in spending scribbled on the back of a napkin. That's the cost of the programs demanded by the NDP to prop up the federal Liberals. Let's start there and see how we can reduce the price of gas from that direction.