Eco-Tax: Tim Hudak's Truth Diversion

On July 1, 2010, consumers began seeing a new fee on the receipts they received when they purchased any of a number of products designated by the government to be on a “Phase 2” list of “municipal hazardous and special waste” (MHSW): such things as thermostats, fire extinguishers, aerosol cans, batteries, fluorescent bulbs, pharmaceuticals, syringes, and mercury switches. The media widely reported that some consumers were upset or confused by what they were seeing on their receipts. Hoping to gain electorally, Ontario Progressive Conservative Party leader Tim Hudak jumped right in and commenced a months-long campaign of lies and hypocrisy that must not go unaccounted for. And so, I begin.

First, a little history is in order. In the early 20th century, the Progressives in North America sought to replace the laissez faire capitalist system of supply and demand with a myriad of collectivist central planning schemes. One such scheme was the imposition of a government monopoly on household waste collection. By requiring waste collection to be paid for through taxes, those who could afford waste collection were forced to pay for those who could not do so as easily. In short: government waste collection was simply one of a large number of programs of wealth diversion; a diversion of wealth from those who earn it, to “free riders” who do not, in the form of free waste collection for the poor.

Fast forward now to the 1960s. Soft-drink companies introduced drinks in non-refillable, disposable cans. By the 1970s, the volume of non-refillable containers – hence, of waste – increased considerably. Ontario’s Progressive Conservative (PC) government of the time sought to phase out non-refillable containers by 1982 but, in the face of industry opposition, the PCs back tracked on that promise. Instead, the PCs imposed regulations requiring a percentage of soft-drink containers to be refillable, and requiring a percentage of non-refillable containers to be recyclable.

By the eighties, manufacturers and retailers wanted to continue providing materials to consumers in non-refillable packaging. They feared the provincial government would ban various forms of disposable packaging. To decrease the likelihood of a ban, some companies formed an “industry funded organization” (IFO) called Ontario Multi-Materials Recycling Incorporated (OMMRI) which would provide financial support to “blue-box” recycling programs.

As 1990 approached, provincial subsidies for municipally-operated blue-box systems were about to expire. Supporters of the blue-box system believed the system’s viability would require more financial support from industry. By the early 1990s, Ontario’s NDP government, under then Premier Bob Rae, was contemplating the introduction of a “product stewardship” system, which would require manufacturers to pay for some or all of the disposal costs of the products they produced and sold. Again, a number of companies organized to promote a system of collective responsibility, in which all producers would be forced to pay into a common stewardship fund, managed by an IFO, for the disposal or recycling of the goods they produced.

In 1994, Rae’s NDP government passed a regulation requiring all municipalities having a population of 5000 or more to set up a blue-box collection system. However, costs of the blue-box system continued to rise. By that time, the product stewardship plan some companies wanted to foist on others still had not been implemented.

In 1995, Rae’s NDP government was replaced by Mike Harris’ PCs. Plans for product stewardship were shelved. Provincial funding for blue-box systems was ended.

By 1999, blue-box recycling programs were on the verge of collapse. A Waste Diversion Organization was formed by industry and various other interested parties. It issued a report in September of 2000. That report led the Progressive Conservative government of Ontario to introduce bill 90 – titled the “Waste Diversion Act, 2002” – on June 26, 2001. The bill received Royal Assent on June 27, 2002.

The Waste Diversion Act, 2002 set up a corporation called Waste Diversion Ontario (WDO). Largely, it is an organization operated by the industries affected by the Act, plus some others. The Act permits the Minister of the Environment to make regulations declaring a material to be “designated waste”. It allows him/her also to require the WDO to develop a program to divert such “designated waste” out of your garbage bag waste, and into other systems of collection. For each type of designated waste, the Act requires the WDO to set up an industry-funded corporation (an IFO) that will collect fees from the producers and importers of a that type of designated waste.

To date, four main kinds of materials have been declared “designated waste” by the Ministers of the Environment that we have had since the PCs’ Waste Diversion Act, 2002 came into force: blue-box materials; tires; electronics; and municipal hazardous and special waste (MHSW). Pursuant to the Waste Diversion Act, 2002, and acting on the written instructions of Environment Ministers since 2002, the WDO has set up plans for the diversion of each of these four kinds of designated waste. And, as required by the Act, the WDO has set up or designated IFOs for each kind of designated waste.

It has taken years for the bureaucracy to prepare for the launch of these diversion programs. As the (now dated) Waste Diversion Ontario website explains:

“The Blue Box Program Plan was approved by the Minister on December 22, 2003 and commenced on February 1, 2004. The first phase of the Municipal Hazardous or Special Waste Program Plan was approved by the Minister on February 19, 2008 and commenced on July 1, 2008. The next phase, referred to as the Consolidated Municipal Hazardous or Special Waste Program Plan, was approved on September 22, 2009 and will commence on July 1, 2010. The first phase of the Waste Electrical and Electronic Equipment Program Plan was approved by the Minister on July 10, 2008 and commenced on April 1, 2009 while the second phase was approved on August 14, 2009 and commenced on April 1, 2010. The Used Tires Program Plan was approved on April 9, 2009 and commenced on September 1, 2009.”

Tire, electronics, MHSW, and blue box waste-producing companies are deemed by the Act to be “stewards”. As stewards, they are required to pay some or all of the cost of the disposal of the products they manufacture/sell. They pay those costs in the form of “steward fees”. The steward fees are paid to their respective IFOs. Blue box and MHSW stewards pay fees to an IFO called Stewardship Ontario. Tire producers/stewards pay fees to an IFO called Ontario Tire Stewardship. Electronics producers/stewards pay fees to an IFO called Ontario Electronic Stewardship. In effect, the Progressive Conservatives’ Waste Diversion Act, 2002 makes various goods producers financially responsible for the cost of disposing of the goods that have been bought from them after their customers have finished using the goods. That way, the municipalities are relieved of the cost of (and the responsibility of) disposing of those goods: municipal governments get to provide you with less service, but can continue to charge you the same taxes, or higher taxes. That’s the primary purpose of the Progressive Conservatives’ Waste Diversion Act, 2002.

Steward fees add to the stewards’ costs. How the steward comes up with the money to pay the steward fee is his own problem. He can lower his other costs (e.g., wages). He can reduce his profit margin. He can raise the price of his goods. And, if he raises the price of his goods, he is free to put the price increase onto his invoice/receipt separately. For example, if he would usually charge $1.00 for a litre of his product, and is required to pay a steward fee of 13 cents per litre, he can either charge the consumer $1.13, or charge the consumer $1.00 plus a fee of 13 cents.

In fact, there is no law requiring the steward to charge 13 cents more. For example, he might deal with the steward fee by lowering his labour costs and raising his price by 6 cents (to pick a figure at random). As another example, he might believe that, for various reasons, he has to charge customers 25 cents more per litre if – all things considered – he is to have the 13 cents he needs to pay the steward fee. Of course, the fact that the fee some stewards chose to charge consumers did not equal the steward fee paid by the steward only adds to the confusion.

It is precisely that confusion that has allowed Tim Hudak to play free and loose with the truth, for political gain. Consider how Hudak has exploited the confusion:

On July 13, 2010, Hudak issued a media release in which he called the fee that appeared on consumers’ receipts “[Dalton McGuinty’s] new secret eco-tax”. That was false, because the fee – if any – that appeared on receipts was not a tax. Moreover, no government, no law, no regulation, and no ministerial directive required stewards to charge a tax or fee to their customers. The only persons responsible for charging fees to customers were: the stewards who decided to raise their revenues by charging their customers a fee.

But Hudak’s representation – that the amounts showing up on some consumers’ receipts were an “eco-tax” – was worse than false. It was also a lie, because Tim Hudak demonstrated that he knew full well the nature of the legislation, regulations, and directives pursuant to which stewards are forced to pay steward fees. On July 15th, 2010, Hudak issued a media release setting out a timeline explaining how the steward fees came into being…but, in the media release, he called the steward fees an “eco tax”. This is important, because it demonstrates that his misrepresentations, which I discuss below, were not the result of ignorance or accident. They were made with full knowledge of the legislation, regulations, and directives involved. The July 15, 2010 media release also falsely represented not only that the steward fees were a “tax”, but that they were a tax paid not by stewards, but by consumers: “I am calling on Dalton McGuinty to scrap his eco tax grab before another Ontario parent pays it on bath toys or sunblock for their kids and before another Ontario senior pays it on laundry detergent or batteries for their TV remote.”

The lie got bigger as time passed. On July 21, 2010, Hudak issued another media release stating that “…eco-taxes were collected by Ontario businesses…” and that the government “must immediately act to refund consumers who were forced to pay this tax”. Again, no law required consumers to pay anything, and no law required businesses to collect a payment from consumers. The entire statement was an utter fabrication, and Hudak knew it.

The falsehoods didn’t stop there. Hudak also wanted the public to believe, falsely, that these “eco taxes” he was speaking of were a Liberal creation, full stop. On July 16th, 2010, Hudak issued a media release in which he “called on Dalton McGuinty to take responsibility for his government’s decision to outsource their eco-tax collection scheme, to a supposedly arm’s-length agency”, claimed “Stewardship Ontario is a Liberal Agency, run by a Liberal partisan, collecting eco-taxes on behalf of a Liberal Government”, and asserted that McGuinty “must take responsibility for this eco-tax rip-off without delay”.

Where to begin? First of all, the Liberals did not decide to “outsource” anything: the Progressive Conservatives’ Waste Diversion Act, 2002 required such “outsourcing”. In point of fact, “outsourcing” was the whole point. Wanting municipal governments to hold on to their Progressive, collectivist, monopoly on waste collection, the PCs sought to reduce the municipal costs of that monopoly by sticking producers with the cost of collecting an ever broadening percentage of the waste produced in the province…waste that otherwise would have to have been collected by municipalities, and paid for through taxes. So, even if “outsourcing” is an appropriate description for what the Liberal government is doing with its WDO and IFOs (and the term “outsourcing”, I would submit, is ill-suited and chosen by Hudak solely for reasons of emotional manipulation), the blame for such “outsourcing” should be laid at the feet of the party that made the Waste Diversion Act, 2002, which requires such “outsourcing”; the blame can be laid only at the feet of the Progressive Conservatives.

Second, if Stewardship Ontario is “supposedly arms length”, whose fault is that? Stewardship Ontario is set up pursuant to the Waste Diversion Act, 2002. That Act was the baby of none other than the Progressive Conservatives. If Stewardship Ontario is not, in fact, an arms length organization, why did the Progressive Conservatives make legislation that would facilitate the making of a non-arms length IFO? Did the PCs, for example, mistakenly think that they would be the ones staffing it after the 2003 election?

Third, Stewardship Ontario does not collect a tax, and it does not collect money “on behalf of the government”. Stewardship Ontario is not a crown agency, and its revenues are not remitted to the provincial government. More arrogant, manipulative, dishonest Hudak, Progressive Conservative spin-doctoring.

Now, it would be remiss of me not to point out that, on July 13, 2010, the Liberals fired back at Hudak, saying – as I do above, but in almost no detail – that it was the Progressive Conservatives who brought in the Waste Diversion Act, 2002, pursuant to which the steward fees – Hudak’s “eco-tax” – came into being. Hudak responded. The Toronto Sun reported the exchange as follows:

“This secret tax — the municipal hazardous and special waste program — is nothing more than a blatant tax grab that will hit average families and seniors when they’re already down,” Hudak said Tuesday.

The Ontario Liberals have countered that it was the Mike Harris PC government that ushered in the Waste Diversion Act that created the eco fees.

Hudak said the goal of the Act was to ensure that businesses who produce products that go into the blue box pay their fair share of the cost.

“The eco fees are Dalton McGuinty’s latest tax grab that were brought into effect under this government,” he said. (emphasis added)

Note, carefully, that Hudak here clearly defined what he was complaining about: the entire “municipal hazardous and special waste program”. Thus, when Hudak also stated that: “At no time did the previous PC government talk about putting an eco-tax on the backs of families, on 9,000 consumer goods that families use every day…”, he was stating that the previous Progressive Conservative government “at no time” talked about bringing in a diversion program for municipal hazardous and special waste, such as pharmaceutical products, fluorescent lighting tubes and batteries. He is stating that the Progressive Conservatives brought in the Waste Diversion Act, 2002 solely for the purpose of funding the blue-box system.

That claim – that the Progressive Conservatives intended the Act to be used only for the funding of blue-box waste – is another falsehood. One need merely read the minutes of the Ontario Legislature (i.e., Hansard). On December 3, 2001, during second reading debates of bill 90 (the Waste Diversion Act, 2002), Progressive Conservative MPP Ted Arnott (currently the MPP for the riding of Wellington-Halton Hills), defending the Progressive Conservatives’ bill, explained that:

“This bill, however, goes beyond sustaining and enhancing our blue box system. It will also lead to increased diversion of many other waste materials, such as organics, scrap tires, used oil, household special wastes, electronics, pharmaceutical products, fluorescent lighting tubes and batteries.”

In other words, as early as 2001, the Progressive Conservatives fully intended that the Waste Diversion Act, 2002 would result in the creation of a host of different designated wastes, going well beyond just blue box waste. It knew fully – and intended – that the Act would lead to steward fees (what Hudak calls “eco tax”) for municipal hazardous and special waste (MHSW), as well as to fees for tires and electronics. Tim Hudak’s claim – that the Waste Diversion Act, 2002 was only about blue box waste, and that the diversion of wastes like electronics and MHSW was somehow a Liberal invention, is erroneous, if it is not an outright lie.

So consider the hypocrisy of Hudak’s latest misrepresentation, made December 17, 2010. Specifically, he announced that, were the PCs elected, he would scrap what he characterized as Dalton McGuinty’s “electronics eco tax grab”. He was referring, this time, to the amounts that some electronics producers have added to their bills so that they can afford to pay steward fees to Ontario Electronic Stewardship. In other words, having falsely characterized the fees imposed on consumers by some MHSW stewards as “eco tax”, he now has moved on to falsely characterizing fees charged by electronics stewards as an “eco tax”. And, given that his rap about MHWS eco tax apparently was implicitly a promise to get rid of the MHSW diversion program, we can infer from his new misrepresentations about fees charged by some electronics stewards that the PCs would eliminate the electronic waste diversion program too. Yet the same hypocrisy underlies his deliberate mischaracterization of the fees charged to consumers by some stewards: the Progressive Conservatives brought in the Waste Diversion Act, 2002 with the intention of charging steward fees to electronics producers. The Liberals are just doing what the PCs had intended to do (re-read what Arnott said in 2001, if you doubt me).

Finally, consider the implications of Tim Hudak’s plans to scrap the Electronics and MHSW diversion programs if Ontario voters are ever delirious enough to make him Ontario’s premier. Scrapping those plans means relieving the producers of such designated waste from the financial obligation of paying for the disposal of their products. As a result, none of the stewards will make up fees to charge to their consumers. Yes, that sounds good. However, somebody still will have to pay for the disposal of electronic and MHSW waste: eliminating the steward fees will not make the waste disappear in to thin air. Guess who will instead pick up the tab for disposing of electronic and MHSW waste?

For the answer, consider what happened after Hudak complained about “eco-tax” for Phase 2 MHSW waste. On July 20, 2010 – less than three weeks after imposing steward fees on the producers of Phase 2 MHSW materials – the Liberals eliminated the steward fees on Phase 2 MHSW waste. Companies no longer pay steward fees to dispose of the thermostats, fire extinguishers, aerosol cans, batteries, fluorescent bulbs, pharmaceuticals, syringes, and mercury switches that they produce and sell. Instead, the recycling or disposal of such products will be charged to…the taxpayer. Having cancelled steward fees for such products, the cost of disposing of those products was shifted to the provincial government, which is funded by the taxes you pay. Therefore, if Tim Hudak were chosen to replace the outgoing Liberals in 2011, and if his PCs eliminated the electronics and MHSW diversion plans, you would pay higher taxes instead of paying higher prices for the electronics and MHSW products. If your neighbour throws out a lot of electronics or MHSW, and you throw out little or none, you would pay for some of your neighbour’s electronic and MHSW waste disposal, and he would pay for none of yours.

Now, I acknowledge that the above explanation involves a lot of acronyms, agencies, fees, economics, etc.. Why, it’s enough to make one turn away and just accept the mess in hopeless confusion and resignation. Knowing that, Tim Hudak hopes you will forget about learning the facts, and just focus on the false conclusion he wants you to remember: that the Liberals imposed a secret eco tax, that the Progressive Conservatives had nothing to do with it, and that they’ll make everything better if you choose PCs to replace the Liberals.

I submit that there’s a better take home message; one that – unlike Hudak’s proposed take-home message – is not based on utter bullshit. Here it is: Elect Tim Hudak’s Progressive Conservatives if you want to pay higher taxes to dispose of your trash. Or, more generally: “Liberal, Tory, same old story”.

The essential problem is the one that neither the Liberals nor the Progressive Conservatives are willing to mention: that the spiraling costs of a government monopoly on household waste collection is the primary reason we ended up with the Waste Diversion Act, 2002, steward fees, and extra fees charged to customers. To fix the real problem, the government monopoly on household waste collection would have to be eliminated. Each consumer would personally bear the full cost of disposing of the things he freely chose to buy. The government would prevent waste disposition of a form that poisons our air, food or water, but would not prevent waste disposal companies from competing for your business. Some would offer lower prices to customers who pre-sort their trash, whereas other companies might charge a bit more for the service of sorting out the various kinds of trash so that their customers would not have to pre-sort their waste. Competition between waste collection companies would maximize your satisfaction, and minimize the unavoidable costs of recycling or otherwise disposing of the waste that results from our production and consumption.

To speak of anything less is, ultimately, to speak of maintaining the status quo.