The federation makes its argument in a submission to a panel set up earlier this year by the provincial government to review the tax.
The federation’s B.C. director Jordan Bateman says input to the panel comes at a critical time as the province heads into an election next year.
He says tax credits that were meant to offset the carbon tax don't help the average taxpayer.
"We’re sending out … an action update to our supporters across B.C., encouraging them to send in their own email to [Finance Minister Kevin Falcon] and this review panel," Bateman said.
"The government will review it and I imagine sometime before the next year's election they're going to want to come with their platform or their plan for this carbon tax."
However, Ottawa University professor law and economics professor Stewart Elgie says the Canadian Taxpayers Federation is wrong when it claims B.C.'s carbon tax isn't working.
Elgie says fuel usage in B.C. has dropped 15 per cent since the carbon tax was introduced in 2008, showing the tax is working in encouraging people to use their vehicles less.
He also says funds raised by the carbon tax have allowed the province to reduce personal income taxes to the lowest level in Canada, with people paying far less on the fee than they are getting as a benefit through the income tax cuts.
The tax on gas and other fuels was imposed under the Gordon Campbell government in an effort to reduce the amount of greenhouses gases being spewed into the air.
The gasoline carbon tax now totals 6.67 cents on every litre. The tax is also applied to diesel and all oil-based fuels, as well as natural gas and coal, and has jumped every July 1 since 2008.
The government billed the tax as revenue neutral, since it was intended to be offset by cuts in personal income taxes.
But the federation says the income tax cut only covers $228 million of the $1.2 billion the carbon tax rakes in every year, and average taxpayers can't get other tax breaks such as venture capital and industrial property credits, or research and experimental development grants.
The federation also argues the carbon tax is hurting B.C.'s competitiveness in North America and across the globe.
Environment Minister Terry Lake has argued the carbon tax has helped the province become a leader in environmental technologies and more motorists are embracing hybrid or electric vehicles.
The tax is part of the province's effort to cut greenhouse gas emissions by one third by 2020.