Alberta finances no longer envy of Canada
Troy Media – by Roy Clancy
Alberta’s economy is often rightly compared to a roller coaster.
When energy revenues are gushing, it turns into a gravy train, giving the provincial government the spending power other provinces only dream about. And spend it does. Alberta’s 2012-13 budget rings up more than $41 billion in expenses, double the amount dished out a decade ago.
Trouble is, when the resource revenue roller coaster heads downhill, the government has trouble finding the brakes on the gravy train.
A year ago, Premier Alison Redford’s budget saw only economic blue skies ahead. Brushing off warnings, the Tories ramped up spending seven per cent and dipped into Alberta’s rainy day saving funds to pay for it. Now the government is staring at a deficit that could hit $3 billion this year and more red ink that could drain the province’s savings fund next year.
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That has some Tory caucus members calling for big cuts to bring Alberta finances back into equilibrium.
One prominent Progressive Conservative took a different approach. Lee Richardson, Redford’s principal secretary, called for a new look at taxes. In tax-averse Alberta, that’s the equivalent of shouting “fire” in a crowded movie theatre.
The ensuing outburst of anger prompted the premier to declare she doesn’t “want to see any new taxes.”
She left herself plenty of wiggle room, telling reporters it was only her “preference” not to raise taxes. She also noted that some Tory caucus members and other Albertans want all options on the table, including taxes, when it comes to the province’s budgetary woes.
It’s unlikely Richardson, a political veteran and one of Redford’s closest aides, was going rogue when he talked about a different balance of revenues and expenditures. His comments followed similar recent musings from former finance minister Ron Liepert.
Alberta has no sales tax, low corporate taxes and a flat 10 per cent personal income tax rate some say unfairly favours the wealthy.
Although it might confound more tax-tolerant Canadians in other provinces, many Albertans get incensed at the very thought of giving the taxman more of their hard-earned dollars. It’s become part of the provincial DNA. Or, as Liepert once put it: “It’s almost an Alberta mantra somehow that we’re never going to have a provincial sales tax.”
Opposition critics accuse the Tories of floating trial balloons. Well, it’s better to have your balloon popped than go down in flames for breaking an election campaign promise to not hike taxes.
Liepert isn’t the first finance minister to muse about a new provincial sales tax. It’s hardly unnatural for politicians to lust after a revenue source enjoyed by every other province and many U.S. states. And it would add billions to the provincial treasury yearly.
Some pretty smart economists have touted a sales tax as a solution to Alberta’s unstable revenue flow.
Noted economist Jack Mintz, head of the School of Public Policy at the University of Calgary, has said Alberta could restore its sagging tax advantage and attract investment by introducing a harmonized sales tax and cutting income taxes.
It would allow the province to cut corporate and income taxes in half, Mintz argues, making Alberta a personal tax haven in North America.
So what’s wrong with having a healthy debate about it? For one thing, the PC dynasty is already grappling with widespread doubts about its fiscal competence.
“Alberta collects more in government revenues and income taxes (per capita) than any province in the country,” says Rob Anderson, the Wildrose Party’s finance critic. “The problem is the Redford PCs spend more than any other province in the country, as well.”
While the Alberta Liberals and NDP favour higher taxes – and more spending – too many Albertans recall how painful it was for the province to dig its way out of debt after the last free-spending Tory regime held the reins two decades ago.
The government has already signalled it will take on new debt to pay for roads, hospitals and schools. Adding new taxes to the discussion is just too . . . er . . . taxing for the average Albertan to contemplate.
Until the Tories provide tangible evidence they can reform their spending habits, they are wasting their breath even uttering the word taxes.
Roy Clancy is Eye on Alberta columnist for Troy Media.