Kenney cracks the door to a provincial sales tax

He knows he's between a rock and a hard place when it comes to a skyrocketing debt and no relief through federal transfer payments. He's going to have to start squeezing his 'highest income earners in Canada' Albertans for some of that money they've been hoarding.

Next, he might start looking at increasing the income tax rates for those high income earners. But one step at a time . . . . mustn't scare the oil-profit-reliant types so much that they stop whining and pack up to move to . . . . . ?
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iPolitics - Published on Mar 3, 2021

Kenney no longer slamming the door shut against a provincial sale tax

'In a subtle yet significant change in tone, Kenney is no longer railing at talk of new taxes but is saying “now is not the time” to talk about new taxes.'

If you’d like to take a peek at the new Alberta budget released last week, might I suggest you turn to page 152.

Here you’ll find a handy and instructional chart entitled “Alberta’s Tax Advantage” that spells out how much money the United Conservative government of Jason Kenney could collect each year if it had the same tax rate as other provinces.

For example, if it copied the taxes of Ontario, Alberta could collect an additional $13.3 billion a year. If it had identical taxes as British Columbia: $14.3 billion. As Quebec: $19.5 billion.

Heck, if Kenney was to introduce the same tax rates as Newfoundland, Alberta would be swimming in an additional $23.5 billion a year and Kenney could spend his mornings frolicking in the mounds of excess cash in the provincial treasury, a la Scrooge McDuck.

To put this in context, according to the new budget, Alberta had a record $20-billion deficit last year and will run up an $18-billion deficit this year. The total provincial debt will hit $115-billion this year, another record. Kenney’s budget is holding the line but he has warned of a “fiscal reckoning” in the future.

This is in part because of the COVID-19 pandemic and low oil prices but also because Alberta has a stunningly dysfunctional taxation system.
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Conservative governments, proudly and without any irony, call it the “Alberta Advantage.”

That’s why the “Alberta Tax Advantage” chart has been a fixture of Alberta budgets for years.

Once upon a time, back when Alberta was flush with cash during energy-price boom years, the chart was a useful piece of propaganda to remind Albertans just how lucky they were to live in a province with the lowest tax regime in the country, the only one with no provincial sales tax.

But it was an illusion.

Alberta didn’t have the lowest taxes because of strong government policies.

Alberta had the lowest tax regime in Canada because it sat atop an ocean of oil and gas fetching strong prices.

Whenever the prices dropped, the Alberta government of the day was left scrambling to cut spending, usually by targeting public sector wages, raising user fees and reducing services.

It was a never-ending roller coaster ride with no safety bar.

When boom times returned, the government began spending again and even, in the case of former premier Ralph Klein in 2006, handing out $400 cheques to every Albertan that wasn’t in jail. Such spendthrift policies did nothing to encourage national sympathy for Alberta when it hit another rough spot in 2008.

The NDP, during its one-term in office during a recession, didn’t slash spending but did introduce a carbon tax to help fund a greening of the provincial economy — and was rewarded for its troubles by losing the 2019 provincial election to the United Conservatives who campaigned in large part against the carbon tax.

Nobody likes higher taxes but Albertans have made it such a point of cultural pride that a PST is referred to as a “political suicide tax” in the province.

That might be changing, ever so slowly.

Kenney, who promised to balance the budget his first term in office and lay out a path to eliminate the accumulated debt, is now presiding over a government that has no plan to eliminate the annual deficit, never mind the ballooning debt.

What’s a libertarian, fiscally conservative premier to do?

Well, acknowledging reality is a good start.

Kenney has lately admitted “we cannot cut our way” out of such a deep deficit/debt hole.

Even if by some miracle the price of oil rises and the economy recovers to the point the government can balance its budget in two years, Alberta will still be saddled with a $130-billion debt by then.

One obvious solution staring at us from the “Alberta Tax Advantage” chart: higher taxes.

In a subtle yet significant change in tone, Kenney is no longer railing at talk of new taxes but is saying “now is not the time” to talk about new taxes. He will be setting up a panel to review revenues, much as he did in 2019 when he had a panel investigate cuts.

But any changes would have to wait until after the next election and after Albertans have had a public debate. ^^^^^^^^^^^^^^^^^^^^

“Albertans are going to have to tell their next government their marching orders,” said Kenney during a news conference Tuesday. “Do you want more spending cuts? Or do you want to keep running deficits forever? Or do we want to find a way to address that through revenue as well or some mix of the above?”

According to a “law” passed by Ralph Klein two decades ago, a government would have to hold a referendum before introducing a sales tax. So, there’s that.

But the conventional wisdom is if anyone could convince Albertans it’s time for a PST, it would be Kenney, someone who has been so vociferously against it. Alberta’s version of Nixon going to China.

Helping Kenney in that fight, should he dare clamber into the trenches, is the Alberta Business Council that on the eve of Alberta’s 2021 budget, issued a report arguing in favour of a taxation overhaul, including introducing a sales tax and resurrecting a provincial carbon tax.

“Alberta has a serious problem,” said Adam Legge, president of the council that has more than 90 members including Suncor, TC Energy and Westjet. “For decades, governments have spent too much, and collected too little in taxes, because we could make up the difference with resource revenues. We can’t count on that in future, and our trajectory is unsustainable. We need to make some tough decisions about our revenues and expenses to bring Alberta back to a more sustainable position.”

Alberta is facing a “fiscal reckoning” sooner or later.

The only question is whether that reckoning will be more debt, deeper cuts or higher taxes.

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