The Alberta Party Economic Recovery Plan
Posted on April 08, 2015 by James Teterenko
Protect the services we need by reducing our dependence on oil and gas royalties
The PCs have made Alberta too dependent on oil.
Since the price of oil started its downward spiral last fall, the PCs have been calling the drop in energy revenue “the most serious fiscal circumstance we’ve seen in a generation”. When the Premier was asked who was responsible for this ‘fiscal crisis’ he said that “we all need only look in the mirror”. In other words, it’s all your fault.
It’s not your fault. It’s the PCs.
The PCs have been in government for 44 years. During that time, the price of oil and natural gas has bounced around like a ping pong ball. During their time in power, the PCs have ignored the volatile nature of natural resource revenues and have made our government more dependent than ever on energy revenue.
Even Alberta Finance acknowledges that natural resource revenue is extremely volatile and produced the following chart to illustrate this point:
Currently, nearly 30% of the government of Alberta’s revenue comes from natural resource royalties, which makes Alberta particularly susceptible to energy fluctuations. See the following chart:
The problem with the flat tax
Back in 2001, the PCs got rid of the progressive tax system used everywhere else in Canada and made us even more dependent on natural resources revenues.
The introduction of the flat tax benefited high income earners who were suddenly paying dramatically lower taxes than they would have paid in any other province. It was the middle income earners who wound up paying more than their fair share. Individuals earning less than $90,000 generally pay more tax in Alberta than they do in British Columbia and Ontario, while those earning over $120,000 pay significantly less. Simply put, the Alberta Advantage missed ordinary income earners.
Alberta was able to afford to have a flat tax because of increasing crude oil prices. But now the price has collapsed, instead of taking responsibility, the PCs have chosen to blame you.
The PC solution: Pay more, get less.
The PCs proposed budget would see average income Albertans paying more taxes (including the new healthcare levy) and more user fees, while front line services get cut. Healthcare, for example, will have an effective cut of nearly $1 billion and education will have an effective cut of $200 million. Make no mistake, this means longer wait times, larger class sizes and the new schools promised by the PCs will have nobody to teach in them.
The Alberta Party has a better way.
The Alberta Party has a better way. We operate from the principle that your kid’s kindergarten class size shouldn’t depend on the price of oil. Having 30% of our revenues dependent on natural resource prices is far too risky and that portion must be reduced significantly over time.
The Alberta Party’s Economic Recovery Plan will:
Protect frontline services in health and education by balancing the budget over six years.
Alberta should balance the budget over a six year period as opposed to the PC’s three. Alberta has more fiscal capacity than any other government in Canada and can afford to take the time to get this right. That way there would be enough time to find ways to reduce costs while preserving the frontline services your family needs.
Replace the PCs’ proposed new income tax, which continues Alberta’s unfair income tax system, with an effective progressive tax system that’s fair to average families.
We need to bring back fair taxation to Alberta - the PC’s proposed changes, including the new healthcare levy and increased user fees, still leave middle income earners paying a disproportionate share of income tax revenues. That starts with re-introducing a progressive tax system over time.
The Alberta Party would cut taxes for Albertans earning less than $50,000 per year. We would cancel the PCs planned healthcare premium that punishes middle-income earners, and replace the flat tax with a truly progressive income tax:
- 9% below $50,000
- 10% $50,000 to $100,000
- 12% $100,000 to $250,000
- 13% $250,000 and over
We expect this would generate approximately $1.5 billion per year in stable revenues.
Encourage entrepreneurship by gradually eliminating small business taxes.
Many people incorrectly assume Alberta has the lowest small business tax rates in Canada. In fact, we’re in fourth place. The Alberta Party would create the necessary conditions for small businesses to lead market-driven economic diversification in Alberta. We would start by eliminating taxes on the first $50,000 in net earnings and scale up from there over a 10 year period.
Increase revenues from corporate tax by increasing the tax rate by 1%, which will still leave Alberta with the lowest corporate tax rate in Canada.
The PCs didn’t raise corporate taxes, even though the government’s own survey showed public support for it. We would increase the corporate tax rate by 1% which would tie us with British Columbia for the lowest corporate taxes in Canada. This would generate approximately $500 million in stable revenues every year.
Empower front-line staff to find cost savings and reduce administration costs by at least $250 million per year through zero based reviews of all departments.
We need to examine each department from the ground up to determine what they should be doing and how they can do it more cost effectively. More significantly, zero-based reviews help identify what services the government should no longer be providing.
Create a Legislature Budget Officer mandated to review budgets before they are passed to increase transparency and accountability over budgeting.
Independent oversight of the budget process is critical and a Legislature Budget Officer would ensure that Albertans are getting accurate information about how the government is spending our money. We also believe that designated taxes should actually go to the services they are allocated for. For example, the PC’s new healthcare levy doesn’t go directly to healthcare and the education portion of the property tax doesn’t go straight to education. It’s time to stop misleading Albertans.
Rebuild the Heritage Fund.
The Alberta Party would mandate 50% of resource revenues are saved to the Heritage Savings and Trust Fund and that 100% of future surpluses be used to pay down debt until the debt is retired, at which point all future surpluses be put into the Heritage Fund.
Implement a “smart” infrastructure investment plan to build the infrastructure we need and keep Albertans working
The Alberta Party would use Alberta’s excellent credit rating and access to low interest rates to borrow the funds needed to build the schools, health facilities (including the long overdue Calgary Cancer Centre and upgrades to Edmonton’s Misericordia hospital), transit (including LRT expansion) and roads needed to accommodate our population growth. We would also require the government to commit to a plan that pays back those loans over a reasonable period of time, similar to how you use a mortgage to purchase a home.
These are the crucial first steps in reducing our government’s dependence on oil revenue. We, as a community, will need to start having an honest discussion about the services we want and how to best pay for them.
The Alberta Party has a better way.