The good news? There is a better way!
If we’ve learned anything from past economic downturns, here in Canada and around the world, it’s that cuts don’t end recessions; they make them deeper and longer.
But the good news is that we have options. Alberta could increase the amount of money it generates from taxes on profitable corporations and wealthy individuals by more than $8 billion a year – and STILL be the lowest tax jurisdiction in Canada.
We could also increase royalty rates on oil company profits by billions and still have dramatically lower rates than other oil-producing jurisdictions like Alaska, Texas and Norway.
The Better Way Alberta Proposal
The Alberta government’s immediate problem is that the price of oil has dropped significantly. But the long-term, underlying problem is that we still have a broken revenue system that has been too dependent on oil and gas royalties.
Successive Conservative governments undermined the revenue base we need to fund public services. Our current government has taken steps towards mending the holes, fixing the system and restoring tax fairness. But there's still more that needs to be done to avoid cuts to the services that Albertans need and value.
Here’s how we could repair Alberta’s broken revenue system:
1. Adopt an income tax system like the one Alberta had in the 1990s.
In the 1990s, Alberta's income taxes were largely comparable to those in other provinces. Because oil prices were high, the government of the day was able to pay off the deficit, while maintaining the day-to-day operations of the province.
But in 2001, the government adopted a "flat tax" that has blown a hole in our revenues, and has resulted in a huge giveaway to Alberta's richest while raising taxes on Alberta's middle class.
The new NDP government deserves praise for bringing back some progressive elements to Alberta's tax structure. But by only raising taxes a point or two on the very wealthiest, they've only added about $400 million to $450 million per year to the government's bottom line -- barely denting the predicted $6 billion shortfalls the government expects over the next couple of years.
Alberta needs a true, fulsome, comprehensive and progressive tax structure.
2. Increase Taxes on Corporate Profits
Corporations only pay taxes when they make a profit — and only on that profit.
In 2001, Ralph Klein cut the corporate tax rate from 15.5 per cent to 13.5 per cent. Then in 2006, he took it down again to 10 per cent.
Alberta has for years had the lowest corporate tax rates in the country, and has been an active leader in the “race to the bottom.”
The new NDP government should be congratulated for increasing Alberta’s corporate income tax rate from 10 per cent to 12 per cent. That change is predicted to raise between $250 and $400 million more in government revenue every year.
This is a good start, but a further increase to corporate tax rates is needed.
Canada currently has the lowest corporate tax rates in the G7. And Alberta currently has average corporate tax rates.
If Alberta’s tax rate on corporate profits was returned to 15 per cent, it could generate an additional $1 billion to $2 billion each year in revenue that could be used to pay for public services and public infrastructure.
3. Increase Oil Royalties
Royalties are not taxes: they are the price that oil companies pay to purchase resources assets that are owned by the citizens of Alberta.
Former premier Peter Lougheed set a target of collecting royalties equivalent to 30 per cent of the revenue generated by the energy sector. For many years, he succeeded in reaching this target but, unfortunately, his successors did not.
As it stands right now, the Alberta government collects royalties equivalent to only 3.6 per cent of the energy sector’s revenue, the lowest level in Alberta history and a fraction of what’s collected by governments in most other oil-producing jurisdictions.
The Alberta government’s take is even lower in the oil sands, where as much as 80 per cent of the sectors’ value has gone to corporate profits, and only 5 per cent has been collected in royalties.
The Better Way Alberta coalition believes the government should take the following three steps on royalties:
Re-establish Lougheed’s 30 percent target
According to a 2010 study from the University of Alberta’s Parkland Institute, the failure of the Klein and Stelmach governments to meet their own modest targets for royalty collection resulted in the loss of at least $37 billion in forgone revenue over about 15 years.
Instead of addressing this embarrassing and disturbing failure, the Redford government quietly eliminated royalty targets altogether and replaced them with a commitment to “competitive” royalty rates (in other words, lower than everyone else’s).
We think the Alberta government should re-establish Lougheed’s targets – and they should stick to them.
Introduce an annual “Shareholder Statement” for Albertans
Investors in stocks and mutual funds get annual reports outlining how their investments have done in any given year. We think Albertans, as owners of our province’s resources, deserve to get similar annual reports about how much they’re earning from their assets.
In a similar vein, we think the provincial Mines and Minerals Act needs to be amended to disclose how much individual oil companies are paying in royalties. This information is currently kept secret. We think Albertans deserve to know how much oil companies are paying to purchase publicly-owned energy resources.
4. Sales Tax
The Better Way Alberta coalition is opposed to the introduction of an Alberta sales tax. We think the revenue needed to pay for public services and public infrastructure should be generated by progressive taxes on income and corporate profits.
However, if the government proceeds with a sales tax against the majority opinion of Albertans, we demand that efforts be made to reduce the regressive nature of the tax by exempting day-to-day necessities such as food and prescriptions drugs. Additionally, the province would need to bring in a low-income tax credit — like Saskatchewan's — to reduce the taxes paid by lower-income citizens.
5. Budget Deficits
We support the Alberta Government running deficits to maintain the services Albertans depend on. While some opponents of the government have tried to make an issue over the percentage by which the debt is forecast to increase, that increase only looks large because Alberta has no net debt — and is the only province to enjoy such a status.
Debt is a legitimate policy tool for governments to use to get through bad economic times.
Send a message to the Premier!
Sign the Better Way Alberta petition, on-line or when we come to your door!
Say “no” to cuts to vital public services, like education and health care!
Say “no” to continued sweetheart deals for profitable corporations and the wealthy!
Say “yes” to fair taxes and royalties to pay for quality schools, hospitals and public services!
There is a BETTER WAY for ALBERTA!