Time for an Alberta sales tax
Any Alberta politician who says we can get back to a balanced budget with “efficiencies” in government spending is foolish, lying or both.
It’s true that every government department — and every business — can operate more efficiently, offering the same services for less money.
But those savings are at the margins.
They won’t come close to covering the $6-billion shortfall that now exists between Alberta’s incoming energy revenues and government projections.
To bring them back in balance, Premier Alison Redford must cut programs, raise revenue or both.
No politician hoping for re-election ever wants to do either.
For Alberta politicians, however, one tool never comes out of the toolkit: we have no provincial sales tax.
Too many Albertans are blindly and perversely proud of that fact. They take it as a badge of honour.
Changing their mindset won’t be easy, but I say the time to do it is now.
For too long, Albertans have relied on a steady stream of oil and gas royalties to sustain government services.
Those resources were in the ground for millions of years before extraction, and we are squandering their potential benefits in an eyeblink.
Almost all the money from petroleum royalties is spent immediately.
When oil prices fall, Alberta government budget projections quickly tumble into a shambles.
That’s what’s happening now. Alberta can’t get anything close to the benchmark international prices for our oil because we have only one big foreign buyer: the United States.
We are now getting about $50 for a barrel of our oil while West Texas Intermediate crude is trading around $96 a barrel this week.
That’s why it’s so important for Alberta to expand its global oil customer base.
Equally important, however, is the need to diversify our internal revenue sources.
The Alberta Heritage Savings Trust fund was set up 37 years ago to ensure that significant assets from depleting resources were maintained for future generations.
For the past 25 years, Alberta Conservative governments have barely added to that pot, a shameful record that Redford promised this week to rectify.
At last report (September 2012) the fund’s value stood at $16.1 billion, earning barely more than two per cent a year since 1995, when it was worth $11 billion.
We can’t pretend that’s more than a pittance for future generations of Albertans. Today’s government spends almost $11 billion every three months.
We can’t betray young Albertans by denying them capital assets that my generation of post-war baby boomers has come to demand and cherish.
We badly need new roads, schools and hospitals.
Alberta is adding enough people to fill another city the size of Red Deer every year. Airdrie, with a population that will soon pass 50,000, has no hospital.
Sylvan Lake, with a population above 12,000, has no acute care health centre.
Blackfalds, whose growth rate puts it on track to pass the City of Lacombe, has no high school.
It won’t get one soon. Education Minister Jeff Johnson announced this week that proposed new schools already near the top of the list will be delayed a year or two.
Every municipality in Alberta has genuine, pressing needs.
Tax revenue from a fair, stable and broad-based provincial sales tax can help pay for them.
We can’t plan for the future as we have in the past — crossing our fingers constantly hoping that petroleum revenues will spiral ever upwards, then slashing program spending when they do not.
An Alberta sales tax offers a decent way to stability.
It’s inherently a graduated tax. People who can afford to spend the most contribute the most.
It’s easy to administer. It offers short- and medium-term revenue in ways that volatile petroleum royalties cannot.
Tax codes can be readily constructed to exempt certain items from the sales tax, and to rebate taxes spent by low-income Albertans.
Successive federal governments — Liberal and Conservative — have been doing that with the Goods and Services Tax since 1989.
Critics might suggest once an Alberta sales tax is introduced, it will be fated to rise steadily whenever the government of the day feels short of cash.
Again, that hasn’t been the history of the GST in Canada. When Prime Minister Brian Mulroney first proposed the GST to replace the much narrower Manufacturers’ Sales Tax, he suggested a rate of 11 per cent.
He introduced it at seven per cent in 1989. Since then, Prime Minister Stephen Harper has cut the rate twice: to six per cent, then five-per-cent in 2008.
On Thursday, Redford went on television, telling Albertans “a province as prosperous as Alberta should not be as susceptible as we are to the price of oil and gas.”
An Alberta sales tax would broaden our tax base immediately.
Alberta is the richest province in Canada and has the lowest taxes.
We can raise those taxes on people who can afford to pay, generate stable revenue sources and still be the lowest-tax regime in the country.
Then we can proudly hand Alberta off to our children, knowing we did what was right for them and for generations to come.
Joe McLaughlin is a retired former managing editor of the Red Deer Advocate.