One of the myths Albertans enjoy telling themselves is that we have the lowest taxes in Canada. We have no sales tax and our income tax rate is a flat 10 per cent.
Well, we do have the lowest taxes but only if you happen to be rich. Middle- and low-income earners pay more than most of Canada, clear up to the $75,000 income level.
The Parkland Institute released a report last week, titled giving Away the Golden Egg, that is a condemnation of the mismanagement of our provincial treasury for the past decade.
Since instituting the flat income tax via Stockwell Day in 2000, Alberta has become something far from the safe haven for hardworking families that Premier Ed Stelmach referred to in his blog Ask Premier Ed.
We became a place where the rich get Canada’s equivalent of a free ride, while the government runs deficits that the middle class will pay.
In fact, says the Parkland Institute, if we didn’t have a flat tax, we wouldn’t have a deficit at all.
“Albertans tend to be reluctant to discuss tax reform because they have bought into the myth that we pay the lowest taxes in the country,” said Parkland research director Diana Gibson. “This is not the case when it comes to income taxes. While Alberta’s top income earners pay the lowest income tax rate in Canada, most of the rest of us are actually paying a higher rate than we would elsewhere in the country.”
But how does anyone know if a tax rate is too high or too low?
There are two global tests.
• Is the government a good steward of what they collect? Well, we went through one of the biggest economic booms in history just a few years ago and got the largest revenue windfall ever assembled outside an Arab country. Where did the money go?
• Is the tax load carried equitably and fairly? Parkland Institute says it isn’t.
Their report says the highest income earners (above $75,000 a year) will collectively avoid $4.3 billion in income tax this year, which they would pay in any other province.
Alberta’s lowest tax bracket, however is taxed at a higher rate than that of six other provinces. And an Alberta family earning $75,000 per year pays more tax than the same family in British Columbia, Saskatchewan, Ontario, Quebec, the Yukon, the Northwest Territories and Nunavut.
Another myth that Albertans love is the that we are free of sales taxes. But in almost every economy in the free world, a balanced tax regime contains both income and consumption taxes.
Economists nationwide condemned the federal government for knocking two points off the hated GST. Truth be told, the GST levels out the economy by taxing the spending of rich people more than the poor. The rate is further equalized by giving poor people a quarterly cheque, meant to give back at least a portion of the GST they paid.
You can argue the levels of taxation or repayment, but a combination of consumption and income taxes spreads the load fairly — far more fairly than Alberta’s flat-tax regime.
It’s great to be rich anywhere. But it’s even greater to be rich in Alberta.
Under Ralph Klein, the Alberta government liked to harass the poor. They savaged welfare rates, they held minimum wage to the lowest rate possible for as long as possible. They held off increasing AISH supports to disabled people for as long as they could. This was called fiscal responsibility.
Meanwhile, they gave the richest Albertans the equivalent of a free pass and squandered a fortune worth tens of billions.
Our government is telling families with school-aged children to lower their expectations. They’re telling sick people not to expect a nurse to answer their hospital bed call. They’re telling people with mental illness to do the best they can in the community. They’re telling seniors to pay more for their housing (so wealthy investors can make the profits).
Our government does not just live on myth, it is a myth.
If we are to pay the lowest taxes, at least the ordinary wage-earner should get the same treatment as an oil executive.
Greg Neiman is an Advocate editor.