Prentice primed to repeat fiscal mistakes of the past

The headline in the Jan. 15 edition of the Advocate was, ‘We are all in this together.’ It is a quote from Premier Jim Prentice about the consequences of the steep drop in oil prices: much less income from oil royalties, fewer jobs, less capital investment, and less personal and corporate income tax revenue.

The headline in the Jan. 15 edition of the Advocate was, ‘We are all in this together.’ It is a quote from Premier Jim Prentice about the consequences of the steep drop in oil prices: much less income from oil royalties, fewer jobs, less capital investment, and less personal and corporate income tax revenue.

Instead of a budget surplus, he is projecting a $500-million deficit and a continuing shortfall in revenue until the price of oil goes up to at least $75 a barrel.

He acknowledges that “It is time to get day-to-day spending off the roller-coaster of volatile oil revenues.”

But he would not indicate how he planned to reach this objective, saying only that he and the caucus would be talking with Albertans about how to make up the difference between the cost of government services and the drop in oil revenues.

After these “consultations,” how has the premier and his caucus decided to make up for the shortfall? Over the past few days, we have learned that “We’re all in this together” in meeting this objective does not include everyone.

Will we all be paying a two or three per cent sales tax worth $2 billion to $3 billion per year? No, he has ruled out a sales tax, however modest compared to other provinces.

Will he scrap the unfair flat 10 per cent income tax and return to a pre-Ralph Klein/Stockwell Day progressive tax structure, a change which would bring in another $2 billion?

No, he likes the flat tax. He and other high-income citizens will not be in this together.

Will he raise corporate income taxes from 10 to 11 or 12 per cent (the national average is 12.6 per cent), an increase in revenue of $2 billion to $3 billion?

No, Prentice has decided that those who have profited handsomely from the lowest corporate taxes in Canada since 2006 will not be in this together.

Will the premier increase royalties paid by oil and gas producers, presently nine to 12 per cent compared to 35 per cent for conventional oil and gas and 25 per cent for oilsands oil during the Lougheed era?

No, those who have made huge profits from an extremely low royalty regime for the past 26 years have also been given a pass.

After ruling out the source of $6 billion or $7 billion in revenue, not to mention an increase in oil and gas revenue, what can “We’re all in this together” possibly mean?

Who is left to pay for the shortfall?

Who is left to pay for 26 years of financial mismanagement?

Apparently those who work in the public sector and those who bear the consequences of reduced spending on public institutions and government services.

Squeezing a $7-billion shortfall out of the operating budget or out of the operating budget plus the capital budget would be difficult. It would require reducing the operating budget ($40.4 billion for 2014) by about 18 per cent or the combined operating/capital budget ($47 billion for 2014) by 15 per cent.

Since Alberta already has the second lowest spending per capita on government services in Canada and the second lowest number of government employees per capita, he might not be willing to squeeze this hard. Probably it is more likely that he will force the public sector to take a five per cent rollback in pay, worth about $2 billion, and that he will cut or delay capital spending by another billion or two and borrow enough year by year to make up the difference until oil prices rebound.

In the end, it seems that rather than disconnect the provincial budget from the boom/bust cycles of the oil and gas industry by adopting a tax structure similar to our neighbours to the east or the west, Prentice has chosen to repeat the past, a past based on political expediency and an economic model that very effectively serves the interest of political and economic elites but is completely ineffective in providing a living wage for everyone.

In one of the richest jurisdictions in the world, 12 per cent of people over all (19 per cent if you are aboriginal, 30 per cent if you are an aboriginal child, and 33 per cent if you are the child of a single mother) live in poverty.

We now have 110 food banks, who knows how many soup kitchens, 30 permanent shelters with 3,500 spaces, and numerous temporary shelters for those who have no place to sleep except the street or some park.

Prentice and his caucus could choose to change this picture dramatically, but apparently they have not noticed that wealth does not trickle down. It gushes up.

Dale L. Watson

Red Deer

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