Put all resource income into Heritage Fund
Wednesday, Feb 13, 2013 06:00 am
In the Gazette of Wednesday, Feb. 6, both the editorial (Our View: Spending is the problem) and the commentary by Ken Allred touch on part of the financial problem facing Alberta. Unfortunately, neither goes far enough.
Out-of-control spending is the result of many rounds of irresponsible promises made by parties seeking election or re-election. Parties of all stripes and colours have created expectations with no apparent concern for their ability to finance them, if elected. Voters, in turn, have failed to take our government and the opposition to task. Collectively, we are killing the goose that lays the golden eggs.
Revenue from the sale of oil and gas leases and royalties on resource extraction are one-time money from the sale of a capital asset. Peter Lougheed understood this and set up the Heritage Savings Trust Fund. Unfortunately, Lougheed did not go far enough. He should have put all (not just part) of the resource revenue into the fund. If we had had the public and private discipline to live within our means and put ALL resource income into the Heritage Fund for the last 30 or 40 years, we could by now have had a fund like Norway’s!
Such a fund, with steadily increasing capital value, would each year be generating billions of dollars in investment income that could legitimately be tapped for ongoing government operations without touching the underlying capital. Instead, we have been squandering the capital to maintain an artificially low rate of taxation and to enable irresponsible consumption. Alberta and Albertans have been just like the farmer who financed his lavish lifestyle by selling off lots from the family farm, with little or no thought to what he would do when the farm was gone.
We should now be seeking a way to put ALL future resource income into the Heritage Fund. If we cannot cut enough from government spending to balance the budget, then we may need to have a sales tax. Would we like that? Of course not, but it would be far better than to continue on our current insane, reckless path. The government needs to come to grips with this issue now.
Perhaps initiating public dialogue will help the public realize that this issue is far more important than the alleged unfairness arising from the so-called “flat tax.” In fact, notwithstanding its title, the Alberta Flat Tax is really a progressive tax. Not only do higher-income Albertans pay more dollars; the personal exemptions mean that they also pay a higher percentage of their taxable income under the “Flat Tax.”
Is there a party we can trust to save our resource revenue properly and permanently, one that could resist the temptation to use the Fund as a slush fund to finance spending on politically motivated goodies? Is there public interest in finding and supporting such a party? Or was Julius Caesar right when he said, somewhat cynically, that the general public was only interested in bread and circuses?
Dominic Willott, St Albert