When Sherlock Holmes was trying to solve the mysteries of The Sign of Four, he retreated to his cocaine habit, calling it his seven-per-cent solution.
How interesting it is that our addiction to oil money has begun with a return to the five-per-cent solution.
This will be the third time in the past three decades that our provincial governors have made five-per-cent cuts. In 1986, the provincial budget was set based on oil royalties at $20 per barrel. Oil prices collapsed to $10 per barrel. Former premier Don Getty imposed a five-per-cent cut on all government department programs. It didn’t change anything.
Former premier Ralph Klein reimposed a five-per-cent cut in public spending during another oil price slump. He declared that we had a spending problem – not a revenue problem. He then transferred the revenue from the Alberta Heritage Trust Fund investments into the province’s operating budget. This was to be temporary. It wasn’t. He declared that our healthcare system was a ‘drain on the wealth of Alberta.’ Centralized control was to be the solution. It wasn’t.
Premier Jim Prentice’s reintroduction of the five-per-cent cut in public spending was dully predictable. We may be the highest paid folk in Canada, but we have also been the most economically productive province – bailing out Ontario and Quebec in equalization payments. We still face an Alberta The Sign of Four dilemma. How do we survive this one?
The first idea has been a provincial sales tax – another five-per-cent solution. Of course, once introduced it will never leave. Its administrative costs to businesses will punish the very folks who are struggling to survive – especially since the feds imposed a seven-per-cent import tax on goods made in China on Jan. 1. Having no sales tax is an Alberta Advantage and one we have been deservedly proud of. Put in this five-per-cent solution and every Albertan of voting age will be PST-off.
Instead we should be selective and increase our fuel tax at the pump – by say 10 cents per litre (double five). This would bring in $1 billion and provide solace to PST advocates.
The second solution is to increase personal income tax. For most of us, a five-per-cent tax increase is only seen once a year and won't cause a major storm. Leave in the present flat-tax system. Changing it to a sliding scale can't be done easily, rapidly or inexpensively from an administrative viewpoint.
The third solution should be to intensify infrastructure projects. It will provide employment by those laid off in the oil patch and be of long-term social benefit. We should get on with the school construction and intensify rural and urban infrastructure projects. It is time to do what President Franklin Roosevelt did with his public works approach during the Depression. Folks who work pay taxes.
Fourthly, provide for the future through enhancing the Alberta Heritage Trust Fund. We should stop permanently draining it for operational purposes. Recommit to the former premier Peter Lougheed ideal – call it the Legacy Initiative.
Alan Murdock is a local pediatrician.
