The provincial government is toying with several options to help dig itself out of a bleak $6-billion hole by the time the budget is unveiled March 7.
This massive revenue shortfall is being blamed on falling resource prices.
Introducing new revenue streams in the form of increased taxes could help put the province back in the black, while supplying funds for the numerous lofty promises made by Premier Alison Redford as she campaigned in the last election.
However, the fact of the matter – and one that remains unseen by the Redford government – is that Alberta does not have a revenue problem. Alberta has a spending problem.
Increasing taxes is simply a Band-aid solution fixing the symptoms of poor fiscal management. The fact that the Alberta government fails to spend within its means would remain unaddressed.
Redford campaigned on a promise to not increase taxes. Even after news of the “bitumen bubble” surfaced at the end of January when Redford addressed the province in an eight-minute televised speech, she vowed not to increase taxes.
This sentiment was echoed by Spruce Grove-St. Albert MLA and Minister of Finance Doug Horner following the broadcast.
Just four days later, Redford floated the idea of a tax increase or the reintroduction of health premiums during a teleconference with supporters of the Progressive Conservative Association of Alberta.
Alberta is an attractive place for newcomers, as it boasts no health premiums, no sales tax, no capital tax, no payroll tax, the lowest fuel tax and low personal and corporate income tax. This is Alberta’s tax advantage, as stated on the Treasury Board and Finance website.
Premier Ed Stelmach eliminated health premiums back in 2009. Previously, families were charged $1,056 while singles were charged $528 annually for the premium. This generated roughly $1 billion in revenue each year for the province.
As detailed in a new government website, www.budgetchoice.ca, a five-per-cent sales tax would generate an additional $5 billion in revenue, almost enough to put the government back in the black.
Re-evaluating Alberta’s tax regime has merit, especially if focused on increasing corporate and personal taxes on the businesses and individuals that can afford to pay them.
The province, however, should not consider increasing taxes solely to recoup revenue lost as a result of using unrealistic figures to project resource revenue or because it has unrealistic campaign promises to fulfil.
Introducing a sales tax or health premium will generate revenue, but will penalize the most vulnerable Albertans for the government’s poor fiscal management.
It’s baffling that the government can consider charging low-income families $1,056 per year for a health premium when it spent roughly $114,000 on unused hotel rooms for the London Olympics.
