Alberta is dealing with two big problems: we need to get people back to work and we need our provincial government to stop overcharging Albertans by $10 billion a year. There’s plenty of evidence from our own backyard that shows Alberta’s business tax cut will be part of the solution, not the problem.
In 2001, the Alberta government began reducing its business tax rate from 15.5 per cent to 10 per cent in 2006. Alberta’s average yearly real GDP growth rate between 2001 and 2014 was higher than all other provinces and behind only North Dakota among key U.S. energy states. For workers, annual job gains over this period outpaced these other regions.
Even with the tax cut, government’s revenue from business taxes more than doubled from $2.2 billion in 2001 to $5.8 billion in 2014, a faster growth rate than the booming economy.
In contrast, the NDP government’s two-percentage-point business tax hike was a failure. In 2014, the 10 per cent business tax generated $5.8 billion. The 12 per cent business tax only generated $4.9 billion in 2018. Albertan workers were hurt too. The business tax hike cost the average two-income household $830 per year in lost earnings, according to a University of Calgary report.
Following the Blue Ribbon Panel’s report that highlighted the need for government spending cuts, union bosses and the New Democrat opposition tried to make it seem like the business tax cut is part of the problem.
Here’s the reality: Alberta’s fiscal house is a mess. If things don’t change the Alberta government’s debt will be nearly $102 billion by 2022. Then there’s the annual interest payments to service that debt, which could reach $3.7 billion.
But Alberta’s mess has nothing to do with the government’s smart decision to reduce taxes on job creators and everything to do with runaway spending.
The Progressive Conservatives doubled program spending between 2004 and 2015, then the New Democrats continued the spending spree. This led the expert panel to conclude that Alberta taxpayers are being overcharged by $10 billion every year for services compared to provinces such as British Columbia, Ontario and Quebec.
Albertans are being overcharged by $10 billion for services, but union bosses and the opposition have been preoccupied trying to position the business tax cut as a corporate handout or a gift. They’re dead wrong.
If the provincial government decided to reduce personal income taxes, would it be a handout to individual taxpayers? No, this would simply mean Albertans could keep more of their own hard-earned income.
What’s true for personal income taxes is also true for business taxes. Unless Alberta’s New Democrats and union leaders believe the government inherently owns every dollar Albertans earn, they need to stop implying that this across-the-board business tax cut is a gift or a handout.
What we’re seeing now is an opposition party that is ignoring the voters of Alberta who gave the government a clear mandate to balance the books and cut taxes.
But here’s a striking irony: these critics were announcing billions of dollars worth of corporate handouts only a few months ago.
After being all too eager to shower rail car companies, petrochemical firms, oil upgraders and the technology industry with taxpayer cash, the NDP has lost all moral high-ground to be lecturing about corporate favours. And it was the Alberta Federation of Labour that sat on the committee that recommended the province dole out corporate welfare under the guise of energy diversification.
Corporate handouts are a serious waste of taxpayers’ money. Premier Jason Kenney should immediately reverse course, cancel all corporate welfare and commit to rejecting any future business lobbyist begging the government for a taxpayer-funded treat.
But the Premier’s critics are wrong on tax relief. The Alberta government can fire up the economy and get its fiscal house in order with smart decisions to cut business taxes and stop overcharging Albertans by $10 billion a year.
Franco Terrazzano is the Alberta Director for the Canadian Taxpayers Federation.