Alison Redford’s revenue problem will define 2013 budget fight.

The low price of oil and natural gas and an election promise of “no new taxes, no service cuts” has put Alberta’s Tories in an unenviable political bind and set the tone for this year’s provincial budget debate.

Premier Alison Redford Alberta

Premier Alison Redford

This week, Lee Richardson, Principal Secretary to Premier Alison Redford, released a trial balloon suggesting the government is looking at all revenue options, including tax increases, to fund the provincial operating budget.

On the capital side of the provincial budget, Premier Redford and Finance Minister Doug Horner have talked about taking an adult approach to long-term financing of capital projects and maintenance of public infrastructure.

After decades of aggressive messaging and lobbying from interest groups like Americans for Tax Reform in the United States and its the Canadian Taxpayers Federation and the Fraser Institute in Canada, our political culture has been shaped to include a gag reflex to the concept of increasing tax revenue.

The averse public reactions to tax increases are inevitable and is also strengthened with the increasingly prominent belief that government is inefficient and wasting public funds.

Danielle Smith Wildrose Party Alberta Election 2012

Danielle Smith

This perception has essentially robbed government of its ability to increase its most easily accessible and more reliable source of revenue. Alberta currently has some of the lowest tax rates in Canada. Alberta’s corporate tax rates have remained low even as profits of corporations in the province have climbed more than 300%. We could afford to raise corporate taxes and remain the most competitive jurisdiction in Canada.

In the recent provincial election, the Tories pledged they would not raise taxes, Danielle Smith‘s Wildrose are ideologically inclined to cut taxes (and cut services), and Raj Sherman‘s Liberalbertans have differentiated themselves by calling for increased taxes. Brian Mason‘s New Democrats largely shied away from tax talk, but remained steadfast that natural resources revenues should increase (in Norway, a $600 billion oil fund was created from resource revenues collected and invested by the government).

If you asked most Albertans whether they would support cuts to essential services like health care, education, and public infrastructure maintenance, most would overwhelmingly disagree with the cuts. Alberta is just beginning to recover from the decade-long turmoil caused by short-sighted budget cuts and public sector layoffs made by Premier Ralph Klein‘s government in the mid-1990s.

Albertans have a strong economy and good quality of life that is boosted by strong government programs that improve our health, education, and community services. With a growing population and a booming economy, long-term planning and stable funding, not cuts to government services, are critical to preserving and increasing our quality of life.

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Worth listening to: A recent recording of the popular This American Life radio show highlighted the debate and some of the affects that “austerity policies” have had south of the border.

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As noted in yesterday’s post, Premier Redford’s Director of Communications, Jay O’Neill, announced that he will be leaving his position at the Legislature. Stefan Baranski, a communications adviser to the Premier and formerly an Ontario-based consultant, will serve as the new Director of Communications.

23 thoughts on “Alison Redford’s revenue problem will define 2013 budget fight.”

  1. I’m not convinced the public at large is opposed to tax increases. The media (especially in Alberta) would cry bloody murder and make it sound as though its political suicide but I think people are smarter than that and willing to pay their fair share (or see corporations pay theirs) to cover services.

  2. There are two ways to solve a debt problem: increase revenue and/or decrease spending. Why does the left wing never even mention spending problems? Dave, you say the Wildrose are ideologically slated against tax increases as though it’s a bad thing, but then you don’t even mention the spending side of the argument, making you equally guilty of leaning on an ideology! Is too much government spending simply inconceivable to you?

  3. It doesn’t have to be either or. I think most people would agree that taxes of any level are necessary. What I think they don’t agree with is raising taxes before looking at spending. Eliminate waste and optional spending first and then look at raising taxes.

  4. Budget easy to fix.

    1) Voter$ MUST vote for another party. WR or any other is ok.

    2) Increase royalties, very marginally and moderately,
    1 to 2$

    3) Introduce a fair, and moderate progressive tax strucuture. Again, moderate and marginal increases for all tax brackets including corporates, against 1 to 2%.

    4) Decrease government bloat and inefficiencies.

    5) Build Refineries in Alberta, yes, initial investment high, long term payout is huge. We should be selling refined product on the international market and minting billions in AB.

    = billions in surpluses.

    Guaranteed, you will have a stable, rock solid and financially efficient and politically stable climate for businesses to thrive. Build highways, roads, hospitals and schools with cash with proper free market, openly tendered competing contracts.

    If some businesses whine, they need to be reminded some countries charge 80 to 90% royalties.

    Albertans have been taken for granted long enough.

    Its time for some sane, intelligent financial managers to bring some financial discipline and thoughful, intelligent, evidence based spending.

    Financial sovereignty of AB and Canada has been at risk for too long. Tory Balance sheet shows lack of intelligence, ability and competance.

  5. I, for one, would like to see government revenues stabilized by NOT having to rely so heavily on oil and gas royalty revenues. Then ALL the oil and gas revenues could be put into a much better managed Heritage Fund for the inevitable “rainy day”.

    Stabilizing government revenue to a more predictable level could mean that actual PLANNING could take place, with a reasonable expectation that plans would actually be executed, not put on hold every time the oil and gas prices tumble.

    Spending SHOULD be re-considered, but not by “blind” bottom-line cutting such as Klein did. That left us with an infrastructure debt, shortages of tradespeople and medical professionals and INCREASED costs when we tried to catch up.

    I would have NO problem with serious program reviews free of political and interest group influence, but I don’t think that will happen in Alberta’s political culture.

  6. Martin, just a reminder, resources DO NOT belong to corporations,they belong to the people of Alberta. I do agree, stabilizing revenue through royalties is not the best way. It is better to use revenue to top up savings for the future and and let the interest pay for the entitlements like education, healthcare, pensions and seniors care. Tories in the past, just balanced by taking a hatchet to social services and called it balanced by the end of the day.

    There needs to be a serious discussion about royalties, taxes and refineres. There is a spending problem, revenue problem and saving problem. A comprehensive solution is required without corporate or political interference.

  7. I’m tired of people stating that we have a revenue problem or that we have spending problem as if it’s an objective fact. It really is a philosophical/ideological question. Commentary should go something like:

    “I BELIEVE we have a revenue problem because I WOULD LIKE to see services maintained and enhanced”
    or
    “I BELIEVE we have a spending problem because I WOULD LIKE to see services trimmed and/or privatized”

  8. Given all the trial balloons the PCs have been floating,(including Liepert’s suggestion that it’s time for an adult conversation about taxes) it would appear that a number of PCs are prepared to consider the issue. So what’s Redford’s problem? Either she’s worried about breaking an election promise, which is silly because she’s already broken a number or she really doesn’t understand the danger she’s facing, which demonstrates very poor political judgment. In either case it’s a career limiting move.

  9. excerpt:
    PM’s favourite province squandered its petro profits like a ‘banana republic.’ Is this any way to run an economy?

    excerpt: “Warrack, one of the architects of the iconic Alberta Heritage Fund, told the Tyee earlier this year that the province is being run like a “banana republic” for failing to collect fair rents for non-renewable resources like the oil sands.”

    By Mitchell Anderson, 13 Apr 2011, TheTyee.ca

    http://thetyee.ca/Opinion/2011/04/13/HarpersBigQuestion/

    excerpt: “Deficits, foolish giveaways to corporations at the expense of taxpayers, and environmental “carnage” without funds to fix it, according to Allan Warrack, a former minister in the Alberta government who nearly 40 years ago helped craft the province’s plan for saving and intelligently investing its oil wealth. ”

    Corporatism, thy name is Alberta. (related reading, Chapter 9, in the Klein Revolution, by Mark Lisac)

    Vested interests control public policy in joint venture with elected governments. (banana republic)

    Veneer of citizen-based democracy.

    Sam Gunsch

  10. I like the line –”Veneer of citizen-based democracy” but I would go further and say we do not even have this pretty veneer anymore in Alberta.

    It is really a vivid example of a Petro-state now managed by two parties (PC and Wildrose) that are simply the front folks for the oil industry. Both parties are funded by the oil industry and other folks in the corporate sector and both parties only pay lip service to citizen needs. Why should they listen to us? They serve the oil industry masters.

    On the federal level we have the other oil industry party of the federal Wildrosies.

    Both levels of government are –in my opinion—lead by party leaders who understand how to follow an acting script to get into power. Once in power they invest heavily in communications and become not governments but folks— who are basically advertisement and spin producers;they understand that if you control the message —-you control the country.

    It is by information control on all levels of government and by the media—and by our own failures as citizens to be awake to the ongoing erosion of the social contract between the citizen and the state—- that has lead to the poor governance at all levels in Canada. Corruption is flagrant in the public sector in Quebec and there is no doubt, in my mind— that such corruption is present in Alberta and other provinces. We only have to refer to the excessive political contribution limits in Alberta to understand that even though it is a legal matter to contribute major sums of cash to political parties—for most citizens these types of supersized donations raise red flags in our minds about influence peddling and returns on investments made in this way.

    But unless more of us decide to become politically active and speak out about the problems— and then act to vote the folks out of office who have not performed effectively in office, we will be stuck with more decades of such corrupt and poor governance. As this keeps unraveling—democracy falters and we move closer to the inverted totalitarianism system of Sheldon S. Wolin

    Based on the performance of the federal Wildrosies I see that voting for them at the provincial level would have been a financial disaster for Albertans (just look at the F-35 fighter jets file and the costs of the Action Plan advertisement campaigns) and so we currently have a lesser disaster with Redford’s Tories.

    It is sad we cannot get folks in who actually put the people first over their own get rich schemes and harebrained ideas of how to run a province and how to run a country.

    A proportional representation system would solve some of these problems. So would an electorate that is able to think and not blindly cling to one political ideology.

    http://en.wikipedia.org/wiki/Proportional_representation
    PR means that the number of seats won by a party or group of candidates is proportionate to the number of votes received

  11. Albertans overwhelmingly agree with spending cuts. We have a spending problem (highest in Canada), not a revenue problem. Redford is wisely positioninng herself against her main opponent, who she will again defeat in 2016.

    Redford is following the path Klein did in the early 1990′s and will reign for 15+ years like he did.

  12. Agreed Joe, so far Alison has thumbed her nose at the media who so love to stampede stupid politicians. Remember globall warming and Ed and Rob Renner, screaming into the night to Copenhagen and flying that Hollywood dope Cameron around the oilsands to cool the earth, then came H1N1 and we’re all gonna die, the media stampeded E.D. like a Hollywood western, once again, there was also “Our Fair Share”, no that wasn’t a movie, it was E.D.’s attempt to spank and rob the greatest wealth generator in Canada at the same time, the Alberta oilpatch. Sorry WR and your Rutherford/Braid puppet media, the business of Alberta will come first now, not your wet dream scandals.

  13. Raise corporate taxes by one or two points and bring in a fair progressive tax. The poor and middle class will have more to spend and stimulate the economy far more than the 1%. Although royalties should be far higher, to keep he whiners and corporate welfare pigs shut up, you can keep them same. The
    Corporatocracy of Alberta makes triple profit than other provinces. A progressive tax and a moderate 1 to 2% WILL STILL make Alberta the top performing corporatocracy. If they whine, them to f. o. The corporatocracy in AB has taken too much for granted for too long, a sense of entitlement has set in. The middle class is getting gouged by the flat tax. The poor and middle class are paying more than their share in Alberta than other provinces. Yes they are. Royalties must eventually go up so we can build savings into the heritage trust fund much faster.

  14. Hey Bartinsky, don’t kid yourself, Edmonton has more than its share of communications, media relations spin Dr.’, hack journalists, shill academia professors, medical law shills, legal shills, govt hacks on constituency organizations donating money to the party, puppet MLA’s puppeteered by their “secretaries”, illegal donations with smaller cheques written in the amount of $30,000 to as many people as required, its like a pile of crap trying to reach the sky. Fake whitewash inquiries. Biasedly written and presented political stories by biased editorial staff. Daniel will be premier next time. I doubt she will be in the mood to make deals as she cleans up big time. Libs and WR needed to rebalance Alberta. They are rising from the left and right.

  15. Joe understands that voters like “free stuff”. We will overpay the public sector by billions and when we go bankrupt, no one will understand why?
    A pox on their houses!
    We have a spending problem! Simple and factual

  16. “…the increasingly prominent belief that government is inefficient and wasting public funds…” Expense scandals and conflict of interest allegations do nothing to help, either. When assessed objectively against the size of the provincial budget, these stories are about relatively negligible amounts of money, yet they stoke the fires of resistance to any suggestion of revenue enhancement to help stabilize government revenues.

    The only hypothetical government that can even discuss increasing taxes is one that is so squeaky clean it is unlikely to ever get elected in the real world.

  17. Martin has the right idea.
    What the government should do is funneling more royalty revenues into the HTF and use the interest to fund government operations. Ideally, the province would get to a point where interest revenues would equal and subsequently exceed royalty revenues. While interest rates do fluctuate, they don’t have the wild swings that commodities can have, which makes it easier to budget.
    The only problem is, if given a choice between building a school and socking money away, the government will have to opt for savings more often than not – short to medium term pain for longterm gain.

  18. I wish people would stop comparing us to Norway. Look at a map: is Norway a landlocked jurisdiction? No. That means they can sell oil for top dollar to whomever they want – right now I think Brent crude is worth three times as much as our bargain crude.

  19. We “may” have a spending problem. I don’t know for sure.

    We “may” have a revenue problem. I don’t know for sure.

    We DO have a (elected government)management problem, and until THAT’S fixed, we’ll never know the answers to whether we have a spending problem, or a revenue problem.

    Our current government dislikes expertise, and refuses to hire people who may not tell it only what it wants to hear. There’s no commitment to competance.

    Unfortunately, the other parties don’t look much better.

  20. It is so wonderful to hear from so many enlightened people. It seems that we always blame our politicians for the problems we have and yet it is thev people that elect them to do their bidding.

    Albertans have been very fortunate with the many things we have been blessed with. The majesty of the Rockies, plentiful water sources, natural resources that are the envy of the world and a country that is as diverse as any on earth.

    I see our major problem as demanding so much without providing the sacrifice to attain it. Our educational institutions are extremely capable but costing more to operate each year. Our medical care should be the envy of the country if not the world because we have been exempted from paying for it like in the past. Our infrastructure is much better maintained than most but still lagging other industrialized nations because we are short sighted.

    Like everywhere, we are an aging population that places added strain on the programs we so highly value. Like everywhere we have a problem of our citizens not growing at equal rates. We have some, more than most, that are doing exceedingly well while others are falling further behind.

    I agree with others that we are too dependent on the fossil fuel indistry and that we have allowed our government representatives to sell our souls and thus our future to garner their favor. It is long past due for the corporate profiteers to give back in as great a level as the country and province they have so graciously raped and plundered.

    Many have made out very well because of the oil boom and Calgary with it’s housing prices exemplifies this in the best manner. It also shows that the average hard working person or the small business man and now even the laborers that do all the hard work are unable to afford what is being built.

    We have the average Canadian spending 168% of what they make because this scenario exists. No longer are people able to save for the future because business has not kept their employees wages up with the cost of living. Even our growth shows thev direction we wish to take as it is based on immigrants coming for the promise of high paying jobs that don’t exist.

    There is a need for a severe reform of the tax code and corporate and wealthy miens testing must be a part of the process. Like our neighbors to the south, we have seen the erosion of the middle class as a nation even though Alberta is not quite so bad. This, however, does not eliminate the dire consequences that a weakened middle class provides. If only sensible and thoughtful people would realize that the employees they have are also the buyers of their goods and services and when they can’t afford it, the entire economy suffers for it.

    We must diversify, innovate, educate and provide opportunity for everyone. It will be a hard road if we cannot get everyone to engage and see community before self, country before region, and diversity ahead of complacency. The toola are there if only we are willing to be fair and equitable in how they are used!

  21. Alberta has a spending problem!!!!!

    excerpt: “In 2010, Alberta collected just 11 per cent of the tar sands’ economic rent, or excess profit.””

    http://www.ipolitics.ca/2013/01/22/canadas-two-new-solitudes-one-wealthy-one-wanting/

    excerpt: “In 2010, Alberta collected just 11 per cent of the tar sands’ economic rent, or excess profit.””

    excerpt: “The oil and gas sector’s effective tax rate is just seven per cent.
    Subsidies to the oil industry by both levels of government totalled $2.8 billion in 2008. Alberta received $2.1 billion, or 73 per cent, of those subsidies. Half of that subsidy money came from Ottawa.
    Oil companies take as much as 65 per cent of total tar sands revenue; Ottawa captures a maximum of 10.6 per cent.
    Ottawa’s only direct access to oil revenues is through the 15 per cent corporate income tax, a rate lowered from 28 per cent in 2000.
    In 2010, Alberta collected just 11 per cent of the tar sands’ economic rent, or excess profit.”

    excerpt: “Seventy-six per cent of the total North American GDP benefit from the tar sands occurs in Alberta, 20 per cent in the U.S. — and only four per cent in the rest of Canada.
    Projected future tar sands GDP benefits to the U.S. are five times greater than to the rest of Canada outside Alberta. The U.S. enjoys employment benefits from our tar sands development — wages and salaries — that amount to four times the benefits going to the rest of Canada.
    Three states — California, Texas and Wisconsin — see a greater employment benefit from Alberta’s tar sands than the combined benefit to all provinces excluding Alberta”

    h/t here
    http://accidentaldeliberations.blogspot.ca/2013/01/wednesday-morning-links_23.html

    http://www.ipolitics.ca/2013/01/22/canadas-two-new-solitudes-one-wealthy-one-wanting/

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