Tag Archives: Alberta Advantage

Finance Minister Joe Ceci presents the Alberta NDP's first budget.

Looking ahead to the Throne Speech and Spring Session

Similar to last week’s third quarter fiscal update delivered by finance minister Joe Ceci, this week’s Speech from the Throne will mostly focus on political messaging and managing public expectations. Along with the pomp and circumstance that will drape the Legislature as Lieutenant Governor Lois Mitchell reads the throne speech on March 2, 2017, the government will present its narrative for the upcoming session of the Assembly.

To give you an idea of what recent throne speeches have included, here is what the NDP government’s throne speech from March 8, 2016 promised to:

  • diversify energy markets.
  • pursue a coherent and effective economic development strategy.
  • invest in a greener, more sustainable economy.
  • pursue a responsible approach to public finance.
  • pursue ongoing democratic reform to ensure public accountability in all of this work.

The spring session will start just as Premier Rachel Notley returns from Washington D.C. and will mark the half-way mark in the New Democratic Party government’s first term in office.

We can expect NDP cabinet ministers to boast about achieving the approval of the Kinder Morgan Trans-Mountain Pipeline expansion and Environment & Parks Minister Shannon Phillips to release further details of the plan to address Climate Change, including government support for communities impacted by the phase out of dirty coal-fired power plants. We can also expect to hear some hint about what type of reforms the government could make to Alberta’s outdated labour laws in this session of the Assembly.

We can also expect the NDP to begin shifting away from its more activist legislative agenda into re-election mode later this year.

Predictions that the Alberta economy is beginning to recover bodes well for the NDP as they prepare to present their next provincial budget. If the economy does recover and the unemployment rate decreases, they should be praised for not making the massive cuts to critical public services advocated for by, Jason Kenney, the Wildrose Party and the Progressive Conservative Party.

(One of the big stories of the upcoming session will be the one-upmanship we can expect to see between Wildrose leader Brian Jean and soon to be anointed PC leader Kenney, but I will save that for a future blog post).

The NDP inherited a financial mess in 2015 from an old PC government that relied too heavily on revenue from resource royalties to fund the daily operations of public services. As we saw starting in 2014, when the international price of oil dropped, the much-lauded Alberta Advantage of using unreliable resource revenues to subsidize short-sighted tax cuts quickly became the Alberta Disadvantage.

I support the NDP government’s decision continue investing in public services and much-needed public infrastructure projects rather than slashing-and-burning, as the opposition conservative would do.

Alberta fell behind on critical infrastructure investment during the years when Ralph Klein was premier, when his government’s singular focus was on deficit and debt reduction. I was pleased to see the PCs move away from that short-sighted approach during their final years in government and that the NDP has continued to invest in building the type of public infrastructure – schools, hospitals, roads and public transit – that Alberta’s growing population will need.

The conservative opposition parties continue to irrationally lambast the NDP for taking on debt to fund capital infrastructure projects, but on this issue I agree with the approach presented by John Kenneth Galbraith in The Good Society:

“There remain those government expenditures which are intended to improve future well-being and economic growth or which so serve. Here, borrowing is not only legitimate but socially and economically desirable. Similar borrowing in the private sector of the economy is both accepted and wholly approved even by the most eloquent, frequently vehement, opponents of the public deficit.”

The last throne speech recognized the key economic and financial challenges facing our province. “We have seen oil price drops before. We will get past this one. And we will draw the right lessons from it, and act on them,” the Throne Speech stated.

But overall, it is still not clear to me what the NDP’s longer-term fiscal plans are, or how they plan to significantly diversify the government’s revenue sources without further increasing taxes (which they should do). Maybe they are praying for another oil boom? That was the old PC government’s plan too.

Maybe we will learn more in this week’s Speech from the Throne?

The origin and real meaning of the “Alberta Advantage”


August 31, 1993 marked the first time the words “Alberta Advantage” were uttered on the floor of Alberta’s Legislative Assembly.

Unlike some others, my government will not try to buy prosperity through higher taxes. Instead, it will build on Alberta’s existing advantage of low taxes and its free enterprise spirit to develop the most competitive economy in North America. The government will strengthen the Alberta Advantage and sell it aggressively around the globe.” – Speech from the Throne, August 31, 1993.

Premier Ralph Klein

Ralph Klein

“Promoting the Alberta Advantage” was the theme of the Speech from the Throne read by Lieutenant Governor Gordon Towers following Ralph Klein’s victory in the 1993 provincial election, dubbed by Tories as the ‘miracle on the Prairies.’ The Progressive Conservatives had narrowly defeated an insurgent Liberal campaign led by former Edmonton mayor Laurence Decore. Both party leaders campaigned on deep funding cuts and deficit reduction.

The one element, probably the most important element, of the Alberta Advantage that was not mentioned in that year’s throne speech was that the reality of the provincial advantage was based almost entirely on the government receiving royalties from high-priced natural resources, mainly natural gas and oil.

Gordon Towers Alberta

Gordon Towers

For two decades, PC governments were able to subsidize their tax cuts with royalty revenues from natural gas, and then oil. This unfortunately led to government then using those undependable royalties to fund the province’s operations budget. What this meant was that large portions of royalty revenues that should have been saved for future generations, or for a rainy day – like now – were spent on day-to-day operations.

The PC government was once so flush with cash that it sent out $1.4 billion worth of Prosperity Bonuses – known as Ralph Bucks – to every Albertan. It was an embarrassment of riches and a hallmark of PC financial mismanagement.

The Alberta Advantage of low taxes and quality public services stopped being so easy when the international price of natural gas, and later of oil, dropped through the floor. When the PCs began running deficit budgets in the mid-2000s due in part to the drop in natural gas prices, they refused to restore the modest levels of personal income and corporate taxation that had existed before the ‘Alberta Advantage’ became their motto.

The most recent economic decline had many Albertans asking themselves “where did all the money go?” In an off the cuff moment, former premier Jim Prentice told Albertans to “look in the mirror.” But Mr. Prentice’s ‘Hail Mary’ budget of early 2015, which raised some taxes, was not enough to persuade Albertans that the Tories had learned a lesson.

Instead, having despaired of changing the Tories, they opted to change the government and elected the New Democratic Party led by Rachel Notley.

Who will stand up for Alberta’s persecuted billionaire community?

A billionaire is moving away from Calgary and we should all be worried, the newspapers tell us. Postmedia newspapers reported recently that nameless sources are saying oil billionaire and Calgary Flames co-owner Murray Edwards is “switching his residency to the U.K. for tax reasons.”

Postmedia headlines and columns have characterized Mr. Edwards as a “tax-climate refugee” but it does not appear that anyone from the media has actually spoken with him about his move.

Alberta has some of the lowest taxes in Canada and remains the only province without a sales tax. It has been speculated that a billionaire like Mr. Edwards would only pay about 3 percent less tax in the United Kingdom. But the billionaire’s alleged economic refugee status fits nicely into the editorial narrative of the Postmedia newspapers and the political agenda of the Wildrose Party opposition, who immediately blamed Alberta’s New Democratic Party government for Mr. Edward’s relocation.

In May 2015, Albertans elected an NDP government that ran on a platform clearly stating that billionaires should not be in the same tax bracket as average Alberta taxpayers. Even the party that earned the second most votes in last year’s election, the former governing Progressive Conservatives, planned to cancel the 10 percent flat tax and increase taxes for high income earners up to 12 percent if they were re-elected.

Wildrose Party MLA and former Canadian Taxpayers Federation spokesman Derek Fildebrandt appears to be leading the charge in defence of the rights of billionaires to be in a low tax bracket.

One of the first laws the NDP passed after it formed government scrapped the flat tax that the PC government introduced in the early 2000s. Personal income tax rates for high income earners, like billionaires, were increased to 15 percent for annual income above $300,000.

We continue to hear plenty of rhetoric about the decline of the “Alberta Advantage” but the reality is the biggest economic and financial advantage our province has only exists when the international price of oil is high. When oil prices drop and natural resource royalties are low, our artificially low tax rates are unrealistic if we want to sustain the public services that contribute to the high quality of life we enjoy in Alberta.

The government needed to generate revenue and increasing personal income tax rates is a basic way to do that, though it still remains unclear if anyone in government or opposition has a plan to actually get Alberta off the oil roller coaster.

But enough about Alberta. Back to the billionaire.

No offence, Calgary, but it could be that as a billionaire Mr. Edwards wants to live in a large international city like London that is home to a large billionaire community. While being a billionaire in London comes with billionaire-specific problems, I imagine a major European city can offer a lifestyle that a city in western Canada cannot.

There could be private personal motivations for the move. Until the media actually speaks with him about his move, all coverage is just speculation.

If he is indeed relocating, I hope Mr. Edwards enjoys his stay in London. I might even join him there if I one day become a billionaire. And if I do, it probably would have less to do with the taxes and more to do with London being a great city to live in, especially for billionaires.