Taxes in Alberta – daveberta.ca – Alberta Politics and Elections

Only in Alberta are huge deficits and low taxes completely irreconcilable

“When the global price of oil collapsed and the recession hit, we had a choice: Cut or build. We chose to build. In making that choice, we focused on the priorities of regular people and families – creating badly needed jobs, building our province for the future, making life more affordable for people and protecting the schools, hospitals and public services all Albertans rely on.”

It was with this familiar refrain that Finance Minister Joe Ceci began his speech on the floor of the Legislatve Assembly as he introduced the Alberta Government’s 2018/2019 budget. This was Ceci’s fourth budget since the NDP were swept into office in the 2015 provincial election and this is likely the last governing budget from this government before next year’s provincial election is called.

This year’s budget appears to have avoided the “compassionate belt tightening” that Premier Rachel Notley warned about in her 2017 year-end interviews. The NDP has avoided making significant cuts to public services over the past three years, instead opting for stable increases to operations funding and major investment in capital spending.

Titled “A Recovery Built to Last,” the themes of this budget – a path to a balance budget, jobs and diversification, protecting public services – are key to the narrative the NDP hopes to shape between now and next spring’s election.

This budget’s narrative also provides a contrast between the NDP and what many expect would be a much different budget implemented under a government led by United Conservative Party leader Jason Kenney, which might be expected to impose deep cuts to funding for public services, education and health care.

Welcome to pre-election season.

Overall, it was a generally acceptable budget, but it is difficult to get too excited about it.

With government prone to make major changes to budgets over the course of a year, it is hard not to see the Budget Day pomp and ceremony as just an overrated exercise in expectations management.

Ceci said in his speech that the NDP are projected to balance the provincial budget by the 2023/2024 fiscal year, which would coincide with the end of a second NDP term in government.

The current deficit is forecast to be $8.8 billion, which is $1.5 billion less than was initially forecast. The government will be lambasted for taking on more debt, even though significant debt accumulation was already forecast in the media coverage of last year’s budget. Economists will be quick to point out that the Alberta government is still in a fairly strong position when it comes to the net debt to GDP ratio, but that message might be hard to sell to newspaper opinion writers and voters at the doorsteps.

But what is not clear in this budget is how the government plans to deal with its revenue problem.

Only in Alberta could a finance minister calmly deliver a speech about an $8.8 billion budget deficit while also bragging about the lowest taxes in the country. “…Albertans and Alberta businesses pay at least $11.2 billion less in taxes than they would in any other province,” Ceci stated. Maybe if we paid a little bit more taxes, we could have a balanced budget, or at least a lower deficit?

Economists and political staffers might tell me it’s not that easy, and maybe it’s not, but only in Alberta could huge deficits and low taxes be totally reconcilable in reality but completely irreconcilable in politics.

What’s in a budget name?

The titles of Alberta’s budget documents typically present a general theme. Budget names can sometimes be quite silly, but they do provide a snapshot of the political and economic agenda of the government of the day. Here is a look back at titles of Alberta budgets from 1997 to 2018:

A Recovery Built to Last (March 22, 2018)
Working to Make Life Better (March 16, 2017)
Alberta Jobs Plan (April 14, 2016)
Supporting Jobs, Supporting Families (October 27, 2015)
Budget 2015 (March 26, 2015)
The Building Alberta Plan (March 6, 2014)
Responsible Change (March 7, 2013)
Investing in People (February 9, 2012)
Building a Better Alberta (February 24, 2011)
Striking the Right Balance (February 9, 2010)
Building On Our Strength (April 7, 2009)
The Right Plan for Today and Tomorrow (April 22, 2008)
Managing Our Growth (April 19, 2007)
Strengthening Today, Securing Tomorrow (March 22, 2006)
Investing in the Next Alberta (April 13, 2005)
On Route, On Course – Heading Toward Alberta’s Second Century (March 24, 2004)
Making Alberta Even Better (April 8, 2003)
The Right Decisions for Challenging Times (March 19, 2002)
The Future … Meeting Priorities, Sharing Benefits (April 24, 2001)
New Century. Bold Plans. (February 24, 2000)
The Right Balance (March 11, 1999)
Agenda for Opportunity (February 12, 1998)
Building Alberta Together (February 11, 1997)

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.

“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.

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.