Beware Alberta Conservatives: The more you tax the people, the more they'll demand from their government, and the more at risk your four-decade dynasty is.
In its most austere budget in years, complete with a gaping deficit of nearly $5-billion, the province is forcing Albertans to pony up for some of the revenues that the oil patch is losing because of the collapse in global crude markets.
In doing so, the government of Premier Jim Prentice is chipping away at the cornerstones of the so-called Alberta Advantage championed by Ralph Klein. They are the flat tax system and a heavy reliance on energy revenues to fund public spending.
The system has afforded the energy sector unequalled influence in the province when it comes to fiscal policy, so much so that executives once jumped all over a previous premier who wanted a greater take from oil and gas royalties and forced him to backtrack.
This time, the government steered well clear of tinkering with royalties and corporate taxes, saying that the oil patch is already chopping spending and bleeding staff to cope with crude prices that are less than half of what they were last June.
Still, life's getting more expensive for the average Albertan, and there's a shrinking wall of energy cash to keep opposition to future government moves at bay.
Albertans have long enjoyed a flat tax of 10 per cent, making the province Canada's conservative haven. Now, with non-renewable resource revenues set to dwindle to just 6.6 per cent of total revenue in 2015-16 from 18 per cent in the previous budget, that's about to change in practice, if not in name.
To help make up part of a projected $7-billion skid in revenue, the government is increasing the tax rate for Albertans earning more than $100,000 a year by 0.5 percentage points this year, with more hikes of that size in the subsequent two years. For those scraping by on more than $250,000 annually, the government has tacked on a further 0.5 per cent tax for the next three years.
Also, the Prentice government is reintroducing a health-care premium – really, a levy to bolster general revenues – an addition to personal taxes taken off paycheques. It also increases with on income levels.
Taxes already in place, on booze, smokes and gasoline, are going up. In addition, user fees are increasing for vital statistics services – presumably everything from birth to death certificates.
Any way you slice it, it's an end to the flat tax in Alberta.
Finance Minister Robin Campbell has also reinforced that his government's goal is to lean a whole lot less on oil to fund public programs, even when crude prices recover.
"Our spending on public services is higher than the rest of Canada. We have a revenue issue. We need to get off the roller coaster of oil," Mr. Campbell said.
He's right. In the last budget, non-renewable resource revenue topped $8.7-billion. With crude prices not expected to average above $55 (U.S.) in the upcoming year, the take is forecast to fall to a paltry $2.9-billion, and not get back to last year's levels until 2019-2020.
Meanwhile, the amount shouldered by average Albertans through the taxes and health levy will jump to more than $15-billion from $11-billion.
By 2020, the government wants just half the revenue from energy to go to funding public spending, with the rest earmarked for "building lasting financial security for the province." A quarter of the oil and gas take will go to beefing up the Heritage Savings Trust Fund.
This should please some of those who have slammed the government for draining the rainy-day kitty, while Norway's sovereign wealth fund has ballooned.
All in all, the moves should make Albertans much more keenly interested in how their government operates and how the increased chunk of their income gets used.
With the oil roller coaster slowing down, the Alberta Tories that have enjoyed 44 years of relative security at the polls are going to have to be a whole lot more responsive.
Jeffrey Jones