Sales tax, debt on table as Alberta plans fiscal overhaul

EDMONTON — The Globe and Mail

Alberta Premier Alison Redford, left, scrums with the media following her meeting with B.C. Premier Christy Clark to discuss the Northern Gateway pipeline in October 2012. Redford's government will be forced to address how to balance the provincial budget with oil revenues not meeting projections. (Jeff McIntosh/The Canadian Press)

Alberta Premier Alison Redford may get the public “conversation” she’s seeking on tax rates, but reaction to her latest speech suggests she’ll need to lead by example with spending cuts if she expects broad support.

Ms. Redford revealed, late in a conference call with Progressive Conservative party supporters Monday evening, some of the options on the table as she plans to overhaul the province’s resource-dependent fiscal structure. Those options include one day bringing in a provincial sales tax (PST), adding health premiums, forcing doctors to take a pay cut and taking on debt. New taxes would come only once the province is “prudent and responsible and accountable” with money it already has, she said.

Story continues below ad

That has many waiting to see, precisely, what the government will do before any appeal to the public to back a tax hike.

“We’re going to need to see some evidence of change from the provincial government,” said Ben Brunnen, chief economist at the Chamber of Commerce in Ms. Redford’s hometown, Calgary. A conversation on taxes first demands that the government “credibly” demonstrate the gravity of the situation, with cuts and by setting clear priorities, he said.

“The government needs to come out and demonstrate beyond all doubt that they are in this, just as they’re asking Albertans and businesses to be,” Mr. Brunnen said.

It’s unclear to some, though, what the government’s goal is, and the business community is waiting to hear it, said Brad Ferguson, president of the Edmonton Economic Development Corporation.

“What I haven’t heard in anything is the articulation of that overall goal. And that goal, in my perspective, is Alberta has to maintain that strong business environment and a competitive advantage as a low-tax jurisdiction,” he said, later adding: “I think what has to happen, from the business community’s point of view, is we want to see the goal and the plan. Then we can put the discussion on taxation into proper context.”

Ms. Redford’s government has been developing a website that allows Albertans to take their own shot at balancing the budget while revenues decline. The province had put it online, but took it down when it was discovered by the Calgary Herald. It’s expected to formally launch Wednesday.

Options in the website include cuts in every ministry, as well as bringing in a 5-per-cent sales tax ($6-billion annually), inching up the corporate tax rate by 1 per cent ($440-million annually), tax those who earn $250,000 or more at 14 per cent instead of 10 per cent ($1.2-billion annually) or add a health premium (as much as $2-billion annually).

Ms. Redford’s own goals, though, are unclear because critics say she has been sending mixed messages. She flatly ruled out tax hikes in last year’s election, before revising that to say it was her “preference,” before on Monday leaving the door open to new taxes in coming years. Asked specifically about a five-per-cent sales tax, she said it was “a really important part of the conversation” going forward and didn’t rule it out, but suggested the budget due in March wouldn’t include it. It was a long response that left the door to a PST being part of her “conversation” wide open.

Then, she muddied the waters a day later, tweeting Tuesday evening: “Stories and opposition spin about a sales tax are simply false. I've been clear - no sales tax. Period.”

The back and forth, meanwhile, on the fiscal framework has come with dwindling economic fortunes. “We cannot continue to rely on oil and gas revenue to the extent that we do,” Ms. Redford said in Monday’s call.

In a televised address four days earlier, Ms. Redford mentioned few of the same details as on Monday, Wildrose Leader Danielle Smith noted. “I think this is why Albertans are so frustrated. She’ll say one thing one day then completely contradict herself the next,” she said, adding: “She certainly did not campaign on this [raising taxes].”

If Ms. Redford’s PCs end up pushing the idea of a sales tax – which some party members have before, to no avail – they’ll be alone in the legislature. The opposition Wildrose favours spending cuts and no new taxes. And while the Liberals and New Democrats agree new revenue is needed, they see a PST and health-care premium as “regressive,” because they disproportionately affect low- and middle-income households.

“From our point of view, that’s a regressive tax for working families. But the conversation has to be had. We have a revenue problem,” Liberal Leader Raj Sherman said Tuesday, reacting to Ms. Redford’s speech to party supporters the night before. Ms. Redford’s delay in talking about taxes, he argued, is due to a leadership review she faces in the fall – if her party is upset, a poor showing could force her departure. “What this is really about is taking a sharp turn to the right. She’s kicking the can down the road,” he said.

Both the Liberals and NDP would raise corporate taxes – currently tied for the lowest in the country, at 10 per cent – and income taxes on the wealthy. Additionally, the NDP would raise royalty rates on oil and gas, while cutting small business taxes.

NDP Leader Brian Mason says Ms. Redford’s party caused its own mess by reducing corporate taxes and bringing in a flat tax, where high-earners pay the same percentage rate as low-earners. That costs billions a year. “Look at what you did, what you changed, that led to this,” Mr. Mason said. “We had no expectation that when they finally abolished [the higher rates], they wouldn’t replace the revenue. But that’s ultimately what they did.”

Topics: