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Alberta UCP Leader Jason Kenney vows to cut Alberta’s corporate tax rate by a third if elected

Jason Kenney speaks to the media at his first convention as Leader of the United Conservative Party in Red Deer, Alta., on May 6, 2018.

Jeff McIntosh/The Canadian Press

Jason Kenney, the Leader of Alberta’s United Conservative Party, is promising to cut corporate taxes by a third if his party wins the spring provincial election and said the policy would pay for itself by creating thousands of jobs.

The tax promise is one of the clearest dividing lines yet between Mr. Kenney’s Opposition party and Alberta’s governing New Democrats ahead of an election campaign that’s expected to focus heavily on the state of the provincial economy. Premier Rachel Notley’s government increased the corporate tax rate from 10 per cent to 12 per cent after taking office in 2015, fulfilling one of her main campaign promises.

“This will make Alberta, once again, a magnet for job-creating investment with the lowest taxes on employers in Canada,” Mr. Kenney said at a news conference in downtown Calgary on Monday. “We refuse to preside over the gradual economic decline of Alberta.”

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He cited a vacancy rate in downtown Calgary office space that has been as high as 30 per cent in recent months as a sign of the province’s economic woes. The Conference Board of Canada has warned that Alberta’s economy will grow by only 1.3 per cent this year, the lowest of any province, but forecasts it will rebound in 2020 to 3.5 per cent. The price paid for Alberta oil collapsed in the last few months of 2018 owing to pipeline shortages, although prices have recovered somewhat since the provincial government ordered oil production cuts that began in January.

If his party wins the election, which needs to be held before the end of May, Mr. Kenney said he would lower the corporate tax rate by one percentage point annually, starting in July, until it drops to 8 per cent in 2022. The Opposition Leader said 55,000 new jobs would be created by the move and the provincial treasury would receive $1.2-billion more in annual revenues by 2023 because of the cut.

“This job-creation tax cut is projected to be self-financing,” Mr. Kenney told reporters.

Premier Notley warned the tax cut would increase the size of the provincial deficit, projected for $6.9-billion this fiscal year. Calling Mr. Kenney’s plan “a historic tax giveaway to profitable corporations,” Ms. Notley said it would require the government to hire fewer teachers and doctors to serve the province’s growing population. “It will blow about a $4.5-billion hole in our budget over four years and roughly $2-billion a year after that. I think it’s a bad move,” she said.

Asked if she would consider lowering or increasing the corporate tax rate, Ms. Notley promised: “We’re going to leave it right where it is.”

Trevor Tombe, who teaches economics at the University of Calgary, said he is skeptical of Mr. Kenney’s claims that the tax cut would actually increase revenue. He said the party hasn’t released enough information to verify the claim.

Prof. Tombe said past research from the University of Calgary’s School of Public Policy suggested that Alberta’s corporate tax rate would need to surpass 15.2 per cent to reduce revenues.

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“It’s completely unfair for someone to point to Alberta corporate income tax revenues and say, ‘Look, they are lower, therefore increasing corporate tax rates lowered investment.’ That’s a trope we hear a lot. Oil prices fell, so identifying the impact of a corporate tax change on revenue, employment or investment is difficult,” he said.

Jack Mintz, a fellow at the University of Calgary’s School of Public Policy, said that Mr. Kenney’s plan “makes quite a bit of sense.” He said the lower rate would help the province better compete with energy-producing states because sweeping tax cuts in the United States have left Alberta with higher taxes.

“There’s a real incentive for companies to shift their profits to the U.S. and shift their costs to Canada. Getting the rate down to 8 per cent brings it pretty close to the Texas rate and takes pressure off moves to shift investment to the U.S.,” he said.

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