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NDP tax hikes spell the end of traditional 'Alberta Advantage'

Joe Ceci, Alberta's Minister of Finance and member of the New Democratic Party (NDP), signs as a member of the executive council during the official swearing-in ceremony in Edmonton, Alberta, Canada May 24, 2015. Ceci admits that the province will have to rely on other strengths as its taxes are set to increase.

Topher Seguin/REUTERS

Alberta's new Finance Minister grudgingly admits it, and the province's opposition proclaims it: The old Alberta Advantage is dead.

The label long used by Progressive Conservative premiers to sell the Prairie province as a low-tax haven for individuals and corporations could be consigned to history when the NDP government passes a series of tax hikes that were at the centre of the party's election campaign.

"It's a new orange day," Finance Minister Joe Ceci said. "People know that we're more than beautiful mountains, trees and things like that. We have great quality of life and we can do better on quality of life for our low-income earners. It's a new Alberta Advantage perhaps."

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On July 1, Alberta's corporate tax will go from lowest in the country to middle-of-the-pack, increasing to 12 per cent from 10. Three months later, the 10-per-cent flat tax on personal incomes will be replaced by five new tax brackets. The rate paid by the wealthiest Albertans will increase by 50 per cent, with the top tax rate increasing to 15 per cent from 10 per cent for those making more than $300,000.

"The PCs killed the Alberta Advantage and the NDP buried it," said Derek Fildebrandt, finance critic for the official opposition Wildrose. "For years we have seen the former government attempt to make Albertans comfortable with high spending, going back into debt and most recently with raising taxes."

Alberta's economy is expected to slide into recession this year as job losses in the energy sector increase. The Conference Board of Canada has predicted that the provincial economy will shrink by 0.7 per cent this year, before growing by only 1.1 per cent in 2016.

Premier Rachel Notley has said that the province's books are in worse shape than the previous government had admitted. While she isn't ready to release new numbers yet, she told The Globe and Mail that her government's bill to increase spending by $624-million over the summer until a full budget in the fall is "more modest" than what was promised in her platform.

"There are some key, time-sensitive issues that we are moving forward on, but some of the spending in our proposed platform has either been delayed due to timing issues – we just can't do it at this point – or because we actually need to negotiate with other stakeholders before we put them into play," she said. "We are conscious of not wanting to go full-speed-ahead until we have the money coming in from the other side."

The NDP's tax hike is Ms. Notley's second piece of legislation as premier, known as An Act to Restore Fairness to Public Revenues. According to Mr. Ceci, the government was elected on a mandate to return fairness to the province's tax code.

"Albertans gave this government a strong mandate to act on its promises: That was to ask top-income earners to pay a little bit more for the betterment of all and to ask corporations who benefited the most during stronger economic times to contribute fairly to rebuilding our province," Mr. Ceci said.

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Speaking before her party's first Throne Speech, Ms. Notley called the province's flat tax a "brief and unfortunate experiment," while vowing that Alberta would continue to have the lowest overall provincial taxes in Canada. Alberta remains the only province without a provincial sales tax.

The flat tax had been at the centre of the PC promise of the Alberta Advantage for 14 years since it was introduced by then-premier Ralph Klein. However, even the PC party was ready to ditch the flat tax during its final days in power.

Facing a $5-billion deficit, then-premier Jim Prentice announced plans in March to raise income taxes for the first time in three decades and add new tax brackets for those making more than $100,000. Mr. Prentice's plan would have created a top bracket of 11.5 per cent by 2019. The plan would also have introduced a health levy on all Albertans making over $50,000 annually. Ms. Notley has scrapped the levy, arguing in the process that she's effectively cut taxes.

According to David Taras, a political analyst at Calgary's Mount Royal University, there is now a wide gap between what Ms. Notley would like to spend and what she can afford – especially if the government's books are much worse than is currently known.

"Together with the progressive tax increase, the corporate tax doesn't do enough to deal with the deficit. The disconnect between revenues and promises is quite staggering," Prof. Taras said. "We'll need to see what promises they drop."

Ms. Notley has promised to spend more on health, education, universities and a tax credit to create jobs.

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On Friday, the Premier announced that she had hired former governor of the Bank of Canada David Dodge to help develop the government's plan to build new roads, hospitals and schools over the next four years.

Mr. Dodge will conduct a review over the summer of Alberta's infrastructure needs and how to pay for them. He said on Friday that debt financing is an appropriate way, in many cases, to finance large building projects. The provincial debt, once eliminated, has grown to about $18-billion. Mr. Dodge's report will be due at about the same time the NDP tables its first full budget in October.

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About the Author
Ontario legislative reporter

Based in Toronto, Justin Giovannetti is The Globe and Mail’s Ontario legislative reporter. He previously worked out of the newspaper’s Edmonton, Toronto and B.C. bureaus. He is a graduate of Montreal’s Concordia University and has also worked for CTV in Quebec. More

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