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Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)
Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)

Jeffrey Simpson

A sales tax makes sense – just not to Albertans Add to ...

Welcome aboard, Jack Mintz, on the policy train to nowhere.

There’s lots of room on this Alberta train called the Sales Tax Express. It’s a small train with only a few hardy passengers who now include you – one of the country’s leading tax experts, teaching at the School of Public Policy at the University of Calgary. It’s great to have you and your fine reputation on board. Just don’t expect the Express to leave the station.

This week, Mr. Mintz climbed aboard with a study, co-authored with Philip Bazel, suggesting Alberta add an 8-per-cent sales tax to the 5-per-cent federal GST for an overall sales tax of 13 per cent. In exchange, Mr. Mintz said that income taxes on individuals and the corporate income tax could be slashed.

Introducing a sales tax while slicing other taxes could be “revenue-neutral” – that is, the state would not get more money, but the tax system would become more efficient. Only 30 per cent of Albertans would be paying income tax instead of 70 per cent today, said the authors.

Alberta, of course, is the only Canadian province without a sales tax. That this policy is dumb by any rational measure means nothing. It is part of the province’s political culture – to the extent that Albertans think it is their birthright – that a sales tax is bad, bad, bad. That they are the only people in Canada (and in the Western world) to think this way about sales taxes rather perversely makes them defiantly proud.

Soon after her election, Alberta Premier Alison Redford very broadly hinted that maybe, just maybe, the province should at least debate the idea. Those were the months when Ms. Redford was hinting at tilting at various windmills, including perhaps raising the tax on carbon emissions.

It didn’t take long for Ms. Redford to get politically scared, so that nothing came of those hints. When the Mintz-Bazel study came out this week, her Minister of Municipal Affairs said of the sales-tax idea, “It hasn’t come up once in a single, solitary meeting. There has not been one discussion of a sales tax.”

A sales tax is justified, as Messrs. Mintz and Bazel argued, on the grounds that lower personal and corporate taxes encourage savings and investment, while a sales tax discourages consumption, both of which are good for long-term economic growth. This is why the Organization for Economic Co-operation and Development repeatedly urges a shift toward consumption taxes – advice the Harper government has just as repeatedly spurned with its own two-point cut to the GST.

A better but different argument exists for a sales tax in Alberta than the one Messrs. Mintz and Bazel stressed. As Albertans are seeing now – and as they have often seen in the past – their province’s finances get buffeted by the ups and downs of oil and natural gas prices.

Money from these resources accounts for about 30 per cent of the province’s revenues, and they are very volatile. Alberta is a price-taker, meaning it doesn’t set the prices for these commodities; the prices are set internationally or at least within North America. When they go up, it’s happy days are here again for Alberta. When they slump, it’s cut, cut and cut some more – just as the Redford government has done.

A high-powered commission into Alberta’s future, chaired by David Emerson and appointed by former premier Ed Stelmach, hammered home that point. The commission didn’t specifically recommend a sales tax (although reading between the lines it did), but argued that a more stable revenue source than resource revenues was needed. Moreover, said the commission, the province needed to put money into the Heritage Fund, which has been shamelessly neglected for decades.

That advice, like that of Messrs. Mintz and Bazel, and recommendations for a sales tax from experts writing in the past for the Canada West Foundation smash against this Alberta article of faith: There Shall Be No Sales Tax Here.

No Alberta politician has had the courage to question the article of faith, even though the lack of a sales tax hurts the province by every rational standard.

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