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Why Alberta deserves a provincial sales tax

David Finch is a Calgary energy historian.

Alberta had a provincial sales tax in 1936 and 1937 – a 3-per-cent hit called a tax on "ultimate purchases."

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It was part of a broad set of unexpected policies sprung on the public by the radical Social Credit government under Bill Aberhart after the 1935 election.

Public outrage forced the Socreds to rescind it.

Aberhart had promised voters a monthly $25 "basic dividend" – equivalent to $450 in 2016 currency – but introduced a sales tax instead. And no dividend.

Not that Alberta was not already taxing goods.

It collected revenue on the sales of furs, amusements, coal, electricity, pipelines, betting, telephones, land, tobacco and liquor – the "sin" taxes. And on gasoline.

The province languished in debt for the rest of the Dirty Thirties, running deficit budgets well into the 1940s.

Petroleum is the reason Alberta currently has no PST.

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The discovery of massive quantities of crude oil in 1936 in Turner Valley, southwest of Calgary, set Alberta on its way to being, per capita, the richest economy in Canada.

Turner Valley was Canada's first 100-million-barrel oil field, and by 1942, the province was producing more than 95 per cent of all the oil in Canada. The discovery of even more oil at Leduc, near Edmonton, in 1947 further expanded the petroleum prize.

Taxation on this black gold flowed into provincial coffers.

For generations, the people of Alberta have given their elected officials a clear mandate: Play the petroleum-income lottery instead of taxing us fairly. And it has worked – most of the time.

Two out of every three years since the 1950s, the Alberta government has run surplus budgets.

According to Eric J. Hanson's Financial History of Alberta, 1905-1950, a sales tax would have allowed Alberta to dig itself out of debt by the early 1940s. Ernest Manning – who became premier when Aberhart died in office in 1943 – balanced the budget with other revenues.

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By the late 1950s, Alberta was running embarrassingly large surpluses. In 1957, Manning's government passed the Oil and Gas Royalties Dividend Act, which set aside one-third of all energy royalties for direct payment to citizens. Cheques of $20 in 1957 and 1958 – the equivalent of $150 today – went out to each person. Some of them were dead.

Years later, Manning recalled why his government ended the program. When asked if they wanted the dividend to continue, "interestingly enough, the majority said, 'No,'" he explained.

"They would prefer the money to be spent on capital expenditures. … We launched a program of building homes for senior citizens all over Alberta. And diverted the discontinued oil dividend to that fund."

A similar cash payout, called "Ralph Bucks" or the Prosperity Bonus, distributed 20 per cent of a $7-billion surplus in 2006 in $400 payments – or $500 in 2016 funds.

Peter Lougheed tried to break the dangerous Alberta addiction to resource revenue in 1976, when he created the Alberta Heritage Savings Trust Fund.

Its objectives were "to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans."

But since 1987, the Alberta government has not added to the principal in this fund. Instead, politicians raided the "rainy day" piggy bank repeatedly when the price of oil was low and failed to replenish it during good times.

In Fort McMurray in 2010, then-energy minister Ron Liepert said the income Alberta was getting from the oil patch was the equivalent of a 16-per-cent sales tax.

And that was before the price of oil fell to less than $30 a barrel and the catastrophic wild fires of 2016 shut down 1.2 million barrels a day of petroleum production from the Fort McMurray oil sands.

Petroleum is the reason Alberta deserves a PST.

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