Time was, an Alberta finance minister could trumpet to a Calgary business audience that, under his watch, the province will stay sales-tax-free, and he could count on a raucous standing ovation.
Joe Ceci pulled out that chestnut during a speech to the Calgary Chamber of Commerce this week and garnered only a smattering of applause.
Could it be that a central tenet of Alberta-ness – the birthright of zero provincial sales tax – is getting a serious rethink in polite society as energy revenues dwindle? It appears so.
Ask Mr. Ceci, the NDP Minister of Finance who just delivered a budget with a cavernous deficit and mounting debt, and he'll say it's out of the question. The party of Premier Rachel Notley has promised not to impose a sales tax while it tries to sort out the province's fiscal mess, and "that commitment is pretty iron-clad," he said on Monday.
Still, a growing and meaningful contingent of the Alberta business community is thinking aloud about how to raise badly needed revenue when the oil-patch contribution – a meal ticket that's long been taken for granted – keeps shrinking. This year, non-renewable resource revenue is pegged at $1.4-billion, or 3.3 per cent of total revenue. Compare that with 2011-12, when energy revenues topped $11.6-billion, or 27 per cent of the overall take.
Even then, with oil above $90 a barrel (U.S.), the government couldn't balance the books. The deficit rang in at $114-million (Canadian), though that's peanuts compared with this year's $10.4-billion shortfall. Mr. Ceci's budget assumes oil will average $42 (U.S.) in 2016/17.
Progressive Conservative governments in the past decade had another ace in the hole that is not available to the NDP – a robust market for Alberta natural gas. By the start of this decade, the shale-gas revolution had unleashed a flood of supply in the United States, knocking down prices and usurping Canada's traditional export markets for the fuel – once a major source of torque for Alberta budget surpluses. Now, gas revenues have shrunk as companies have slammed the brakes on acquiring land and drilling.
It's just another thing that has forced the government to seek new ways to pay for increasingly expensive public services. Until this year, finance ministers could backfill their budget shortfalls with money from a sustainability fund that former Premier Ed Stelmach set up, a kitty funded in years of surplus. But that's drained away following years of deficits.
This year, the government is forced to finance a portion of its operations in the debt markets, essentially using the credit card to pay for some day-to-day living expenses.
One option the Notley government has ruled out is wholesale cuts to spending. Its ministers often raise the spectre of the early years of the Ralph Klein administration, which was marked by public-sector job cuts and hundreds of millions of dollars pulled from health, education and social services. Instead, Mr. Ceci has pledged to "bend the cost curve," rather than crimp it, as he tries to avoid making life tougher for people who may already be hurting due to the shaky economy.
So, about that sales tax.
Earlier this year, 19 academics called for a harmonized sales tax as a way to return to balanced budgets without the thrills and spills of the oil-royalty roller coaster, the metaphoric midway ride that so often zooms into Alberta economic chatter. The group estimated that a 5-per-cent tax would generate $5-billion (Canadian) annually, which, when applied to the latest budget, would cut the deficit to a more manageable $5.4-billion.
To be fair, Alberta already has sales taxes. It's just that they are applied to selective purchases. In the past 13 months, levies have been imposed and increased for gasoline, tobacco and booze, among other things. There's also the newly established, economy-wide carbon taxes.
Let's not overplay this – few people in the business community are pounding the table and publicly demanding a sales tax. But day by day, more are putting the idea forward as something that should at least be part of the discussion, along with deeper cuts to public spending. That's noteworthy.
Just a few years ago, as oil and gas money flowed, anyone with the temerity to bring the subject up would have been banished from the cocktail circuit.