Can Alberta handle a taxing truth?
Globe and Mail columnist Gary Mason.
There is a day of reckoning coming in Alberta if it hasn’t arrived already.
The ugly state of the province’s economic condition was once again laid bare in the NDP government’s latest budget. The debt numbers seemed to catch most off-guard; projected accumulated arrears of $71-billion by 2019-20. By pan-national standards it isn’t that extraordinary, but for a province that has mostly counted on oil revenues to keep its ledger sheet clean it is a shocking figure.
Finance Minister Joe Ceci isn’t forecasting another balanced budget for years. In defending his numbers, the minister had the gall to boast about how the province still has the lowest taxes in the country.
Maybe it’s time Alberta started to rethink that.
There are few, if any, analysts in the world predicting that oil is going to once again achieve the giddy, $100 (U.S.) a barrel prices that were common not long ago. More likely, the new normal is going to be something around $65 a barrel, give or take a few cents. But the oil rush days are over.
This means that the “modest” 2.6-per-cent economic growth predicted for the province this year – modest was Mr. Ceci’s word – will be something approaching typical for Alberta. Sure, if two recently approved pipelines get built and start producing, that growth might increase somewhat, but Alberta is not expected to be awash in cash like it once was.
It will, however, still be better off than many other provinces in the country, but it will be years before it can dig out of the financial hole it is digging for itself now. That is, unless measures are taken to remedy the situation more quickly.
There seems to be little doubt now that Alberta needs to reconsider its approach to taxation. There isn’t a political party alive that would have the audacity to make the kind of deep, permanent cuts to government staff and services that would allow the province’s books to be balanced in a shorter time period than the one being proposed by the NDP. The lawn of the legislature would be filled with people bearing torches and pitchforks.
Some cuts, the kind Premier Rachel Notley’s NDP government has so far been unwilling to make, are likely required. But so are tax increases.
It is hard to stomach some of the woe-is-me stuff emanating from Alberta when the province is free of taxes the rest of the country bears. There is no payroll tax. There is no health-care premium. There is no sales tax. Well, it’s time some government initiated that conversation with Albertans.
Sooner or later someone is going to have to.
This notion that Albertans would never tolerate a sales tax is nonsense. They are not stupid people. They can see what is happening around the world as well as anyone. They understand that those roaring years when Rolls-Royces were as common as Camrys in the downtown streets of Calgary are over.
There is a new fiscal reality that demands a reality check. Alberta’s debt problem is now structural, not situational.
The province needs the type of rethink that is taking place in Saskatchewan, where the government of Premier Brad Wall was scheduled to unveil a new budget on Wednesday that will take a new approach to taxation. This is in response to the deadly boom-and-bust existence that comes with living off the avails of an oil-and-gas industry whose prices are continually in a state of flux.
Alberta could begin mitigating its own miserable economic circumstances immediately by bringing in a harmonized sales tax, the kind most economists in the province are recommending the government consider.
Unfortunately, that government is unlikely to be Ms. Notley’s NDP. The New Democrats have already incited public anger over the carbon tax that went fully into effect this year. So it is unlikely they will suggest bringing another tax measure in advance of the next election.
Nor is a new free-enterprise coalition that is led by Jason Kenney or someone else – because it would be deemed to be politically fool-hardy.
But at some point, someone has to be the parent here. Someone has to tell Albertans that they can still have the incredibly privileged existence they have known for decades; they’re just going to have to pay a little more to enjoy it.