The Voldemort of Alberta Politics- a sales tax
No one likes to pay tax, least of all residents of Alberta. The Progressive Conservative Government of Alberta had for years been successful in stifling debate on the need for alternative sources of revenue to offset declines in non-renewable resource revenue. In fact, all parties in Alberta are equally silent on this question.
The Conference Board of Canada’s Q32016Outlook on Alberta weighed into the sales tax fray in their June briefing on Alberta’s fiscal situation. Their analysis, part of the Conference Board’s periodic review of provincial government finances, offered a sober outlook for the province. The Board’s analysts Daniel Fields and Alicia Macdonald, forecast Alberta’s economy to come out of back to back negative annual growth rates for 2015 and 2016, when the economy is expected to expand by 2.5 per cent in 2017. This thread of optimism is based on an assessment that the supply and demand imbalances of the oil market to stabilize by the end of the end. Aiding the economy “in the short term” is infrastructure spending by the federal and provincial governments.
The report highlights the dilemma facing Alberta’s Treasury Board as it grapples with a collapse in royalty revenues accompanied by a “soaring unemployment rate.” However, the Board’s proprietary econometric model projects that the April budget’s future deficit forecasts are somewhat pessimistic meaning accumulated debt, and associated interest payments, should be lower (pages 10-11). Unfortunately, the Board’s June forecast of a $9.6 billion deficit for 2016-17 may already be out-of date as the first quarter update shows a nearly $11 billion deficit is predicted.
The Conference Board analysts note that Alberta’s youthful population will continue to place financing pressures on the education system. In addition, Alberta has the highest per capita expenditure in health care on an standardized sex and age basis- at just over $5000 (pages 11-12). Given the dilemma facing Alberta’s policy-makers Fields and Macdonald argue for a middle course that would mean a retail sales tax, “although politically unpopular” at a comparably low rate, combined with “additional cost efficiencies” would “return the province to a more sustainable fiscal position- ideally one that is less dependent on volatile swings in commodity prices.” (page 13)