Updated 25 February 2021
On 24 February, the day before the UCP’s third budget, the Globe and Mail reiterated its editorial position about a sales tax for Alberta. This perspective will be written off by political leaders as paternalistic, unwanted central Canadian twaddle. But the mood is definitely changing as a 2020 CBC-Calgary public opinion poll indicates.
The non-debate by our political leaders has also been picked up by Alberta’s business leaders. In a recent report Towards a Fiscally Sustainable Alberta- A Review of Provincial Government Finances, the Business Council of Alberta (BCA) of Alberta proclaims on its website: “Alberta, we have a problem.” This message is not dissimilar to the language used by the Financial Review Commission’s Report to Albertans issued in March 1993- a call to action to restore Alberta’s fiscal stability. The BCA is made of of the CEOs of Alberta’s top companies including, among others provincial Crown corporations AIMCo, ATB, and large private sector companies such as ARC Resources, Canadian Western Bank, Finning, Pembina Pipelines, Shaw Communications, etc. Its vision is “To Make Life Better.- This means business is a leader in helping Albertans, the economy and the environment thrive.”
The Business Council of Alberta is a non-partisan, non-profit, and for-purpose organization dedicated to building a better Alberta within a more dynamic Canada. Composed of the chief executives and leading entrepreneurs of the province’s largest enterprises, Council members are proud to represent the majority of Alberta’s private sector investment, job creation, exports, and research and development. The Council is committed to working with leaders and stakeholders across Alberta and Canada in proposing bold and innovative public policy solutions and initiatives that will make life better for Albertans.
The policy paper, written by Mike Holden and Alicia Panincic, points out that Alberta’s fiscal fortunes highly depend on volatile resource revenues. This fact, combined with high per capita spending and low tax rates is not sustainable. The analysts also point out that there exists an “outdated mythology” about Alberta being home to no provincial sales tax. Key to the Council’s concerns is that traditional resource exploitation opportunities and revenues are fading.
The same resource revenues that have allowed government spending to exceed tax revenues for so long face an increasingly uncertain future. Countries around the world are transitioning to lower-carbon fuels. The new US Administration is expected to focus on similar goals. And the pandemic could result in permanent behavioural changes, all of which will lower demand for fossil fuel energy. (Page 15).
Up until now the business community has been reluctant to put its head above the parapet to wade into a debate which the two main political parties do not wish to touch- what I have called the Voldemort of Alberta politics. While a sales tax may be self interest on the part of big Alberta business, it is vital to remember the Kenney government listens to business more than academics and labour. This introduces a whole new dynamic in the formulation of taxation policy.
Things are indeed moving more quickly than the two main political parties would like. The day before the provincial budget comes out, Next 30 hosted a 2-hour discussion on the province’s financial situation. The Next 20 is “a grassroots initiative developed by a small group of passionate Albertans and not affiliated with any political party. We are a Not-for-profit, non-partisan, action-oriented group and we would love others to jump in, support directly and find a way to add momentum.”
Speakers at the session included Lindsay Tedds and Trevor Tombe of the School of Public Policy and Ted Kouri, Founder and President of Incite a strategic marketing consultancy. The event started with skill-testing questions about Alberta’s fiscal structure (e.g., Alberta has had only one surplus in the past decade), attracted considerable chats and questions from participants who included former provincial ministers and deputy ministers, academics, journalists, policy wonks, and economists.
Political leaders will face increasingly difficult fiscal choices.
Historically, Alberta governing parties have relied on resource revenue to finance 10 to upwards of 50 per cent of government expenditure. This is no longer the case and will likely remain so over the medium term. Economists like Trevor Tombe estimate the structural deficit after the effects of COVID are removed will be in the $10 billion range.
Political executives then will undoubtedly be managing constituency associations looking to initiate a discussion about revenue as part of the solution. However the myth of Alberta as “special,” highlighted by Emma May at The Next 30, is an emotional feeling which stands in the way of political leaders having the courage to begin the discussion. The two contending parties- the UCP and NDP- will look at a sales tax as a way to exploit the anger and angst of Albertans who perceive governments as fat and unresponsive. From the UCP’s point of view, their approach is to starve the government beast before even suggesting tax increases.
The NDP meanwhile is keeping its powder dry having out-fundraised the UCP in 2020. They are doing was good governments-in-waiting do- they consult with Albertans to develop policy for the next election. They do seem to be building some support with certain business sectors (e.g. high tech, green economy). For NDP strategists the question will be how to mine the huge discontent among public sector workers, their families, especially in Calgary ridings where the next election will be won. At the same time, moderate Albertans who believe in “sound finance” remain concerned that the NDP remains a “tax and spend” political party. This makes support for an HST (the most practical form of a retail sales tax) awkward,
For party apparatchik the question becomes how to control, contain and focus the message. At party conventions, the UCP may defer the intra-party discussion to a government-appointed panel reporting just prior to the next election to gauge the public mood before making final decisions. The fly in the ointment however is the Alberta Taxpayers Act which requires a referendum before implementation. However by 2023, will the Alberta government have any fiscal flexibility left to defer making the hard decision needed to bring in a sales tax?
One can only imagine the angst-filled discussions that will take place in party backrooms and constituency associations on this vexing topic. What is the role of a party? “To win elections- of course!” on the one hand. “To do the right thing” on the other.
A Sales Tax for Alberta: Why and How
Here is a link to the Athabasca University Press website concerning a forthcoming publication readers may be interested in.
A-Sales-Tax-for-Alberta-cover
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