TORONTO, July 4, 2013 /CNW/ - A revenue-neutral tax swap would improve
Alberta's fiscal prospects, according to a report released today by the
C.D. Howe Institute. In "The 8 Percent Solution: A Sensible Tax
Compromise for Albertans," authors Colin Busby and Alexandre Laurin
propose a change that would better equip Alberta's government to meet
its longer-term fiscal challenges, which include plunging resource
revenues and growing budget deficits.
"Beyond the financial damage caused by the flooding, Alberta will need
to address its record of rapidly growing expenses and volatile
revenue," said Colin Busby. "The surprisingly large deficit of $3.1
billion for fiscal year 2012/13, revealed in the Government of
Alberta's report released last week, highlights the province's ongoing
fiscal troubles. A tax swap would better position the province for
future economic growth and related tax revenues."
Financial trouble has led to calls for a broad-based sales tax in
Alberta, and strong opposition to that proposal, note the authors. Most
proponents favour a revenue-neutral tax swap that would see a sales tax
introduced alongside a decrease in income taxes. Such a switch, they
say, would lead to greater saving, investment, and result in less
volatile government revenues. Those opposed are concerned about
shifting costs onto lower- and middle-income Albertans, and the loss of
Alberta's identity as the only province without a sales tax.
The authors propose a solution that would break the deadlock between the
two sides of the debate. They recommend Alberta introduce an 8 percent
HST - by adding 3 percentage points to the existing federal GST of 5
percent - and lower its personal income tax rate to 8 percent, which
would be revenue neutral.
"By introducing a generous HST credit for low- and middle-income
earners, the proposal would also limit the distributional problems
associated with sales taxes like the HST, while creating a more
competitive economy," concluded Alex Laurin.
For the report go to: http://www.cdhowe.org/the-8-percent-solution-a-sensible-tax-compromise-for-albertans/22194
SOURCE: C.D. Howe Institute
For further information:
Colin Busby, Senior Policy Analyst, or Alexandre Laurin, Associate Director of Research,, C.D. Howe Institute, 416-865-1904; email: email@example.com.