Coalition calls for "Obama-style" debate on taxes and royalties In lead-up to provincial election
EDMONTON, Jan. 25, 2012 /CNW/ - Ever wonder why Alberta, Canada's wealthiest province, is running a $3-billion deficit and saying it can't afford to maintain middle-of-the-road spending on vital public services?
That's the question that a coalition of labour and community groups want Albertans to start asking in the run-up to the next provincial election, expected to be called within the next two months.
"Why in a province as wealthy as Alberta is the talk always about cuts and freezes to things that Albertans value, like education and health care," asks Gil McGowan, president of the Alberta Federation of Labour (AFL).
"The truth is the only reason our government is running deficits and talking about cutbacks is because they've blown a hole in the revenue base we need to fund services. The cupboard is bare because Alberta's irresponsibly low royalty and corporate tax rates have made it bare."
In an effort to highlight the unnecessary damage caused by years of tax and royalty giveaways, the AFL has teamed up with Public Interest Alberta (PIA), a network of community groups and activists, to launch an advocacy campaign on tax and royalty reform called the Better Way Alberta campaign.
"Albertans are being told they have no choice but to accept cuts to things like post-secondary education and various services for the disadvantaged or expand public health services to our growing seniors population" says PIA Executive Director Bill Moore-Kilgannon.
"But the truth is we DO have choices. By re-establishing a progressive tax and improving our royalty rates, we could generate the money we need to maintain the kind of high-quality services that Albertans need to face the future with confidence."
"What we're trying to do in Alberta is what President Barack Obama is doing in the US," concludes McGowan. "And that is to make the upcoming election campaign a forum for a discussion on tax and royalty fairness."
Better Way Alberta Backgrounder
Here are a few facts and observations about taxes and royalties in Alberta that are discussed on the BetterWayAlberta.ca website.
- When Peter Lougheed was Premier, Albertans - as owners of their energy resources - collected about 40 per cent of the wealth generated by the province's energy sector through royalties and taxes. Under Ralph Klein, the public's share of the energy pie dropped to 20 per cent. And under Ed Stelmach it fell to 10 per cent, the lowest share in Alberta history.
- If our current provincial government collected the same share of Alberta's energy pie as Peter Lougheed, we would have billions more each year to save for the future or invest in services and infrastructure that Albertans value. For example, Alberta's energy sector generated $57.85 billion in 2009 or about 24 per cent of provincial GDP. If the province had taken a Lougheed-sized piece of the pie, $23 billion would have been collected. Instead, royalties collected from natural gas, crude oil and bitumen totaled $6.5 billion in the 2009-10 budget year.
- The Alberta government would have collected between $37 and $65 billion more than it did over the past ten years if it reached its own very modest targets for royalty collection. Because the government's targets weren't met, those billions went into the pockets of energy companies that were already hugely profitable instead of being available to spend on things that matter to Albertans, like health care and education.
- The so-called Alberta Advantage is only an advantage if you're rich. Under Alberta's flat tax system, high-income earners pay lower taxes than people earning similar incomes in other provinces. Meanwhile, middle-income earners actually pay more taxes in Alberta than in many other provinces. Alberta is the only Canadian jurisdiction without a progressive income tax system.
- On a per-capita basis, the amount of money generated by corporate taxes in Alberta has remained flat over the past 20 years (between $200-$500 per person) while corporate profits have skyrocketed (from about $4,000 per person in 1989 to about $16,000 per person in 2008). This means corporations operating in Alberta have been earning dramatically more and paying dramatically less. In 2008, for example, corporations in Alberta paid only $4.7 billion in taxes on $66.5 billion in profits: an effective tax rate of 7 per cent.
- Alberta's Heritage Fund is worth about $14 billion. Norway, with a similar population and similar amounts of oil as Alberta, has saved more than $500 billion in its savings fund - even though its fund was started 14 years later. Factoring in inflation, Alberta's fund is actually worth less now than when it was started in 1976.
- According to the Alberta government's own calculations, an extra $11 billion in revenue could be generated every year if Alberta had the same tax structure as British Columbia, the province with the next lowest tax rates. If we taxed at rates slightly lower than B.C., we could get rid of the province's current $3.05-billion deficit and have billions left to save or invest in services and infrastructure. And we would still be the lowest tax jurisdiction in the country.
- On a per-person basis, Alberta's economy is 70 per cent larger than other provinces. And with the equivalent of 52,000 barrels in oil reserves for every man, woman and child in the province, Alberta's economic prospects for the future are bright.
- And yet, the province continues to record multi-billion-dollar deficits. Why? It's not because of spending. When you adjust for inflation and population growth, we're spending about the same on services as we did 20 years ago. The real culprit can be found on the revenue side of the equation. As a result of years of tax and royalty cuts, the provincial government has blown a hole in the revenue base we need to fund the high-quality services that Albertans value.
- The bottom line is that low corporate taxes, low taxes on high-income individuals and low royalties are creating government deficits and putting unnecessary pressure on Alberta's public services. The solution is to fix the budget hole by rolling back the cuts, not by slashing the services that Albertans need (and which they could easily afford if we had a fair tax and royalty system).
For further information:
Gil McGowan, President, Alberta Federation of Labour (780) 218-9888
Bill Moore-Kilgannon, Director, Public Interest Alberta (780) 993-3736