With Alberta's large, growing economy and modest spending you'd think the Alberta government would be recording healthy surpluses, but it's not. In fact, even during good economic times, the province has been struggling with a string of multi-billion-dollar deficits.
So what gives?
Alberta has deficits because our revenue system is broken. As a result of years and years of ill-advised tax and royalty giveaways to corporations and high-income earners, the government has blown a gaping hole in the revenue base needed to fund services like education and health care.
The solution is not to hack and slash at services which are already only modestly funded. The real solution is tax and royalty reform to fix the hole in our revenue base. What would this kind of reform look like?
Here are a few ideas:
1. Tax fairly: Return to a progressive income tax system
Alberta is the only province with a flat tax, which disproportionately benefits high-income earners. We need a progressive tax structure similar to what was in place in Alberta under former Premier Peter Lougheed.
Depending on how it's structured, a progressive tax system could generate billions more each year to pay for things Albertans value while, at the same time, maintaining Alberta's status as Canada's lowest-tax jurisdiction.
2. Get our fair share: Increase energy royalty rates to match the international average
Royalties are not taxes. Royalties are the price that owners of a resource (in this case, the citizens of Alberta) charge for the sale of their assets (our energy reserves).
One of the best ways to determine whether you're pricing your assets too high or too low is to look at the price being paid for similar assets. With oil, it becomes clear that Albertans have set the price for their energy assets too low — far lower than the prices being charged in other oil-producing jurisdictions.
In the words of the expert-panel on royalties created by the Alberta government several years ago, Albertans, as owners of their energy resources, are "not getting their fair share."
To get our fair share, the Alberta government needs to set a goal of collecting 75 per cent of the surplus profit ("economic rent") left over after energy companies pay their costs of production and take a normal profit of 15 per cent. Such a target, if pursued, would generate billions of dollars that could be used to pay for services or saved for a rainy day (Source: Parkland Institute, "Misplaced Generosity").
3. End the giveaways: Increase corporate tax rates for large, profitable corporations, keep lower rate for small businesses
Corporate taxes in Alberta have never been high by international standards and since the giveaways in 2001, are among the lowest in the developed world. There is no evidence that these giveaways played any role in spurring growth in the Alberta economy. Companies came for our resources, not our tax rates. But there is evidence that the giveaways played a big role in creating government deficits.
The tax rate on profits earned by large corporations operating in Alberta should be increased to pre-2001 levels. The tax rate for small business should remain where it is.
4. Turn the budgeting process around: Plan for revenues not cuts
For too long, any discussion about budgets has focused on cuts, with little or no thought about how those cuts affect Albertans. We believe that spending and revenue discussions have to occur together and at the same timet.
5. Stand up for what's ours: Alberta's government must reach its own targets for resource revenue collection
According to a study conducted by the University of Alberta's Parkland Institute, the Alberta government would have taken in an additional $37 billion in revenue from energy companies over the past decade if it had met its own minimum targets for royalty collection.
How can we ever hope to get full and fair value for the sale of our resources if our government is not willing to aggressively pursue its own targets?
For more information or to join the campaign go to betterwayalberta.ca