Alberta’s budget: $11.4 billion in extra taxes

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Appeared in the Calgary Herald

Premier Jim Prentice dropped hints for months that the 2015 provincial budget was a once-in-a-generation chance to “fix” Alberta’s finances.

That didn’t happen. Instead, the province raised taxes on Albertans in a manner akin to the worst of the late-1980s budgets. That was the last time Alberta faced chronically high per capita program spending and then low oil prices and thus, a serious budget gap of this magnitude.

In 1987, tax increases included higher provincial income taxes, a new surtax, another new tax on all incomes, an increase in liquor and tobacco taxes, a new hotel room tax, a new fuel tax, and higher insurance premium taxes.

Now look at Budget 2015. As of 2016/17, new and increased taxes will carry a huge price tag, including increases to personal income tax ($420 million), fuel taxes ($535 million), and a new health care tax ($532 million). Increased taxes on insurance premiums, on liquor, and increases in fees and fines will hit Alberta families for almost another $700 million annually.

In total, the new budget hits Albertans with $2.2 billion in new or higher taxes as of 2016/17, and between now and 2020, a whopping$11.4 billion in total extra tax taken from the pockets of Albertans.

The Alberta government claims that Alberta will remain the lowest-taxed province, next to British Columbia.

The B.C. comparison is revealing, however. Budget 2015 notes how per person program spending in Alberta was $10,880 last year; almost $2,000 higher, per person, than in neighbouring B.C. ($8,884 per person).

Clearly, B.C. can make do with less per person program spending. But Alberta insists on spending more than one-fifth more, per person, than B.C.

Which brings us to the missing element of Budget 2015. There’s no serious reform on the spending side of the budget.

And spending was ripe for reform. Some examples. Provincial contracts (between 2007 and 2012) with teachers at double the rate of inflation. That helped put maximum salaries for teachers at 9.8 per cent above Alberta/B.C/Saskatchewan average, as of 2013.

Salaries for academics: eight per cent higher than the three-province average. General management positions: eight per cent higher. Unionized government employee positions: 10 per cent higher. And nurses: 12 per cent above the three-province average.

In-province comparisons also show a government-sector pay advantage over Alberta’s private sector.

As my colleagues discovered recently, on average, Alberta government employees have a 6.9 per cent wage premium over comparable Alberta private-sector workers. And that’s after accounting for age, experience, education and other relevant factors that might explain a worker’s wage advantage.

Just as concerning, none of the above accounts for the more generous pensions enjoyed by government-sector works in Alberta, which led to contribution rate increases of between 97 and 116 per cent across most plans since the early part of the last decade. Or the cost of bailing out other pension plan shortfalls, such as the Teachers’ Pension Plan, where ongoing extra payments include a special payment of $465 million this new budget year for pre-1992 liabilities.

Tellingly, Jim Prentice’s first act as premier was to cancel planned, modest pension reforms for government employees. Now the province has established a “working group” to study the wages and pensions of government-sector staff for any possible reform.

In the meantime, while Albertans wait for reform—if it ever arrives, Budget 2015 will force Albertans to pay an extra $11.4 billion in taxes and fees over five years, with zero reform to the government-sector’s pay and pensions.