Alberta government spent more than $22 billion on corporate welfare
The Alberta government spent $22.1 billion (inflation-adjusted) subsidizing firms from 2007 to 2019. According to a new study, this corporate welfare, which does little if anything to stimulate widespread economic growth, came with huge costs to government budgets and Alberta taxpayers.
Let’s take a closer look at the numbers.
Over the 13-year period, annual Alberta government spending on corporate welfare—which included agricultural subsidies, tax credits for natural gas drilling, and payments to reduce the power bills of industrial users—ranged from a high of $2.5 billion in 2010 to a low of $1.1 billion in 2014.
Importantly, this measure of corporate welfare only includes unrequited government transfers to businesses but excludes loan guarantees, direct investment, and regulatory privileges for particular firms or industries. So the actual level of corporate welfare in Alberta during this period was much higher.
Unfortunately, taxpayers ultimately bear the cost of corporate welfare. The total cost of provincial corporate welfare equalled $8,103 per Albertan tax filer from 2007 to 2019 (the latest year of available pre-COVID data)—that’s a significant amount of money unavailable for other priorities. Factor in federal and local subsidies, and the total cost of government spending on corporate welfare jumps to $13,285 per Albertan tax filer.
Such spending might be justified if it led to widespread economic benefits. However, there’s little evidence that corporate welfare generates widespread economic growth or creates jobs. In fact, research suggests that corporate welfare may actually hurt the economy as government interference in the market ultimately distorts private decision-making and misallocates resources. Put simply, the government’s attempt to select winners and losers in the economy generally makes the economy less efficient than if those decisions were left to individuals. Indeed, the better option is to let Albertans make their own decisions about where to spend their money and subsequently determine what businesses will succeed.
The Alberta government should, however, play a role. But instead of giving preferential treatment to select firms and industries, it should foster a pro-growth environment that gives all businesses the opportunity to thrive by reducing business income tax rates. Indeed, the same study found that (on average) more than one in every three dollars of business income tax revenue collected in Alberta was sent back to select firms and industries (again, from 2007 to 2019). That money could have been used to broadly reduce business taxes, which would stimulate investment, job creation and economic growth.
Corporate welfare comes with significant costs to Alberta taxpayers, with questionable efficacy. If the Smith government wants to truly encourage growth in the economy, it should focus on pro-growth tax reductions that give all businesses the opportunity to thrive.