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What will it take to balance Alberta’s books?

Tough choices lie ahead for the Alberta government

Jul 2, 2013

by Michael Ganley

When the Alberta government delivered its most recent budget last spring it unveiled plans to borrow $4.3 billion to build infrastructure, withdraw $2.1 billion from the Sustainability Fund (leaving it with a balance of $691 million, down from $17 billion in 2008) and book a projected deficit of $2 billion. How can the government of such a rich province with the hottest economy in the country be in such straits? The government blamed the “bitumen bubble” as loudly and often as possible for the divide between revenues and expenses, and there was much wailing and gnashing of teeth among the commentariat about irresponsible budgeting and spending.

But what are the possible solutions? We at Alberta Venture sat down and decided we wanted to contribute to the discussion in a meaningful way and so, in this issue, we launch our new series: Transform Alberta: The Provincial Budget Series.

I know it’s not a sexy label, but these are hardly sexy topics: taxes; expenditures; research and development. Sometimes, clarity is the key, and that’s certainly the case when it comes to controlling the public purse. So, I maintain, the name fits.

And so, over the next six months, we will bring you stories meant to stimulate real, constructive discussion of the budgetary needs of the province. We will address health care costs, the effective commercialization of research and development, water-pricing and more.

We begin in this issue with the provocative idea of using a value-added tax to reduce Alberta’s personal and corporate income taxes. By all accounts, bringing in a VAT on consumption is good public policy. A well-designed VAT means the consumer tends to pay less for the good or service in question and the business that produces it gets a refund for any taxes paid.

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It could also be a valuable selling tool in Alberta’s ongoing efforts to attract talented people. Nobody coming to Alberta blinks at the idea of a VAT: virtually everyone has one in their home jurisdiction, and many of them are much higher than the one Alberta would need to implement. But to tell a prospective employee from outside Alberta that he or she won’t have to pay any provincial income tax? That’s a difference maker.

Currently in Alberta, however, any type of sales tax is political suicide. Premier Alison Redford has stated – repeatedly and loudly – that she will not touch the idea. But that’s not to say it isn’t a good one. And perhaps, with a corresponding drop in personal or corporate income taxes and an effective promotional campaign behind it, it could become palatable to enough people.

One way or another, we’ll pay for the services we get, not get the services we don’t pay for, or borrow to make up the difference. They’re our choices to make.

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