Andrew Coyne: Alberta should have a sales tax (after cutting all its other taxes)
Andrew Coyne | Feb 11, 2013 8:19 PM ET
In fact, Alberta already has a sales tax. Leave aside the portion of their own taxes that companies, even in Alberta, pass onto consumers, or the many and devious ways that governments at all levels conspire to raise the costs of consumer goods (did someone mention supply management?): As things stand, the province’s citizens pay an explicit, statutory tax on nearly everything they consume. It’s called the GST.
So let us not pretend that such things are unknown in Alberta, or that Albertans pay only the pristine economic cost of things, untouched by government’s bony hand. It may not be collected by the province, it may more accurately be called a value-added tax, but it is a sales tax, in the sense that most people understand and loathe it. Were Alberta to join most other provinces in collecting such a tax, as a growing body of opinion urges it should, it would require no additional layer of bureaucracy to collect it. They could just piggyback on the federal GST.
All the same, the province’s citizens are right to be suspicious of the idea on one point. No, not the one that always comes up whenever consumption taxes are discussed: that such taxes are regressive. They are, but that defect is easily repaired by rebating the tax to those on low income, as the GST already does — a more sensible way to address equity concerns, surely, than giving the same break to everyone, rich or poor.
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Rather, the line in the sand should be drawn here: that any consumption tax should be a replacement for existing taxes, not a supplement to them. With a provincial budget looming, the Redford government is attempting to persuade the province that the projected $6-billion deficit for the coming fiscal year — versus the balanced budget it forecast, preposterously, in advance of last year’s election — is due to something called the “bitumen bubble,” the gap between the world price and the price the province receives for its crude.
This won’t wash. Even taking this (entirely foreseeable) price gap into account, Alberta enjoys the kind of revenue riches of which other provinces can only dream. Alberta’s own-source revenues (that is, not counting federal transfers) were nearly one-third higher in 2012, per capita, than the average of the other nine provinces. The problem is that the province’s spending has grown in line with its revenues, or rather more than in line.
Per-capita spending on programs has increased by nearly 60% in the past decade, from roughly $6,500 to $10,300. Though other provinces have done their best to catch up, Alberta still spends 20% more per capita than Ontario, 33% more than Quebec, and 16% more than neighbouring British Columbia.
So no, the government of Alberta does not need more revenues. Neither would living within its means require it to impose draconian spending cuts. If it confined itself to spending the same amount per capita as, say, B.C., it would not now be facing a deficit. The argument for a consumption tax is about shifting the tax mix, not raising new taxes.
Right now the province raises about 40% of its roughly $35-billion in own-source revenues from income taxes: about $9-billion personal, half that much corporate. Another $11-billion currently comes from resource royalties, give or take a few billion. Both are problematic sources of revenues, though for different reasons.
The income tax has many problems, but foremost is its effect on incentives to save and invest. Since both the principal and the return are taxed, you pay a higher effective tax rate if you save your money to consume it later than you would if you consumed it all now. A consumption tax, since it taxes all consumption at the same rate, resolves this concern.
The problem with resource revenues has more to do with their volatility — or more particularly, with the tendency of governments to spend them when they get them. If there were some prospect of holding spending to some fixed rule — either in line with population and inflation, or with non-resource revenues — this would not be so much of an issue. But as it is, there’s an argument for replacing at least a part of this revenue from some other source.
What would it take to replace some or all of these with a consumption tax? Each percentage point of the federal GST raises a little over $6-billion. Given Alberta’s roughly one-sixth share of national GDP, that suggests a harmonized Alberta tax would raise about $1-billion a point. So for about eight percentage points — the same as Ontario pays — Alberta could abolish its personal income tax altogether. Another four points and it could abolish its corporate tax in the bargain.
Or it could replace a third or more of current resource revenues, which could either be used to pay down debt, or channeled into individual tax-free savings accounts. (The idea that they should be captured in some centralized sovereign wealth fund, whatever its demerits as policy, seems positively eccentric given Alberta’s history with the Heritage Savings Trust Fund.)
The options are many. The point is Alberta has an opportunity, in its current disarray, to fundamentally restructure its tax system — and to lead the way for the country, as it has so often in the past.
http://fullcomment.nationalpost.com/201 ... her-taxes/
Some comments are over the top,oil is a big boust for the canadian economy, including bc. Your ndp govt. at the time sent alberta the beatle because they were too dumb to ralize how it would ruin the forestery industry, now bc is jealous because oil is a national need.Keep your soon to be ndp govt. and get your gas and oil elsewhere, some of you get off welfare and go to work. 