Courtesy of Manning Centre
On CBC’s The Current in January Premier Jim Prentice was asked: “how can a provincial economy become so needy so quickly when you had so much money coming in?” The premier’s response? “In Alberta we have had the most expensive public services of anywhere in Canada….”
If the premier was being honest about the root of our budget problem he would have responded by saying Alberta has the lowest corporate taxes and the most profitable corporations in all of Canada and wealthy Albertans pay far less tax than other wealthy Canadians….
It is dishonest to suggest that we are all living beyond our means. Our system of taxation is grossly unfair and rewards the most well off and politically powerful. That has to change and here is how it should be done.
1. Get rid of the flat tax. Alberta is the only province with one. Whether you make $20000 or $20 million you pay 10 per cent. That is grossly unfair. When the premier says “we have the lowest taxes in every respect” he is wrong. In Alberta the only group that does not have the lowest personal tax rate are the poorest. Nine of the other 12 provinces and territories have a lower rate of taxation for low income earners than Alberta does.
2. Introduce a graduated tax system with more brackets at the top. In 1972 the top combined federal and provincial personal tax rate was 70 per cent. In 2015 it is 50 per cent. Alberta’s combined rate is now 39 per cent. The top federal income tax bracket starts at $140000 with provincial brackets in the same range.
Research by Public Interest Alberta demonstrates that “a very modest progressive tax scheme of 13 per cent over $100000 and 15 per cent over $150000 while increasing the corporate tax rate from 10 per cent to 12 per cent” would bring in an additional $2 billion annually.
If Alberta’s tax regime mirrored the next lowest-taxed province British Columbia we could raise an additional $12 billion. If we taxed like Nova Scotia we could raise an additional $27 billion.
Even Adam Smith noted that “It is not very unreasonable that the rich should contribute to the public expense not only in proportion to their revenue but something more than in that proportion.”
3. Increase corporate taxation. Back in 1972 the top combined federal provincial corporate tax was 52 per cent. Since 2000 the Canadian government has chopped the federal corporate tax rate to 15 per cent from 28 per cent and boasts that this is the lowest rate in all of the G7 countries. Combine this with the 10 per cent corporate rate in Alberta (the lowest in the country) and you begin to see why Kevin Taft reported an explosion of corporate profits in Alberta in his book Follow The Money.
4. Treat all income equally — no special deals for capital gains and dividends. In Canada if you work for your money you pay a higher rate of taxation than if you let your money make money. In Alberta we tax capital gains and dividends at half the rate we tax working income. Alberta’s rates are the lowest in Canada and Canada has the lowest capital gains tax in the G7.
To underscore how unfair this is according to a 2000 CBC article “government figures from 1997 indicate that 45 per cent of total capital gains tax breaks went to individuals earning more than a quarter of a million dollars a year. People in that tax bracket amount to less than one per cent of the population.”
5. Work with the international community to close down tax havens. Just this week the CBC reported that at HSBC alone “The value of [tax haven] accounts tied to Canada is around $4 billion spread across 1859 people and companies.” According to Canadians for Tax Fairness tax haven revenue loss in Canada is at least $8 billion annually.
Though the Canadian government has feigned interest in controlling this criminal tax avoidance financial writer Linda McQuaig argues that Canada’s rules were so poorly designed “they’ve actually opened the floodgates to… allowing multinational corporations to route their profits through the tax haven thereby avoiding Canadian corporate tax.”
6. Persuade Ottawa to champion a Financial Transaction Tax (Tobin Tax) named after the Nobel prize-winning economist who first proposed the idea. Much of the volatility in world markets we see today is due to rampant and massive currency speculation rather than productive investment activity.
It should come as no surprise that according to McQuaig “with some of the world’s leading governments finally on side [with the idea of a Tobin Tax] Ottawa is emerging as an obstacle.”
In that interview on The Current Prentice said “I hope Albertans trust me.” We should do so only if he comes clean on how an unfair tax system has imperiled our future and then proposes a sustainable sufficient and fair system of taxation to secure it.
Noel Keough is a co-founder of Sustainable Calgary and assistant professor of Sustainable Design at the University of Calgary Faculty of Environmental Design. For more details on the cost estimates check out the online version of the article.
