Alberta is so hard done by. With the highest wages in the country and the lowest provincial tax rates (on average), and no provincial sales tax (PST), we have it really, really rough. In the little province that could be wealthier if only Canada would stop taxing us the same as everyone else, Alberta has lobbied to accept more of our taxes back so we can keep our taxes low and our social spending high. It’s not so much to ask is it?
The research is out there. As Gary Lamphier noted in 2016, Alberta has sent more in taxes than we’ve received from the federal government; on average, $20 billion more per year. The implication is that Alberta could have a wealthy trust fund like Norway, if only we didn’t have to share our tax dollars. The argument’s premise is incorrect for a number of reasons; buckle up.
First of all, every Canadian pays federal taxes. Alberta has the highest average wage in the country and pays the same tax rate on the same income as any other Canadian. Alberta is not being taken advantage of, we make more money. As I keep saying, if you want to pay less tax, make less money. It’s an option. Check with your boss about their willingness to pay you less if you don’t believe me.
The $20 billion we “overpay” is from personal and corporate taxes, not “oil wealth”.
The biggest problem with Lamphier’s argument is that he, and others, conflate personal and corporate taxes with oil royalties. They are not the same thing. I cannot stress this enough.
Secondly, Norway’s Oil fund, as the name suggests, isn’t funded by personal taxes, it’s funded by profits and taxes from oil and reinvested income from its stellar investment portfolio. Check out the amazing history of how that all came about.
Norway owns 90% of its oil and gas industry. Canada’s federal and provincial governments have been relieved of the notion that they should own profitable businesses for the common benefit and instead sold off their shares, sometimes at a loss. Ergo, Alberta owns no shares in its oil and gas industry and the government of Canada sold off its remaining shares in Petro-Canada in September of 2004.
Norway taxes its own oil and gas profits at 78%, allowing for hefty investments into its Oil Fund, which it deposits annually at 100%. Alberta taxes privately owned oil and gas company profits at 12% (soon to be 8 per cent*) and Canada taxes corporations at 29% (minus loopholes and incentives and subsidies of course).
Alberta initially settled on an investment structure of 30% of non-renewable resource revenue (NRR) to be deposited annually into the Heritage Fund. This money was not intended to come from personal or corporate tax but solely from royalty revenue.
Alberta has collected around $200 billion in NRR since 1982. Peter Lougheed fought to ensure that Alberta would have sole control over its NRR – and won. One more time, Alberta has collected $200 billion in royalties that did not go to the federal government or Quebec but stayed right here in Alberta. The money that is sent to Ottawa is personal, investment and corporate tax, not resource royalties.
The government of Alberta has not invested royalty revenue in the Heritage Fund since 1987.
To sum, Alberta employees and corporations pay provincial and federal tax, just like every other Canadian. Albertans pay the same amount of federal tax as every other Canadian in their income bracket. Royalties from our non-renewable resources stay in the province. Since 1987, Alberta’s provincial government has offered public services at the discounted rate of up to 50% and didn’t save anything for the future. No, it’s not the federal government’s fault Alberta is broke.
If you’re looking for someone to blame, as Jim Prentice said, “look in the mirror”; or across the dinner table on Sunday.
*Alberta’s corporate tax rate was dropped to 8 per cent at the end of June 2020 – two years early, – barely two months before Alberta announced it was facing a $24 billion deficit for 2020-21.
This post is based on fact and corrects a faulty premise in someone else’s opinion.
Twitter: @Mitchell_AB for all the commentary, @thisweekinAB for posts.