In 2006, The Institute for Public Sector Accountability (IPSA) released ‘A Blueprint for Alberta’. This report outlined a number of policies that the government of Alberta could adopt to further the Alberta Advantage, Unfortunately Progressive Conservative governments under Premiers Stelmach, Redford and the late Prentice never had the courage to implement strong economic policies. Instead they adopted progressive policies which cost them the election and hand over the reins of government to the Notley NDP.
The election of the NDP, has seen numerous catastrophic economic decisions being made and implemented. The government being socialist in nature adopted policies which saw massive expenditures, a labor growth in the public sector and the decimation of the oil and gas industry. While the demise of the oil and gas industry was not entirely the fault of the NDP government, their acquiescence of the Trudeau government environment policies dictated their ultimate decision to impose a carbon tax.
In addition a continued mismanagement of the taxation regime coupled with an increase in the minimum wage has contributed to exacerbate the unemployment rate in the Province.
What was once known as the Alberta Advantage has disappeared and it will be a long time before we see it come back. To this affect IPSA has produced “A Blueprint for Alberta II” to express our views and offer some suggestions that a new government may look at and adopt to restore the economic environment that made Alberta great.
In summary we have addressed the following:
· The Energy Industry
· The Real Estate Market
· The Taxation Regime
The time in Alberta has come to address our Economic and Energy Security as a Province within the context of a national energy strategy taking into consideration the viability of the Industry, conservation and protection of the environment and the protection of the rights and duties of our Indigenous Peoples.
Despite the latest approval of the Trans Mountain pipeline expansion by the NEB agency, we remain skeptical that it will be built sooner rather than later. The Federal government and the special interest groups have yet accepted the fact that pipelines are the best way to move oil. What is required is to have a predictable regulatory process that has integrity and transparency; employs full consultation with all major stakeholders including Indigenous Peoples and more importantly encourages decisions that balance economic and environmental interests. The time has come to end the “resources gridlock” (Bill Gallagher, Resource Reckoning A. strategist’s guide from A to Z Preface page vii).
In addition, Canadians are looking to Alberta as the leader in energy development and the source of energy products for our Nation and beyond our borders. We need the proper infrastructure to see our crude oil and other energy commodities to new and existing markets at the highest prices that the market will allow. We need pipelines because it is the safest means to deliver oil. The use of rail cars to transport oil is very risky, both economically and environmentally. As we have seen the Lac Megantic and more recently the disaster in Manitoba, do not bode well for oil by train. Furthermore using rail to transport oil will also impede the transportation of other goods such as grain, thus affecting the agriculture industry. We believe that the NDP government’s decision to invest $3.7 billion over three years in crude-by-train is very risky, and should be abolished.
In Alberta, 58 per cent of people say Bill C-69 is a step in the wrong direction. Our priority is to come forth with acceptable policies by which to balance our economic growth with job protection, the means to ensure environmental safety and security, and the means to reduce the effects of climate change. A new Alberta government must open a rigorous debate within the borders of our Province, and the rest of the country to ensure a “quality of life that provides economic security for our Province. Alberta urgently needs the leadership, political will and vision to build a strategy to manage all of the forms of energy that touch our lives in so many ways, and aggressively position Alberta as a Leader in the global energy market place to ensure our future economic gain.
The Real Estate Market
Affordable housing is always the talk of politicians when an election approaches. However in many instances it is governments’ interference in the market that is the cause of the problem. Changing rules, such reducing the amortization from 30 years to 25 years, demanding that borrowers have to be able to handle interest rates 2% above the current rate, have curtailed the number of people who can afford to buy a house. Coupled with a downturn in the Alberta economy, the stress of owning a house has increased. The value of real estate in Alberta has dropped, yet property taxes have not. The current Market Value Assessment system of calculating property taxes is a tax based on unrealized values and has become a burden to home owners in older districts.
Having a home is a right, owning a house is a privilege. The answer is to build more affordable housing by bringing back the Multi Unit Residential Building (MURB) that could increase investments in these types of buildings to increase rental units.
The Taxation Regime
Alberta lost its advantage because many policies that made our competitive tax regime the envy of the country were gutted by successive Progressive Conservative governments; from the increase in the oil royalty, to the abolition of the flat income tax and the refusal to consider a sales tax, Albertans have seen an erosion of their wealth, coupled with a dwindling real estate downturn, as well as a high unemployment rate. Alberta needs a new tax regime.
1. The carbon tax should be abolished as it has done nothing to make our oil industry better. The tax was used by the NDP government to play nice with the Federal government, and yet it has resulted in nothing but grief for the industry. The tax has been used as a tool for wealth redistribution and has done nothing for the environment as it was supposed to do, and no pipelines have been built.
2. Alberta should go back to a flat rate for income tax. Furthermore we believe that we should establish a sales tax, coupled with an increase of the minimum taxable income to $ 20,000.
3. The 2018 Alberta corporate tax is currently 12% (general) and 2% (small business). However given the tax reform in the U.S. we have to be more competitive. In light of changes in the U.S which include a dramatic reduction in the headline U.S. federal corporate income tax rate — from 35 per cent to 21 per cent, and the introduction of temporary 100 per cent “bonus depreciation” for certain capital investments. Alberta should revert to the previous rate of 10% (general), 1% ( small business) and accelerate the rate of depreciation for machinery to match the U.S.
4. There is no correlation between the value of a property and the education cost. The cost of education should be transferred to the income tax.
Remove the Market Value Assessment system for property taxes calculations.
Instead use the value of the purchase price as the base and for future years increase the valuation by the Consumer Price Index not the Municipal Price Index which is a manipulated rate.
5. Given that major cities in Alberta have recreation and sport facilities that need to be either built or replaced, it is time for governments to allow municipalities to create tax free municipal bonds, which would be allowed as an investment in TFSAs. Instead of funding these facilities entirely by property taxes, it is time for the taxpayer to have a choice and an opportunity to invest in these facilities. The repayment of these bonds would be done entirely from revenues from these facilities. Given the debacle of the 2026 Olympic Games bid by Calgary, we believe that major expenditures in facilities costing millions of dollars of taxpayers’ should be put to a plebiscite and not left to whims of politician alone.
As reported in the 2018 provincial budget, the spending plan forecasts debt ballooning from $54 billion this year to $96 billion by 2023. Given the increasing Alberta debt load, it will be imperative for any future government to curtail its expenditures while managing its dwindling revenues due to the inability to get our oil to market and any needed reduction in taxation to stimulate the economy.
Having had the honor of serving on two Committees of the Results-based Budgeting task force, we can confirm that there were many ideas that could still be used to move forward, if the results can still be found and not destroyed by the current government. Using some of the conclusions of the taskforce will cut future research costs and also speed up the implementation. More importantly we also suggest that a true Zero-base budget system be implemented to supplement any reform of the financial quandary that the province faces in coming years.
We respectfully submit our suggestions:
Marcel Latouche - President & CEO, James Maxim - Director
The Institute for Public Sector Accountability