Globe and Mail columnist Gary Mason has a timely piece in Wednesday’s edition. Headlined “No one should feel sorry for Alberta” his commentary serves as a preemptive sortie again the emergence of Jason Kenney as the new leader of the United (in rage) Conservative Party of Alberta.
As Mason sees it, Kenney rose to power with a narrative formed by the notion that “the province is a shell of its former self: the NDP has ruined everything: the rest of the country is against us but we won’t be on our knees much longer. Mr. Kenney will Make Alberta Great Again.”
Mason argues that many provinces – just many? – wouldn’t mind having Alberta’s “so-called problems” such as “the highest GDP per capita in the land” and growth exemplified by Calgary’s rate of 4.6%. He could have cited even more examples to strengthen his case – provincial growth which is expected to be the highest in the country this year and next.
But his key point is about taxes. Mason frets unnecessarily about Alberta’s growing deficit and debt but points out that if Alberta raised its taxes to the same level as neighbouring British Columbia – with the second lowest taxes in the country – it could bring in almost enough revenue to eliminate this year’s expected deficit.
The concern about Alberta’s deficit – or as Mason would have it “the mess the province is in” – is based more on ideology than fiscal reality. The province’s debt-to-GDP ratio is estimated at 6.8% this year. RBC’s most recent Canadian Federal and Provincial Fiscal Tables project that even after two more years of sizeable deficits Alberta will have a ratio of only 11.4%, still easily the lowest in the country and about one-third of the 34.1% projected for Nova Scotia in 2019.
NDP raised taxes
Mason paints with an overly broad brush when he suggests that rather than raise taxes or rein in spending “politicians and others here moan and whine about how horrible things are, how awful the province is being treated by Ottawa and other jurisdictions.” So far, the moaning and whining is coming mostly from Jason Kenney and his crowd, not from the NDP government.
In its first budget, the Rachel Notley government increased the corporate tax from 10% to 12% and replaced the 10% flat tax on personal income with a bracketed system that raised the rate to 15% for those making $300,000 or more. (Nova Scotia’s top rate is 21% and kicks in at $150,000). The NDP also bravely introduced a carbon tax of $20 a tonne, rising to $30 next year.
Despite these increases, the NDP government’s most recent budget was still able to boast about Alberta’s overall tax advantage compared to other provinces, with no sales tax, no health premium and no payroll tax. “Even when the carbon price rises to $30 a tonne in 2018, Albertans and Alberta businesses will still pay at least $8.7 billion less in total taxes and carbon charges than if Alberta had the same tax system and carbon charges as any other province,” according to the 2017 budget.
But does this positive, revisionist view of the province’s economic situation mean “No one should feel sorry for Alberta”? Not necessarily.
Reminding about the province’s good fortune relative to others has had no noticeable impact on the complainers and bellyachers. The carbon tax in particular has people seeing red even though the impact of the levy on most Albertans is benign. At worst the tax may cost an affluent fuel-inefficient family of four about $40 a month, but will be fully rebated to the majority of households.
The perceived negative effect on Alberta of the federal equalization program is also hard to fathom. Alberta does not receive equalization – as the richest province in the country it doesn’t need it. In general, Alberta does pay more in federal taxation than it gets back in federal programs – again, a consequence of its wealth. And of course, that has changed to Alberta’s advantage in recent years with the on-going per-capita health transfers and short-term disaster relief. And Jason Kenny’s big idea – removing resource revenues from the equalization formula – would provide negligible benefit to Alberta, while surely helping out Newfoundland and Labrador.
Fear for Future
The fact that equalization and the carbon tax remain such sources of anger suggests they are proxies for underlying anxiety about Alberta’s ability to keep the good times rolling in a world in which fossil fuel consumption must decline. Railing against the carbon tax, equalization and pipeline opponents in other provinces are interconnected responses to that fear of falling now that a major source of the province’s wealth is in jeopardy.
Never mind that several generations of political leadership – federal and provincial – should have seen this coming and planned for it. Any prospect of such forward thinking evaporated a long time ago. Put simply, the Mulroney government handed over the formulation of national energy policy to the oil industry, and Alberta decided to dip into its heritage fund to avoid a sales tax.
Now that Donald Trump has demonstrated again the potency of know nothing populism we will likely see a continuation of the sort of provocative stuff Kenney spouted during his leadership campaign. Trump has his Mexican wall and his Muslim ban; Kenney has his referendum on equalization and his campaign against national polices on carbon emissions.
The difference is that Trump’s cruel but nonsensical proposals may have sprung from ignorance. Kenney, a member of the federal cabinet for eight years, has no such excuse. He will know that a provincial referendum on a federal program is fraudulent. But he could well keep on about that, as well as challenging national polices on carbon emissions.
Stoking people’s anger at scapegoats and paper tigers is easier than talking about the real problems and their solutions. If Kenney and his United Conservative Party continue that approach and are successful we may indeed end up feeling sorry for Alberta – and for the rest of the country as well.