Debt Avenue: Taxes

This is my first article on how to fix Alberta’s financial situation.

Alberta has always been seen as a “have” province, with a great amount of natural resources fueling our growth. In the past weeks, however, residents all across Alberta received shocking news – we’re headed straight into debt city. If Alberta can’t solve its economic problem any time soon, Albertans are going to have to foot the bill – an unpleasant experience for everyone involved. The two main avenues to pay off this debt will be cutting spending or raising taxes, the question only being which will have less of a negative effect on Albertans.

Though a very unpopular idea for many Albertans, a new tax or fee may be the best idea to get us out of this crisis. Right now, Alberta pays one of the lowest income taxes in the country, and pays no sales tax – something no other province does, and an act that only five US states do not do (Texas, which is often compared to Alberta due to their prevalence of oil, charges a sales tax rate of 6.25%). Increasing this tax would cost everyone more money, but like other provinces that charge a sales tax, we could offer tax credits to lower income families, ensuring their lives are not disrupted. A benefit of this tax would mean a more stable revenue base. For numerous decades, our economy has been very much boom and bust – in times of high oil prices, we’ve had surpluses, and in times of low oil surpluses, we’ve had deficits. By increasing our tax base, royalties will become a less dominant part of our income, and preventing major crashes such as this in the future.

Another option of an additional fee that we could put in place would be a healthcare fee, much like the one many other provinces have today, and one that Alberta had in the past. This fee would be something affordable for most citizens, but bring in an additional source of income. Those who could not afford this fee would still receive healthcare, with their taxes reflecting their financial situation. When I was thinking about restoring the healthcare fee, I felt that it had an additional use as well. This fee could also have the potential to lead to reform in the healthcare system due to people seeing that money deducted from their account each year. Though it would effectively be equal to a small increase in taxes, seeing a separate fee would mean that every time an Albertan pays this fee, they’ll begin to wonder where the money is going to. Albertans have been characterized as anti-tax (who isn’t?) in the past, and if Albertans are forced to pay this fee, many will push to insure we get the most out of each dollar. Numerous reports, including this one done by the Fraser Institute, Albertans receive one of the lowest returns on each dollar spent in the healthcare system.  Taxes are not a pleasant idea, and though we’ve always been seen as a province that has enough wealth from oil to not have to pay many taxes, it’s time we take the hit for irresponsible spending over the years and put our government back on track.

If you still can’t swallow the fact that each Albertan will have to pay taxes, cutting spending may still be an option – but how can we do that, and where would we cut?