Alberta government may consider reinstating flat tax system, says Kenney


“I think that was the source of a huge tax shift to Alberta, as people moved here to benefit from far and away the most marginal income tax rates in the country.”

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Alberta Premier Jason Kenney said the provincial government may consider reverting to a flat tax system, which would see every Albertan, regardless of income, pay the same provincial tax rate.

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In response to a question about income during a meeting Wednesday with the National Post editorial board, Kenney, who was joined by Finance Minister Travis Toews, said he believed the flat tax system had been beneficial to Alberta.

“We used to have a single rate personal income tax system here… and I think it was responsible for a huge tax shift to Alberta because people moved. here to benefit from by far the most marginal income tax rates in the country, ”says Kenney. “That’s one of the things we’re going to look at. “

The United Conservatives have long vowed to hold an expert panel to study Alberta’s revenues, against the province’s September 2019 spending report, which Toews says will happen, though no timeline has not been given.

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“It is certain that factoring in income is part of the process of putting the province on a sustainable fiscal path,” said Toews.

The group’s mandate, Kenney said, would be: “What would be the optimal design of a provincial tax system to promote economic growth and job creation?” “

  1. Jason Kenney is the leader of the United Conservative Party in Alberta.

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  2. Alberta Premier Rachel Notley.

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Because government revenues are so closely tied to resource revenues, consecutive Alberta governments have had to contend with the vagaries of the international oil market. This has led, on several occasions, to asking the province to institute a sales tax or find other means of ensuring a less volatile source of revenue. Alberta has a law stating that a sales tax would be passed by referendum, Kenney said.

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“So with about three-quarters of Albertans fairly consistently opposed to the idea of ​​a sales tax, I don’t think this is something Albertans are going to adopt,” he said.

Alberta had a flat tax system between 2001 and 2015. As of the 2016 tax year, Albertans with incomes below $ 131,220 pay 10% income tax – the old flat rate – and this rate then climbs to 15% for those who earn $ 314,928.01 or Suite.

The new tax rate was announced by Jim Prentice, the last Progressive Conservative prime minister, in 2015; less than two months later, Albertans dumped Prentice and Rachel Notley’s New Democrats took over. They kept the promised progressive income tax system, which remains in place now.

The United Conservatives have been grappling with the issue of a return to a flat tax for years, but the province’s finances, shattered as they have been by the collapse in oil prices, the persistent economic slowdown and the moderating effects of the COVID-19 pandemic, prevented it from being a viable option, even when the government decided to cut corporate tax rates.

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A study by the Fraser Institute, a free market think tank, suggests that if rates were cut from 15% to 10% over four years, the government would lose about $ 1.36 billion in revenue. Yet economic benefits, such as increased entrepreneurship or investment, could make these losses “relatively small”.

Lindsay Tedds, an economist at the University of Calgary, pointed out that Alberta has never had a flat tax because there is no tax on the first $ 19,369. “I hate being pedantic,” she laughs.

The effects of returning to a flat tax rate, Tedds said, would be complicated to disentangle, because there are so many other factors. While this would certainly see the government lose money and shift the tax burden to middle incomes rather than high incomes, there are other factors to consider, such as child care, that could affect market participation. labor and economic activity. Additionally, the effect of lost revenue on government services needs to be taken into account, Tedds said.

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“(Alberta) isn’t just competing on taxes. It’s a collection of goods and services that draw people to a jurisdiction, ”Tedds said. “Are you making any assumptions based on your understanding of the world of the 1970s or 1980s?” Or do you really understand it from 2021? “

At the UCP convention in May 2018, party members voted to add a lump sum return pledge to the party’s policy book, but Kenney, who cited the important deficits left by Notley’s government, never fully adhered to the pledge.

Yet this is not the first time the Prime Minister has suggested that the flat tax system may return; he expressed admiration for the flat tax, put in place under Ralph Klein, and suggested that a panel might recommend such a thing, but has long opposed cutting personal tax rates.

“I think that was a big part of the Alberta advantage,” Kenney said in 2019. “I like it in principle, but I can’t commit to something when we don’t know. what will be the overall financial situation of a future government. . “

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Compared to the rest of Canada, Alberta already has a significant tax advantage, which has led the Prime Minister to suggest that everyone should move to Alberta. Albertans pay significantly less taxes – income and sales to name a few – compared to other provinces.

“The cost of living differential between the cities of Calgary, Alberta and Vancouver or Toronto is now so extreme that we really think it will start – it is starting – to generate a new wave of interprovincial migration to Alberta, ”Kenney said.

A dual-income couple with two children in Alberta pays on average $ 1,064 less than the same family in British Columbia, $ 6,043 less than a Quebec family and $ 3,687 less than an Ontario family.

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