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Falling flat on taxes

// Courtenay McKay
// Courtenay McKay

It was 15 years ago when Stockwell Day—slightly before his jet-skiing fiasco—presented a proposal for flat taxes into the provincial budget. The “Alberta Personal Income Tax Act” was passed as the spring 2000 session of the Legislature was finishing up. Albertans across the board­ have been paying a 10-percent rate on their income taxes ever since. (Although it was 10.5 percent for the first year.)

Former premier Ralph Klein’s government was the first (and only) in Canada to introduce flat-rate income tax. So while the poorest remained exempt from paying taxes, the financial burden was disproportionately shifted to middle-income earners instead of the wealthy.

Public Interest Alberta recently began a year-long campaign called “Alberta Could” in order to talk with Albertans about improvements that could be made in the province if a progressive tax rate was reintroduced.

“In a lot of people’s minds, they think that Alberta’s flat tax equals Alberta’s low taxes,” says PIA’s executive director Bill Moore-Kilgannon. “But they don’t realize that it’s actually low- and middle-income earners who are paying a higher percentage of the total amount we would pay in taxes than if we had a progressive tax system.”

On the campaign’s website albertacould.org, charts obtained from the provincial government show the savings in the billions that could be had if Alberta adopted a tax structure similar to other provinces. For example, if we used Saskatchewan’s income-tax structure, we would have an additional $3.821 billion in funds each year. Saskatchewan’s system is slightly different than the one PIA is proposing for Alberta, as they tax an income of $80 400 at 13 percent and an income of $123 692 at 15 percent, while the proposal for Alberta is to tax $100  000 at 13 percent and $150  000 at 15 percent.

But in the Environics poll PIA commissioned for the campaign, even those in higher tax brackets were not entirely opposed to the idea of progressive taxes—though it would mean they’d be paying more.

“I was pleased to see that one-third of people in that highest tax bracket were willing to pay more taxes,” Moore-Kilgannon says. “In fact, 49 percent of income owners over $100  000 were open to this as well.”

He says it’s a myth that Albertans want tax cuts as their top priority. The poll showed that 47 percent of Albertans want to put more money into public services. The next two priorities, at 21 percent each, were building infrastructure and paying down the provincial debt. Only four percent of pollsters wanted tax reductions.

Even across the political spectrum those voters typically more right-wing in their views about taxes and public services still chose public services as a top priority for investing in, followed by paying down the debt and then building infrastructure. Reducing taxes remained a low priority for Conservative and Wildrose voters along with Liberals and New Democrats.

“They know that with 100 000 more people coming to Alberta every year, we absolutely need to be investing in making sure we have enough nurses and enough teachers, that our municipal infrastructure is solid,” Moore-Kilgannon explains of why all types of voters seem to agree, for once. “But the disconnect for a lot of people is we live in an incredibly wealthy province, we’re told all the time how wealthy we are. Why then are we struggling to get enough schools? Why are we seeing class sizes in high school now of 40 kids where they actually don’t have enough desks in the rooms? So that disconnect comes back to this central discussion of what type of tax system should we have.”

The Parkland Institute has been researching the topic of progressive taxes for years, so it was only natural for them to become involved in the Alberta Could campaign.

“I think that people recognize that the narrative around taxes as something profoundly negative, as something that we should look to diminish at all costs is ultimately intellectually bankrupt—it doesn’t make any sense,” says Shannon Stunden Bower, Parkland’s research director. “If we are interested in benefitting from good-quality roads, if we want our kids to go to good schools, if we want to benefit from public-health care that serves our collective best interest, then we need to think about how we’re going to pay for those things.”

Stunden Bower says Albertans are increasingly recognizing that income disparity causes a lot of harm. Parkland reported in 2012 that Alberta has the worst financial inequality in the country.

“People recognize that inequality is a bad thing,” Stunden Bower says. “It hurts us in all sorts of ways. It hurts everyone, both the rich and the poor. It makes our communities less good places to live. It actually impedes economic growth.”

This is an irony worth noting as one of Day’s reasons for introducing flat tax was, he stated, that taxes themselves reduce economic growth so that the government is not able to fund public services. Yet 15 years later, we have a flat-tax income structure and a provincial government still unable to properly fund public services.

“There’s also really strong data coming out from organizations like the International Monetary Fund—not by any means a left-wing advocacy organization,” Stunden Bower notes. “But they recognize that the sort of income disparity we’re seeing now erodes the possibilities for economic growth, it shortens economic growth, it promotes social instability—none of which are seen as good things, even by these organizations that are not typically on side with the sorts of things that progressive, activist types tend to advocate for.”

The campaign is currently touring the province and will hold another forum in Edmonton on Thursday, June 5 at the Alberta Teachers’ Association building at 7 pm.

1 Comment

  • Excellent research by Public Interest Alberta. It’s time the political ‘gift’ of a flat tax to the already richest Albertans is changed to a progressive tax rate and the additional tax revenue flows to those who need it most. Our children, our aging parents, our environment (okay, I can dream too), the working poor, those unable to work, and us middle income earners just trying to get by and save a little for our future and our childrens’ future.

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