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Go West Young Man, and Not For the Mountain Views (Why corporate tax hikes are wrong for Alberta)

May 05, 2015
Go West Young Man, and Not For the Mountain Views (Why corporate tax hikes are wrong for Alberta)

Alberta’s economy is struggling, and politicians with sticky fingers are looking at how they can balance the books without cutting back their own bloated spending. You can hear the Tax Man’s boot steps from miles away.

One proposal has been to raise corporate taxes. But this would be the wrong move. In tough times, we cannot lose sight of what Alberta has been doing right.

Alberta has done well when it has lowered personal and business taxes and ultimately spurred economic growth by saying to businesses and to people, “Come on in! We want you here.”

We’ve all benefitted because of it.  

Go west, young man – and not for the mountain views. Alberta is perceived as the Canadian hub for jobs – a good place to find a career, and a good place to start a business.

Why would we want to change that now?

Provincial demographics are changing rapidly, and it’s great for the province. The population is younger and more diverse. These new Albertans are showing up for one big reason: jobs.

Jobs businesses in the province have created.

With aging baby boomers, the entire country is facing an impending health care crisis. This is a very real problem on Alberta’s horizon as well. But unlike in many other provinces, it’s far less concerning to face this crisis with a larger, younger tax base to generate revenue and pay for the necessary services.

Alberta has that advantage.

So what have we done right? Lower corporate tax rates in Alberta have led to economic growth, and in turn, we’ve seen more revenue collected in the province. This is important because those arguing for a corporate tax hike are doing so – perhaps to stick it to perceived ‘fat cats’ – but less vindictively, to generate more revenue.

As noted by CTF Director of Communications Scott Hennig, in 2000 the province had a 15.5% corporate tax rate and collected $904 per person (adjusted for 2014 dollars). Today with a 10% corporate tax rate we’re collecting almost $1,400 per person.

It’s directly related because even those arguing for corporate tax hikes would agree that these revenue spikes are because of economic growth. Here in Alberta, that growth is connected to welcoming business investment, which pays big dividends to Albertans in the form of well-paying jobs – which means more tax collected.  

Corporate taxes don’t show up as an item line on your receipt when you buy shoes or cereal. But they do impact all of us – not just CEOs, who really, are not the major concern anyway. Corporate taxes mean less willingness by business (big and small) to take risks, to start new companies, to create new jobs in Alberta. Economists often call corporate taxes the most ‘distorting’ to the economy; meaning they’ll have big bad impacts down the road, even if we don’t see them on day one.

Dr. Jack Mintz at the University of Calgary writes that for every dollar of corporate tax collected, the Alberta economy loses $82, and raising corporate taxes would mean losing thousands of private sector jobs that would have otherwise been created.

It could also mean higher prices for consumers.

So, not something the average Albertan will see on their tax bills. But, a very real potential for fewer jobs, lower pay, and higher prices for goods. If not today, then certainly tomorrow.

The desire for everyone to ‘pay their fair share’ is understandable. But it’s crucial to look at the impacts. Wealthy CEOs won’t be hit too hard either way. With higher corporate taxes, it’s the rest of us who will have fewer opportunities for well-paying jobs.

And it’s those well-paying jobs that are the foundation of why Alberta is one of the very best places to live.

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