Sales tax will cost taxpayers but won't solve Alberta's problems
Albertans, we have a problem.
The problem is that our provincial government spends too much of our money, not that the government isn’t taking enough from our wallets. We’re not going to solve this problem by letting politicians take billions of dollars more through a sales tax. We’re going to solve this problem by rolling back years of runaway Alberta government spending.
Fortunately, nobody should know this better than Premier Jason Kenney. Afterall, he led the charge to protect Alberta taxpayers from money-hungry politicians decades ago.
Kenney has already made progress for taxpayers in only a few months as premier. He’s cutting business taxes, scrapped the carbon tax and his Finance Minister Travis Toews already slapped down the notion of tax hikes.
“Seriously? You’re going to ask me that question? We’re spending $10 billion a year in excess of the other provinces. We don’t need to consider any additional taxes to deal with our spending addiction,” stated Toews following the release of the MacKinnon Report.
But, Kenney’s greatest achievement for Alberta taxpayers may have come two and half decades ago.
When he was head of the Canadian Taxpayers Federation in the 1990s, Kenney won an important victory when the Klein government passed the Alberta Taxpayer Protection Act.
If Alberta politicians ever want to impose a sales tax, they’ll have to convince taxpayers to explicitly vote in favour of it. That’ll be a tough sell because a sales tax could cost Albertans billions of dollars every year, but won’t fix the government’s real issue: runaway spending.
Alberta does have a spending problem. Merely matching B.C.’s per-person spending levels would save $15 billion every year, according to data in the MacKinnon report. For perspective, over the last two decades non-renewable resource revenue was at its highest in 2005 when it reached $14.3 billion. If Alberta spent like B.C. did, we could have balanced the budget last year even if these energy revenues approached zero.
Sales taxes don’t mean better budgeting.
In the 1990 budget, the federal government introduced a sales tax to help reduce its deficit. But instead of tackling the deficit, the government hiked program spending from $103.5 billion in 1989 to $120 billion at the beginning of 1994. The deficit climbed from $30.5 billion before the sales tax was implemented to nearly $42 billion after it came into effect.
This led Kenney to state in 1994 that “the GST’s greatest shortcoming has been its apparent failure to reduce the federal deficit.”
In 1995, the feds starting focusing on tackling the spending problem. And the deficit was eliminated only after “Ottawa’s non-military spending was cut back more dramatically than at any time in our national history,” explains the Canadian Centre for Policy Alternatives.
The last 50 years in Alberta have also proven that more government revenue doesn’t mean better budgeting as higher revenues have gone hand-in-hand with higher spending.
Here’s why: an alcoholic’s real problem isn’t that the drinks keep running out, it’s the addiction. You don’t solve the problem by handing over another bottle. Addressing the addiction is the only way forward.
The Alberta government’s core problem isn’t that our energy revenues are down, it’s the spending addiction. We’re not going to solve the problem by forcing taxpayers to shell out billions more every year through a provincial sales tax. We’re going to end the addiction by limiting spending in the boom years and making sure there are some savings for the bust years.
Fortunately for taxpayers, Kenney has long known how to solve Alberta’s real budget problem.
To quote an ad issued by Kenney and the Canadian Taxpayers Federation in 1995: “The only way to deal with our fiscal crisis is to address the real problem and cut spending.”
This column was originally published in the Calgary Herald on September 28, 2019.