Nothing stops Premier Klein from raising our provincial taxes in the March 2004 budget. He did it in 2002, and can do it again in 2004. All it would take is yet another hike in government spending, combined with a drop in the price of oil or gas, or some other economic downturn.

The dangers of tax increases and bigger government were highlighted in a recent study called "Tax and Expenditure Limitations - The Next Step in Fiscal Discipline." This Fraser Institute study explains the difference between balanced budget laws and laws which actually control taxes and spending.

Like seven other provinces, Alberta has balanced budget legislation to stop the government from spending more money than what it collects in taxes. But Alberta does not have a law to limit growth in spending and taxes.

When taxpayer groups started pushing for balanced budget laws in the late 1980s, the idea was dismissed as pie-in-the-sky. Critics said that a law to limit the discretion of politicians would be unworkable, impossible and illegal. These critics were proven wrong when, starting in 1993, eight provinces made it illegal to run deficits. Alberta even went a step further, and legislated a schedule to eliminate its $20 billion debt.

Balanced budget laws were a huge victory for taxpayers, because they stopped debt from getting bigger. When debt goes down, taxpayers benefit by having more of their hard-earned tax dollars available for roads, bridges, and policing rather than debt servicing costs. For example, in 1994 Albertans were losing 12 cents of every provincial tax dollar to debt servicing costs, compared to only three cents in 2003. Controlling debt also benefits future generations of taxpayers, as debt is simply deferred taxation imposed on people who are too young to vote.

Unfortunately, balanced budget laws have not succeeded in reducing taxes or shrinking government. The Tax and Expenditure Limitations study reveals that after provinces passed balanced budget laws, government spending in real terms, factoring in population growth and inflation, actually went up. This is because a budget need not be balanced by spending cuts. Tax increases can also balance a budget - like Alberta's 2002-03 budget.

What is the key to lower taxes and smaller government?

The Tax and Expenditure Limitations study (www.fraserinstitute.ca) looks at the experience of 27 American states which have laws that specifically target growth in government spending and taxes. Unlike studies which have examined state budgets for only two or three years, this study considers taxation and spending over longer time periods, and concludes they are effective in constraining the growth of government and reducing taxes.

Montana, Oregon, New Jersey, South Carolina, Tennessee, Texas, Louisiana, Hawaii, Massachusetts and Florida limit growth in government spending to the same rate as the income growth of taxpayers. What could be more fair? If the income earned by taxpayers in a given year rises by 4%, why should the government's budget increase by more than 4%?

Arizona, Idaho, Michigan, Missouri and North Carolina limit their governments' spending to a set percentage of personal income earned by the state's residents.

Alaska, Colorado, Nevada, Washington and Utah limit growth in government spending to the state's population growth and inflation. This law has worked wonders for taxpayers in the state of Washington. From 1980 to 1995, Washington's population grew an average of 1.2% per year while inflation averaged 4.5% per year, but government spending rose by 8% per year. The pre-1995 trend was towards bigger government and higher taxes. Since 1995, government spending has increased at a steady, reliable pace to keep pace with Washington's inflation and population growth, but taxes have come down - permanently.

Most of these spending control laws include a requirement that any tax increases or new taxes be put to voters in a referendum for their approval. This doesn't make tax increases impossible, but it does force a healthy debate to take place. It puts the onus on politicians to explain and justify why they should get a larger share of taxpayers' earnings. Without a referendum requirement, the onus is on taxpayers to explain and justify why they should be able to hang on to their own earnings.

Unfortunately Alberta does not have effective taxpayer protection legislation. Politicians can raise any tax at any time for any reason, without the approval in a referendum from those who pay the bills. This is what happened in 2002, with a $641 million tax increase which still has not been reversed. Further, nothing stops the Klein government from continuing to increase government spending faster than Alberta's population growth. Since 1996, Alberta's population has grown 14% but spending on government programs is up by 65%.

Laws which limit government spending and taxation force politicians and bureaucrats to choose priorities, just like every family does with its budget. Sure, we would all like more money to buy better and nicer things, but we live within our means. Every day we say "no" to lower priorities. Shouldn't politicians be required to do likewise? It's time for Alberta to take the next step in fiscal discipline.