Who will bear fiscal burden?
Debate erupts whether taxpayers, corporations pay for financial crisis
In the wake of last week’s Alberta budget, an ideological debate has erupted over who should bear the burden of the province’s financial crisis: individual taxpayers or corporations.
Obviously, the ruling Tories believe taxpayers should pay the bill, after they raised fees and taxes across the board. Corporations were left untouched.
On the other side, the NDP, Liberals and a restless public, if the polls are right, argue corporations should take the hit. Meanwhile, the Wildrose party says just don’t raise taxes for anyone; slash spending instead.
Premier Jim Prentice is exaggerating the negative impact of taxing corporations because he is stuck on ideology that low taxes magically create jobs, says NDP Leader Rachel Notley.
She has vocally criticized Prentice’s refusal to increase taxes for corporations along with the rest of Albertans, saying families shouldn’t have to bear the burden of Alberta’s fiscal crisis alone.
“I tend to think that it might truly be sort of an ideological thing. And a belief that the best way to create jobs is to give as much money ( as you can) to corporations, close your eyes, cross your fingers, and hope it happens,” she said Thursday. “But I don’t think that most people would argue that the research shows that’s all there is to creating jobs.”
Notley said low corporate taxes keep Alberta competitive as a place for business, but there are a number of other factors at play, including the cost of land, the availability of labour, the age and education of the labour force and the province’s social infrastructure.
“All these things contribute to the investment climate as a whole in Alberta, and I think it’s simplistic to suggest that one or two points in a corporate tax increase — particularly when we’re so far below other jurisdictions, as we are — would have the kind of impact that Mr. Prentice has been threatening quite insistently over the course of the last few weeks,” Notley said.
The Edmonton- Strathcona MLA said she didn’t believe a small increase in corporate taxes would throw the province into a recession, but feared other policies in last week’s provincial budget might.
“I think that a billion out of health care, quite frankly, is going to hurt the economy — both Edmonton and Calgary — a lot more directly than a corporate tax of one or two points would,” Notley said.
Prentice has refused to consider any increase in corporate taxes, saying Alberta has to protect its competitive tax advantage.
“We’re relying on businesses to create jobs in the province and it is well known that if you increase corporate taxes you reduce investment and you lose jobs,” he told the Herald editorial board this week. “These lessons were learned in our country over the last generation.”
He noted Alberta leads the way with the country’s lowest corporate tax at 10 per cent, but British Columbia is just behind at 11 per cent, Ontario at 11.5 per cent, and Saskatchewan and Manitoba at 12 per cent.
“The worst thing we could do right now is be dissuading investment and losing jobs,” Prentice said.
The premier, who is expected to call a snap election after Easter, said a one percentage point increase in the corporate tax would only generate $ 400 million annually.
But Albertans have called out loudly in surveys and opinion polls for corporations to be involved in making up the loss in revenue due to the collapse of oil prices. An Insights West survey found 44 per cent of Albertans in a weekend online poll believe corporations should pay increased taxes along with other Albertans who were hit with a $ 1.5- billion tax grab in last Thursday’s budget.
Even Calgary Catholic Bishop Fred Henry has complained about the unfairness of the tax hikes that spared wealthy corporations.
“To give corporations a free ride — no new taxes — in challenging times and, at the same time, to chop the tax credit received for charitable donations is simply unconscionable and an insult to what the non- profit sector and churches add to Albertans’ quality of life,” Henry said in a letter to the editor.
The Alberta Liberals announced Thursday they would boost corporate taxes by two per cent, but eliminate tax on small businesses earning less than $ 500,000.
“Jim Prentice wants regular Albertans to pay for his government’s mistakes,” interim leader David Swann said. “But, we believe in sharing the burden fairly and putting money back in the hands of those who need it the most.”
However, new Wildrose Leader Brian Jean said his party is against all tax hikes, including increasing corporate taxes.
“To increase taxes on corporations would mean less corporations would come into Alberta to set up shop,” Jean said.
Notley said the government should also consider raising royalty rates because many Albertans do not believe the province is receiving its fair share for the resources they own.
But neither Prentice nor Jean want to risk alienating their financial backers by raising royalties, she said.
“Obviously, whether it’s Mr. Prentice or Mr. Jean, neither one of them is going to want to put a stick in their major donors’ eyes,” Notley said.
“But the fact of the matter is that responsible leadership means these conversations have to be had, they need to be had openly, transparently in a way that includes all Albertans.”
Notley tabled a private members bill last Thursday that called for the government to establish a permanent commission to annually review whether royalty rates should be adjusted and make recommendations to the legislature.
She said the Resource Owners Rights Act would promote fair resource royalties and encourage the creation of sustainable jobs by upgrading natural resources in Alberta.
“It’s time for the PC fire sale of our resources to end,” she said.