Don Cayo: In my opinion
Decisive: Alberta Premier Notley has wasted no time announcing intention to raise taxes, minimum wage and carbon levy
Alberta’s recent moves to increase the minimum wage and hike corporate and personal taxes could be instructive to British Columbia.
What will the ascendancy of Alberta’s NDP mean to B.C.? Premier Rachel Notley and her new-to-office colleagues seem to have hit the ground running, calling a legislative session and tabling bills within a month of winning office. But they’re running in the opposite direction to the one former premier Gordon Campbell took when he assumed office here 15 years ago.
A day after taking office, Campbell announced his government would cut income tax rates for businesses and individuals. Notley took only slightly longer to announce several measures that will raise the cost of living or doing business in Alberta.
She has introduced a bill to raise her province’s corporate income tax rate from 10 to 12 per cent — one percentage point higher than B.C.’s — and to restore some progressiveness to Alberta’s famed flat tax of 10 per cent. It will now step up in one-percentage-point increments starting at $125,000 in annual income and peaking at 15 per cent on amounts over $300,000. (B.C.’s personal income tax rates, which range in six stages from 5.06 per cent on incomes under $37,869 to 16.8 per cent on anything over $151,050, are structured so differently it’s impossible to compare their impact without doing detailed calculations on any given level of earnings.)
Notley will also double Alberta’s ineffectually low carbon tax of $15 a tonne on heavy greenhouse gas emitters. And her government will review — many analysts assume that’s a euphemism for increase — Alberta’s oil and gas royalties.
B.C.’s carbon tax rate is $30 a tonne, and applies to most emissions, not just those from big companies, as is the case in Alberta.
Given that the tax has had minimal adverse economic impact here, and that it has helped spur emission reductions, the Alberta version seems unlikely to become the job-killer critics fear. Granted, the timing is bad with oil prices depressed and other tax increases pending. But a higher and potentially more effective carbon tax may also go some distance to cleaning up Alberta’s dirty image internationally — something that’s overdue and that could pay dividends in the future.
As for income tax increases, companies don’t usually base location decisions on personal tax rates, and Notley’s corporate tax increase is small enough to leave Alberta in a reasonably competitive position. It’s unlikely this — at least, not by itself — will drive many businesses over the border to relocate in B.C.
The royalty issue, on the other hand, is an open question. No sooner were the ballots counted this spring than drilling companies were talking about spending their exploration budgets in Saskatchewan or, to a lesser extent, B.C.
Of course, they talk this way whenever a hint of higher royalties is mentioned. But it would be folly to rule out the possibility that if royalties go high enough, they might do it. So natural gas drilling could shift, but it’s too soon to make a prediction. This leaves one other costly Notley policy that should interest B.C. It’s to raise the hourly minimum wage to $15 from $10.20 — among the lowest Canada-wide, and five cents less than B.C.’s, although ours is to rise to $10.45 in September.
So will it, as some predict, spur the economy by giving low-wage workers more to spend? Or, as others maintain, will it cripple growth by forcing businesses to reduce their hours, or even close up shop?
Or will nothing much happen, as was the case when Premier Christy Clark upped the B.C. minimum wage from $8 to $10.25 over the first couple of years she was in office?
Clark’s increase was big, but as a percentage it wasn’t much more than half of Notley’s. It raised a wage that was, compared to other parts of Canada, even lower than Alberta’s is today. And it came at a time when our economy was strengthening, unlike Alberta’s, which is hurting.
So it’s worth watching to see how it plays out. If it goes smoothly without much harm to the economy, it will bolster the case for higher minimums here and in other jurisdictions. Or, if any or many of the dire predictions come true, it’ll be a cautionary tale about the danger of raising the minimum too far and too fast. Either way, it’ll be instructive.