Saturday, December 20, 2014

A Little Heresy - Alberta Style

So, according to Premier Prentice, the downturn in oil prices is going to create an $11 Billion hole in provincial revenues, and is now talking about putting the brakes on all kinds of infrastructure spending, including a new cancer hospital in Calgary.

Okay, that's a significant chunk of change.  Let's talk about this for a moment.

As the leader of the governing party, Mr. Prentice has a responsibility to all Albertans to ensure that the machinery of government continues to operate smoothly.  Over the last 25 years, we have seen the government make further tax cuts all over the place, in particular to the benefit of corporations, but also introducing a rather ridiculous 'flat tax' income tax scheme.

Every time, the government has tied itself even more so to the revenues from resource royalties to fund programs.

Mr. Prentice, you want to balance the books?  Here's how you do it.  Take a long look at all of the possible revenue sources the government has access to.  Not just tar sands royalties (which are, a pittance because your predecessors cut them to almost nothing).

First, Mr. Prentice, you need to take a long, hard look at the taxation system.  Are the corporations who do business in Alberta paying their fair share?  No?  Then we need to design a taxation system that ensures that they do, especially since so many of the corporations are basically funnelling monies out of Alberta and Canada as quickly as they can.

Second, we need to look at what the individual income tax system does.  Is a 10% flat tax ensuring that we are taxing incomes fairly across the board?  Or do we need to return to the graduated system that was developed in the 1950s?  (Hint:  probably)

Third, and here's where I commit heresy, you need to take a longer range view and determine the means to stabilize provincial revenues so that we are insulated from the vagaries of the resource markets.  This may mean, *gasp*, implementing a sales tax (like damn near every other jurisdiction in the world) that sits in line with the GST, but is not harmonized with it - we don't want to hand control over those revenues over to Ottawa either.

Oh yes, and you need to shed this fetish that conservatives have developed lately with "Public Private Partnerships" and start thinking about long term debt financing instruments like bond funds again.  PPPs just hang the taxpayer with long term operating costs and leases.  One thing that Redford had done (although clumsily) was to structure our finances with a distinction between long term infrastructure costs and operating costs.  That's a distinction that matters, and we need to shed this silly "debt is bad" mantra - yesterday.  Long term debt that is used for purchasing infrastructure is not a bad thing.  It never was.

Alberta needs to funnel every dime it gets in resource revenues into the Heritage Savings Trust Fund. Now.  In a couple of decades we can use the investment income off that fund to sustain the entirety of the government (hint:  take a long look at Norway).  In the meantime, let's use all of the instruments of revenue collection available to the government so that we can actually have a reasonable standard of living for the PEOPLE of this province.  

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