Envisioning Alberta’s Economy

With Alberta’s election approaching, the United Conservative Party (UCP) and the New Democratic Party (NDP) have both released platforms on the key issues of job creation, business capital spending, and economic diversification. Here we’ll present an overview of each party’s commitments on these issues and provide an analysis about what’s behind each party’s vision for Alberta’s economy.

The UCP Platform

The UCP’s job creation, business capital spending, and economic diversification platform planks largely consist of promises to keep corporate taxes low, offer a list of tax credits for various industries and workers, and expand the Alberta Indigenous Opportunities Corporation loan capacity.

Here’s a summary of the UCP commitments:

1. Keep the corporate tax rate at 8 per cent.
2. Keep the small business tax rate at 2 per cent
3. Create a $1,200 non-refundable tax credit for workers in the trades, health care, and childcare. Workers are eligible after living in Alberta for a year.
4. Establish a $3,000-$10,000 tax credit for students preparing for high-demand professions to stay and work in Alberta after graduation.
5. Increase auto-credentialing for in-demand professions for workers moving from provinces and countries with similar standards.
6. Continue the Alberta Film and Television Tax Credit.
7. Give an additional $100 million to the Alberta Enterprise Corporation to attract more venture capital investment.
8. Invest $25 million in Indigenous equity funds.
9. Double the Alberta Indigenous Opportunities Corporation loan capacity to $2 billion to help Indigenous communities participate in natural resources, agriculture, telecommunication, transportation, manufacturing, forestry, health care, technology, and tourism projects.
10. Expand the Agri-Processing Investment Tax Credit to forestry and other areas.
11. Develop programs similar to the Alberta Petrochemicals Incentive Program for more capital-intensive technologies.

The NDP Platform

The NDP has spread its job creation, business capital spending, and economic diversification platform planks across three interconnected plans.

1. A competitiveness, jobs, and investment strategy.
2. A commitment to create good-paying jobs.
3. A plan for downtown Calgary.

Here’s a summary of the NDP commitments:

1. Raise the corporate tax rate from 8 per cent to 11 per cent.
2. Eliminate the small business tax.
3. Create an Alberta’s Future Tax Credit to grow emerging industrial sectors, such as cleantech, carbon materials, critical minerals processing, and advanced manufacturing.
4. Expand the Alberta Petrochemicals Incentive Program to include eligible feedstocks and final products and to include partial upgrading.
5. Speed up project approvals for responsible companies through a Performance Fast Pass.
6. Consult with Indigenous communities on expanding the Alberta Indigenous Opportunity Corporation.
7. Repeal Danielle Smith’s Sovereignty Act.
8. Partner with the City of Calgary on its plan to invest in downtown office conversions and capital improvements.
9. Build Calgary’s Green Line (public transit).
10. Create targeted grants for small businesses that set up shop in downtown Calgary.
11. Reinstate the Alberta Investor Tax Credit and the Interactive Digital Media Tax Credit.
12. Create an innovation district in downtown Calgary by working with post-secondary schools to relocate and expand campuses downtown.

Analysis

The two parties seem to generally agree on an economic development strategy of offering tax credits to help steer the market. There is little indication that either party would directly intervene in the economy with government investment, except for the NDP’s multifaceted plan to rejuvenate downtown Calgary.

The UCP differentiates itself from the NDP by offering tax credits to workers in the trades, health care, childcare, and recent post-secondary graduates. The irony is the UCP has spent much of the last four years fighting with medical doctors, nurses, and teachers, resulting in many of these professionals leaving the province. The UCP also changed overtime rules so workers in the trades are less likely to earn overtime pay.

The tax credit for recent post-secondary graduates seems like a second instance where the UCP is trying to address a problem that they created or made worse while in government. The UCP’s track record is one of large cuts to post-secondary education, causing institutions to increase tuition. Offering young people some of the extra tuition they paid back in the form of a tax credit might infuriate them and it does nothing to create opportunities for young workers to enter meaningful careers.

Notley’s team differentiates itself from Danielle Smith’s UCP by promising to repeal the Sovereignty Act and thus create a more stable business environment in Alberta. Smith has had opportunities to use the Sovereignty Act, for example, in her efforts to fight the federal government’s actions to create sustainable jobs in emerging energy industries. Smith has thus far kept her powder dry and that may be because many constitutional experts have argued the legislation is unconstitutional.

The two parties also differ on business taxes. The UCP will keep the corporate tax rate at 8 per cent and the small business tax rate at 2 per cent. The UCP claims that maintaining low corporate taxes will lead to increased business capital spending and thus job creation.

The UCP’s claims about the benefits of corporate tax handouts are not supported by the recent history of our province’s largest industry. My research on the so-called “Job Creation Tax Cut” explains how the four biggest oil sands companies received $4.3 billion in tax cuts in 2019-2022, while at the same time eliminating thousands of employees from their payrolls. The research shows the Big Four used the tax giveaway to increase executives’ pay and boost cash transfers to shareholders while accelerating automation and cutting jobs. Moreover, the entire premise of corporate tax cuts generating economic benefits is unsupported by the available evidence – as exemplified in the United States following Donald Trump’s massive reduction of the corporate tax rate in 2017 and the International Monetary Fund’s scathing criticism of plans to slash tax rates in the United Kingdom.

By contrast, the NDP will raise the tax on large corporations to 11 per cent and eliminate the small business tax. The NDP would use the additional revenue from the higher corporate tax to help pay for the party’s health care and education promises. An 11 per cent corporate tax rate would still be the lowest in Canada. Ontario’s rate is 11.5 per cent. British Columbia, Saskatchewan, and Manitoba all have 12 per cent tax rates.

Eliminating the small business tax is a longstanding Alberta NDP policy that the party started to implement when Notley was premier — reducing the tax from 3 per cent to 2 per cent. The NDP asserts that “small business owners have struggled over the last few years and they deserve more help.”

While the promise of lower rates for small businesses has gained popularity with centrist and centre-left parties as it appeals to a sense of ‘fairness’ for ‘mom and pop shops’, its effectiveness as an economic policy is debatable. There is currently little empirical evidence for or against. For conservative economists, such cuts incentivize small businesses to remain small. For progressive parties, promising a tax cut to one sector while slightly raising taxes for another enables them to appear ‘business-friendly’ in a way that fits within conservative framing.

The final issue to compare is the parties’ plans for energy diversification. The two parties agree that Alberta should build on its historic strength in oil and gas. The two parties also agree that the UCP’s innovative Alberta Indigenous Opportunities Corporation loan program should continue. The loan program seems to have been successful in providing Indigenous communities and entrepreneurs access to capital, and in contributing to the slow process of facilitating economic reconciliation.

Both parties would also continue the Alberta Petrochemicals Incentive Program that was first developed by the Notley government and continued by the UCP regime. The UCP has committed to developing similar programs for other “capital-intensive technologies.” It seems like a safe bet that the UCP is talking about carbon capture. If so, such an incentive program would mean more handouts to the Big Four oil sands producers at a time these companies are making record profits.

The NDP would expand the petrochemicals incentive program to enable the development of different types of feedstocks and final products. In short, this means diversification within the petrochemical industry. The NDP has also committed to partial upgrading, which would expand the province’s value-added processing capacity.

The UCP does not have a plan to bolster the province’s booming renewable energy industry. This is a missed opportunity and a bit of a head-scratcher given the UCP claims to be a business-friendly party. After all, it’s power purchase agreements with large companies that are propelling Alberta’s renewable energy industry forward.

By contrast, the NDP has promised to create an Alberta’s Future Tax Credit to grow and diversify the energy industry. They specifically mention cleantech, carbon materials, critical minerals processing, and advanced manufacturing. Using bitumen and natural gas as feedstock for materials manufacturing would diversify the province’s manufacturing sector and help build markets for products like carbon fibre, asphalt binder, and recyclable plastics. Developing critical minerals processing capacity could be Alberta’s opportunity to build a battery manufacturing industry to take advantage of the increasing demand for electric vehicles.

Conclusion

In sum, there are a few points of agreement between the two parties, such as tax credits as the preferred approach to economic development, and the desire to expand two successful programs — the Alberta Indigenous Opportunities Corporation loan program and the Alberta Petrochemicals Incentive Program.

However, it’s clear from comparing the parties’ job creation, investment, and economic diversification platforms that the UCP and NDP are promising very different visions to Alberta voters.

The UCP’s slogan of a “Renewed Alberta Advantage” is predicated on the dubious premise that keeping corporate taxes wildly low will enable wealth to “trickle down” to workers. Four years of this experiment have resulted in very little wealth redistribution to working families, while many large corporations have reaped record profits.

The NDP, on the other hand, would raise corporate taxes a bit to help pay for public services, such as health care and education. And, unlike the UCP, the NDP has a plan to diversify the province’s energy industry that could lead to new business capital spending and job creation in manufacturing and partial upgrading.

While the two parties’ platforms present very different visions for Alberta, neither seem to be offering anything revolutionary for the province. What does it mean that both probable contenders for government are relying on rather limited, niche tax credits to carry an entire economic shift? None of these questions are acknowledged much less answered.

The author acknowledges the contributions made by Rebecca Graff-McRae to the final draft of this blog. 

Photo by Ümit Yıldırım on Unsplash