Avoiding Fair Taxation is Alberta’s Real Addiction

This op-ed was first published in the Edmonton Journal on October 2, 2024.

In his recent column “Albertans addicted to government spending, but there is a way out,” David Staples praised the analysis by former Alberta cabinet minister Ted Morton that successive governments have failed Albertans by spending oil revenues as quickly as they come in. He even goes so far as to applaud Norway and Alaska for putting the bulk of their natural resource revenues into savings.

This analysis is neither new nor radical, as economists and policy analysts across the political spectrum have argued for years that the province should save most of our oil and gas revenues rather than fund core provincial expenses with them.

In fact, at the height of the boom in 2008, while Morton was Minister of Sustainable Resource Development, Parkland Institute published a report — Saving for the Future — showing how the province could wean itself off its addiction to easy money. The report presented a prescription by which, over four years, 100% of non-renewable resource revenues would be phased out of general revenues and deposited in the Heritage Savings Trust Fund. Had the government implemented that prescription, we would have already put well over $100 billion into savings.

Staples’ analysis seems to ignore two important pieces of the puzzle. The first is that one of the reasons Norway and Alaska have been able to save so much is that they charge higher royalties. Maximizing the long-term benefits of our resources means maximizing what we charge for those resources. The PC’s, the NDP, and the UCP have all failed miserably on that front.

The other piece ignored by Staples is that, although we have been foolish in spending our resource revenues as they come in, what we have spent on, for the most part, is not foolish at all. Those revenues made it possible for us to build up and maintain what were, until recently, our world-class health and education systems, a decent social safety net, and our provincial infrastructure.

Both Morton and Staples, in their absolute focus on the expenditure side of the ledger, refuse to acknowledge that Albertans rely on those services and infrastructure every day. Simply removing those oil and gas dollars from general revenues would wreak havoc on our balance sheet, and do serious damage to the health, well-being, mobility, and safety of Albertans. Imagine the impact of cutting $20 billion from the revenue stream on our already struggling health and education systems. It would be irresponsible and immoral for the province to begin saving our oil and gas revenues without replacing those dollars in our revenue stream.

Fortunately, there’s a fairly easy solution for that challenge. Our historic dependence on oil and gas money over the years has allowed the government to keep our corporate and personal taxes artificially low. According to the Alberta government’s own calculations, if we implemented the same tax regime as BC (the province with the next lowest taxes), we would generate $19 billion more in revenue. If we replicated Ontario or Quebec, it would mean an extra $21.3 billion or $28.8 billion, respectively. Making those changes alone would enable us to fully replace the revenue generated by oil and gas this year.

Replacing oil and gas dollars with tax dollars would have one more important benefit for the province. Taxes provide a far more stable source of revenue from year to year than royalties, because they are not as sensitive to the ups and downs of a volatile global market. This would enable the province to finally get off the energy rollercoaster and properly begin planning its finances beyond a 12-month cycle. Relying on tax revenues would also force governments to be much more purposeful about how they spend and invest those dollars.

Increasing royalties, saving 100% of our oil and gas revenues, and using taxes to fund our public services make sense. The numbers add up, and the impact on the long-term well-being, economic stability, and viability of Alberta would be huge. The only thing missing, as it has been for the past 40 years, is a government with the courage and political will to make it happen.

Photo by Zbynek Burival on Unsplash.

Ricardo Acuna

Ricardo Acuña has been executive director of Parkland Institute since 2002. He has a degree in Political Science and History from the University of Alberta, and has almost 30 years of experience as a volunteer, staffer and consultant for various non-government and non-profit organizations around the province. He has spoken and written extensively on energy policy, democracy, privatization, and the Alberta economy, and is a regular media commentator on public policy issues. He is co-editor, with Trevor Harrison, of the 2023 book Anger and Angst: Jason Kenney's Legacy and Alberta's Right, available from Black Rose Books.

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