A new report released this morning by the U of A’s Parkland Institute says that the solution to Alberta’s current fiscal woes, and to growing inequality in the province, lies in an increase in corporate taxes and a return to a progressive tax system—a move that a majority of Albertans would support.
The report, titled Stabilizing Alberta’s Revenues: A common sense approach, was written by Parkland’s research director Shannon Stunden Bower, Parkland’s director and U of L professor Trevor Harrison, and public finance economist Greg Flanagan.
The government has shown that an increase in the corporate tax rate of 2% would bring in an additional $840 million. The authors calculate that elimination of the flat tax, which cost Alberta $1.8 billion in 2010 alone, and re-adoption of a progressive income tax regime in line with the other provinces would result in up to $13.6 billion more in annual revenues.
“By comparing Alberta’s spending to that of other provinces, we show definitively that we do not have a spending problem,” says Stunden Bower. “Our real problem is over-reliance on volatile resource revenues rather than on stable and predictable tax revenue. We also have a problem in Alberta with growing inequality, a problem that would be made even worse by the adoption of a sales tax or by maintaining the flat tax. Governments the world over have figured this out, but somehow Alberta has not.”
The report also uses results from the spring 2012 All-Alberta Survey by the U of A’s Population Research Laboratory to demonstrate that a considerable number of Albertans (40%) would be willing to pay higher taxes to improve public services, and that a majority (60%) feel that those with higher incomes should pay tax at a higher rate.
Of special interest is that those Albertans with annual incomes between $100,000 and $149,999 showed the highest level of support (45%) for paying higher taxes, and significant support (64%) for introducing progressivity to our tax system. Even among those earning over $150,000 support for increased taxes came in at 41% and for progressivity at 44% - a significant level of support.
“In short,” says Harrison, “our research shows that not only would Alberta be better served by a return to progressive taxation, but that Albertans would welcome such a move. The government’s insistence in keeping the flat tax is not only out-of-step with jurisdictions across Canada and around the world, but also out-of-touch with the preferences of a majority of Albertans.”
The Parkland Institute is a non-partisan public policy research institute in the Faculty of Arts at the University of Alberta. The report Stabilizing Alberta’s revenues is available for download on the Parkland website.