Back at the beginning of the 21st century, the Alberta government had no net debt. Now it has about $100 billion in debt. The Kenney government and its water carriers want you to know that this is all the fault of...Quebec.
The "logic" is as follows: In the equalization formula that the federal government uses to transfer federal tax dollars back to provinces so that they can pay for services like health care and education, Albertans pay out more than the provincial government gets back. In Quebec, the opposite is true; the Quebec government receives larger payments than its citizens pay out. And now Quebec has been able to sock away a few bucks in its Generations Fund, while Alberta, not so much.
This argument, such that it is, is easy to demolish. The equalization program's goal is to ensure that the level of public services is consistent across the country. Whether your child is going to school in Red Deer, Sudbury or Baie Comeau shouldn't matter; the funding is available to ensure that the quality of education is comparable. I think it should be obvious that this is a proper objective for the federal government to have, at least if you are interested in having a functioning country.
Equalization should be looked at pretty much like the rest of a progressive tax regime; it is essentially a transfer from wealthy people to less well off people. The reason 'Alberta' pays more than 'Quebec' is because individual Albertans have, on average, higher incomes than individual Quebecers, so they pay higher taxes. It is a federal program, funded by only federal tax dollars.
This has absolutely nothing to do with Alberta's debt. Alberta has $100 billion in debt because it taxes too little. Period. For example, every other province has a sales tax. Quebec has had a sales tax since 1991 and the rate currently sits at just under 10 percent. In 2019, the province collected $15.5 billion in sales taxes. As a rough estimate, if you prorate that amount to Alberta's population, it means that Alberta could have been collecting about $8 billion and could have been doing so for years. Even if Alberta had put in a significantly smaller sales tax just 10 years ago, it's likely its debt would be a fraction of what it is now.
Sales taxes are regressive and are a big hit to lower and middle income families. So take oil royalties instead. When Peter Lougheed was premier, royalty rates were between 20-40 percent. Alberta is now collecting roughly 4 percent. This policy choice by conservative governments has deprived the province of tens of billions of dollars. (How much of these forgone royalties left the country entirely through foreign companies like ExxonMobil?) In 2015, those crazed socialists at the Calgary Chamber of Commerce calculated that if Alberta had matched Alaska's royalty regime, the Heritage Fund would have had $40 billion; if it had matched Norway's, the number would have been $163 billion.
You can do similar calculations on personal and corporate taxes, where Alberta's rates are below every other province. But by now, it should be obvious what's happening here. Under the trickle-down theory that conservatives have implemented everywhere they've been in power, having low taxes, mainly for businesses and the wealthy, is supposed to lead to outsized economic growth and never ending prosperity for everyone, not to mention a miraculous increase in tax revenues. But things have never gone according to plan, mainly because the trickle-down theory is a complete sham. The only thing it accomplishes is it keeps its political proponents rolling in corporate donations. The rest of us are left with diminished services, crumbling infrastructure and broken balance sheets. Seeing the mess they've made and worried that voters will finally hold them to account, Alberta conservatives are looking around for someone to blame.
Comments