2015 Alberta Budget Discussion

[Frequitude]

Originally Posted by Flash Walken

Interesting that health premiums are coming back, but increasing taxes on the wealthy, which was essentially tied with healthcare premiums in terms of public opinion, is not on the table.

Originally Posted by getbak

Based on what he said in his address last night, I thought it seemed pretty clear that the flat income tax was likely to go away (probably phased in over three years) to be replaced by a progressive tax again.

This was the most cryptic part of Prentice's address in my opinion. He hinted at the idea of increasing income taxes by repeatedly stating that increased revenue will be part of the solution and that all Albertans will contribute, but he never flat out said it.

If I were to place a wager based solely on his words though, I would be against a change to our 10% flat tax. This disappoints me.

[Frequitude]

Originally Posted by CliffFletcher

It's worth noting that Sweden has lower corporate tax rates than Canada, and substantially higher income tax rates.

That's what bugs me about the Norway comparison. Yes, less frivolous spending probably contributes to their massive sovereign wealth fund, but by and large it has more to do with having a tax rate between 40%-48% over the last couple decades (it's been decreasing).

[Flash Walken]

Originally Posted by Frequitude

That's what bugs me about the Norway comparison. Yes, less frivolous spending probably contributes to their massive sovereign wealth fund, but by and large it has more to do with having a tax rate between 40%-48% over the last couple decades (it's been decreasing).

But are Albertans, or other Canadians, ready for the sort of reforms that would turn Alberta into the new Norway?

In socialist-leaning Norway, oil profits — including from state-run Statoil — are taxed up to a whopping 78 per cent, and that’s where the seed money for the fund comes from.

Alberta, meanwhile, never even had a provincial sales tax. Albertans pay far, far lower taxes than Norwegians, and if conventional economic theory is right, this should give Alberta the advantage.

But does it?

The average total income in Alberta is around $53,000, well below the province's (stunning) economic output of $80,000 per person. Norway's economic output is actually much lower than Alberta's, at $65,000 per person, but its average income is about the same, at $58,000. Norwegians take home a much larger chunk of the economy's wealth than Albertans do.

http://www.huffingtonpost.ca/2014/01...n_4576887.html

[Fozzie_DeBear]

Originally Posted by crazy_eoj

LOL that's hilarious. There's plenty of evidence that low corporate tax rates are a huge factor behind North America leading the world in economic growth over the past several decades.

However, why not just take a look at Canada.

Alberta has had the lowest corporate tax rate over the past decade. Alberta has had the strongest economy over the past decade.

Alberta leads the country in investment dollars. Alberta has increased investment in the province every year outside of the year Stelmach increased taxes/royalties on oil and gas, which saw investment plummeting by billions.

We've seen multiple head offices relocate to Alberta because of tax treatments, including CP rail and Imperial Oil. We saw Burger King relocate to Canada just this year because of corporate taxes. Pretending that tax rates do not effect investment and economic growth is one of the craziest claims I've read on here.

Take your assumption to the extreme Flash, why not just tax everything 100% ? What's the optimal level of taxation if, as you say "high corporate tax rates and profound public services grow the economy" ?

All of this economic magic (low taxes, inflow of investment, etc) is contingent upon being located over the Western Sedimentary Basin and the world buying our oil to feed their internal combustion engines.

Our wealth (and ability to afford/subsidize low taxes) is because of a 'business model' that, for now, generally works (e.g. exporting oil)...but in the future it may not be as lucrative as it once was.

What if you could look into a crystal ball and see that Alberta has 2 'windfalls' left (a windfall is a prolonged period of high resource prices...the opposite of what is going on now). After the 2 windfalls global supply and demand for oil is forever skewed against Alberta and we are left with essentially coal. What should we do with those windfalls?

Alberta needs to get its #### together and build an economy/government that can weather economic volatility and attract corporations with compelling value. It does not have to rely on discounts like the 'Alberta Advantage' of minimal taxes.

[crazy_eoj]

Originally Posted by Flash Walken

http://www.huffingtonpost.ca/2014/01...n_4576887.html

Apples and oranges comparisons, the differences between our oil and gas industries and extraction cannot be overestimated.

76 631 - Employed in Norwegian Oil and Gas Business
420, 000 - Employed in Albertan Oil and Gas Business

56 - number of wells drilled in Norway 2014
11,255 - number of wells drilled in Alberta 2014

[Jacks]

Originally Posted by Flash Walken

When asked HOW they would like to balance the budget, "59% found raising taxes to be somewhat or very acceptable. "

Ya, ask them which taxes should be raised. You can bet that almost all of them will say to raise taxes on people who make more than they do, or of course corporations. I'm sure non drinkers will be in favor or raising booze taxes, non smokers are good with raising taxes on cigarettes, healthy people are good with health user fees, etc etc etc.

95% of 59% of people are in favor of higher taxes that they don't have to pay.

[Slava]

Originally Posted by Jacks

Ya, ask them which taxes should be raised. You can bet that almost all of them will say to raise taxes on people who make more than they do, or of course corporations. I'm sure non drinkers will be in favor or raising booze taxes, non smokers are good with raising taxes on cigarettes, healthy people are good with health user fees, etc etc etc.

95% of 59% of people are in favor of higher taxes that they don't have to pay.

That's largely true, and it's why lots of people say 'tax the wealthy' because they think that's someone else.

[Cowboy89]

Originally Posted by Frequitude

That's what bugs me about the Norway comparison. Yes, less frivolous spending probably contributes to their massive sovereign wealth fund, but by and large it has more to do with having a tax rate between 40%-48% over the last couple decades (it's been decreasing).

The Norway example annoys me right off too.

The first misnomer is the old 'If you lived in Norway instead of Alberta you would be a millionaire' quote. First of all the 'millionaire' part is expressed in Krone. If you converted that share to CAD you would have roughly $172,000 per person. So no, not anything close to that hyperbole Statement. Also $172,000 goes a whole lot less in Norway than in Alberta.

The next problem is that we're a province of a larger country. Politically I find it hard to see this country letting an Alberta Heritage Fund of $500 billion exist when the Federal Debt is over $600 Billion with other provincial Debt almost equaling this number. Everytime there would need to be tough decisions regarding the country's finances the elephant in the room would be that some portion of Alberta's Heritage Trust fund could supply Canada with XX years of 'insert dire spending program initiative on the chopping block here'

[Flash Walken]

Originally Posted by Jacks

Ya, ask them which taxes should be raised. You can bet that almost all of them will say to raise taxes on people who make more than they do, or of course corporations. I'm sure non drinkers will be in favor or raising booze taxes, non smokers are good with raising taxes on cigarettes, healthy people are good with health user fees, etc etc etc.

95% of 59% of people are in favor of higher taxes that they don't have to pay.

Which is fantastic in a democracy because 95% of them won't be affected by a tax hike on the province's wealthiest personal and corporate incomes.

I have a difficult time coming to terms with this psychological phenomenon. I understand it in it's relationship to America. John Steinbeck held that, “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”, and that makes sense from the perspective of American exceptionalism, but i've never understood it in relationship to Alberta, and I grew up in it.

Earlier in the thread I pointed out that companies, freed from 'excessive' taxation are just sitting on their money and not even returning it as dividends while at the same time not reinvesting it in the company and by association the community. That was dismissed because that would be 'bad business'. Yet, that is plainly what companies in Canada have done with their untaxed profits. To think otherwise is to ignore reality.

Statistics Canada said Thursday that private non-financial corporations increased their cash holdings to $630-billion in the first quarter of this year — up from $621-billion at the end of 2013.

“It would be nice if we could wake it up and get it invested in the economy,” said economist Erin Weir, at the United Steelworkers union.

“This accumulation of ‘dead money’ helps explain the lack of business investment despite record corporate profits.”

Corporations have been singled out by the Bank of Canada for not contributing more to the economic recovery, which has relied heavily on consumer spending for growth since the 2008-09 recession.

It has been nearly two years since Mark Carney, Canada’s central bank chief until his departure last June to head the Bank of England, ruffled corporate feathers by publicly uttering the phrase “dead money” to describe money sitting idle on balance sheets.

...

Statistics Canada data released Thursday show companies has a total of $629.7-billion in cash reserves in the first quarter of 2014 report, up from $620.6-billion during the September-to-December period last year. Compare those levels to the $534.6-billion in corporate cash reserves in the fourth quarter of 2012 and$513.5-billion in the first three months of that year.

“I think the striking thing is that there has been quite a consistent trend, for at least a decade, of just steady increases in cash being held by private non-financial corporations. It slowed down a little during the financial crisis — but not much,” Mr. Weir said in an interview.

“The story for years has been one of optimism about a recovery right around the corner that never really seems to materialize — at least not in terms of investment and employment in the real economy. But there has been a huge recovery in corporate profits,” he said.

“The gap between the recovery and profits, and the lack of recovery in investment, is what explains this huge accumulation of corporate cash.”

Financial Post

I mean, The Financial Post isn't some communist sidewalk literature.

Ten years ago, when this trend started, is when this rush to the bottom nonsense began in earnest in Canada. According to Jim Freakin' Flaherty, these companies aren't using their bundles of cash to invest in the economy, so, let's just get on the same page here that corporate tax rates are absurdly low in Alberta and have not generated the desired economic impact that cuts were designed to produce. If we can all agree on that then maybe we can all agree that raising them to pre-deficit levels might be a good place to start to deal with the current budget deficit?

Just say this outloud, "Alberta could raise their taxes to the point of still being the lowest taxed province in the country and raise an additional $11 billion in revenue." How absolutely, incredulously, ideologically partisan do you have to be to not see that as the obvious solution to this issue?

I'm pleading with guys like you, Jacks, crazy_eoj, to actually present something of a counter argument here, but then I get this drivel about nobody wants to be taxed so there's no solution except no taxes, or how they mis spent my money before so I'm not going to give them any more blah blah bullspit?

More than anything else, it's this kind of mentality that bears the responsibility for situations like the one Alberta finds itself in right now. I guess that really is what it comes down to; willfully ignoring reality in favour of austerity hysteria and sloganeering from the 1980s.

Where is the disconnect between believing higher taxes are necessary and voting for someone who proposes higher taxes?

If I'm an Alberta voter, why bother?

[Flash Walken]

Originally Posted by Slava

That's largely true, and it's why lots of people say 'tax the wealthy' because they think that's someone else.

No, people say tax the wealthy because they are the smallest segment of society that also happens to be the least burdened by taxation.

As an argument, it writes itself.

[Jacks]

Originally Posted by Flash Walken

Which is fantastic in a democracy because 95% of them won't be affected by a tax hike on the province's wealthiest personal and corporate incomes.

Why stop there? If you are sitting down to lunch and have more food than the other 3 people at the table maybe they should get together and vote to take away your pudding.

Maybe you should start by defining what you consider to be wealthy, an actual dollar number, then take your poll. When you say "tax the rich" you can get lots of support because most people consider anyone who makes more than them to be rich.

[Slava]

Originally Posted by Flash Walken

No, people say tax the wealthy because they are the smallest segment of society that also happens to be the least burdened by taxation.

As an argument, it writes itself.

Right. Those "other guys" can afford it. I've seen this argument for years with the corporate taxes, income taxes and basically everything else. I'm just a little bit jaded because at some point there has to be a better solution.

(IMO that is a pure consumption tax, but we've been over that on this board a number of times)

[killer_carlson]

The solution is seen in the thread.

Actually make the money we have work better, more efficiently, and supplement the shortfall with additional tax strategies or taxes allocated for specific projects.

[Bring_Back_Shantz]

Originally Posted by Fozzie_DeBear

I think the point is to put policies in place that will provide the revenues when (and if) the economy becomes healthy again. I'd like to see progressive royalties that increase with the market price of oil. Counter cyclical.

Royalties are tied to the price of oil.

Outside of producing under certain incentives (such as drilling shale gas) Gas and Oil royalties are based on a sliding scale that has a price and volume/rate component.

Natural gas liquds (propane, butate, etc) are on a flat rate at 40% regardless of price.

[CliffFletcher]

Originally Posted by Slava

Right. Those "other guys" can afford it. I've seen this argument for years with the corporate taxes, income taxes and basically everything else. I'm just a little bit jaded because at some point there has to be a better solution.

(IMO that is a pure consumption tax, but we've been over that on this board a number of times)

The better solution is the one used by almost every state in the developed world - a progressive income tax. The flat tax was only viable in the first place because of energy royalties. Now that it looks like the government of this province has finally come to its senses and is trying to develop a revenue base that doesn't really on energy royalties, we'll just have to join the rest of the world and restore progressive income tax. The flat tax was a bad idea to begin with, driven by ideology rather than prudent fiscal management.

[darklord700]

http://www.ctvnews.ca/politics/alber...icit-1.2297985

As of tomorrow Friday March 28, taxes on booze, smoke and gas will go up. So committ your sin tonight or pay more tomorrow.

Traffic fine will go up by 35% so buy a radar detector.

Details on the health care levy are not known yet.

[calumniate]

Think I heard a 9% cut to the education ministry

[nik-]

more sin tax ... so much edge nibbling.

[firebug]

Originally Posted by nik-

more sin tax ... so much edge nibbling.

Not just sin though, pretty much everything...

No more 10% flat income tax (two brackets above 100,000). Health care levy, user fees... you name it, they seem to have done it (except for a PST of course).

[getbak]

So, no health care premium if you make less than $50,000 (taxable, so $68,000 with the personal exemption), and flat tax remains 10% if you make less than $100,000 taxable.