Buckin’ the sales tax bronco!

THERE ARE TWO WORDS that strike fear in Alberta politicians—sales tax.

Here’s a couple more words—Calgary Stampede—the annual hootenanny, where politicians of all persuasions can talk to one another, civil, and friendly-like. If only for a few days.

Cowgirls & Cowboys! Head’s up!

We have a problem in Alberta. Everyone knows it. Oil and gas is a boom & bust economy. History says this is so—many times over. We need to even out the revenue side of our province’s balance sheet, so we don’t go dipping into the line of credit as much as we do.

Ask any financial expert, and the solution is clear: Alberta’s pathway to economic stability requires a sales tax.

PROVINCIAL SALES TAX

Recently, I asked Leo de Bever, the fiscal guru who successfully managed the Heritage Savings Trust Fund, what Alberta should do about its deficit, as well as future prospects for the province’s balance sheet. Here’s what he said, without hesitation:

“Every advanced economy has a sales tax because it balances the volatility of resources—income taxes and sales taxes have a different volatility profile.”  —LEO DE BEVER, former AIMCo fund manager

So, let’s be honest: Alberta needs a sales tax. And, yes, there’s political risk.

It’s common knowledge that anyone, any party, any government that even hints at a sales tax is dead meat. It’s political suicide. But with the first shots in a U.S. trade war, a shattered NAFTA, uncertainty on top of economic uncertainty, does this widely held notion that voters will punish politicians who propose a provincial sales tax hold true?

Meanwhile: back at the ranch—

Politicians (whatever flavour you proselytize), while you’re chatting each other up at the Stampede (especially those pancake-flipping-breakfasts and steak-BBQs), please figure out a way to convince Albertans that a sales tax is a good idea. Immediately. That means now. Not in 5 or 10 years. 

SALES TAX = ECONOMIC STABILITY

You might be thinking a sales tax is a sign of failure. Of capitulation. Alberta would no longer be unique in the Canadian family.

Hogwash.

Not having a sales tax is like keeping supply management alive. There are approximately 11,000 dairy and poultry farmers in the whole of the country. All of the federal parties are terrified of irritating voters, especially in Quebec. The politicians have been cowed into submission.

What if fear of reprisals at the ballot box is a fear that’s no longer warranted?

Imagine if all politicians—everyone in the legislative assembly—said to Albertans, we need a sales tax! Pronto!

For the NDP, consider:

You know deep down you’re doing the right thing. It’s in your DNA to impose a sales tax. Your bold leadership on ‘climate change’ to ensure the future welfare of Albertans is the kind of bravery that makes a sales tax like a walk in the park. You also know it may well be your last time in the legislature driver’s seat— in ‘power’ to do the right thing—it would be an unforgettable final hurrah.  Don’t you think?

Full disclosure: I’m a fiscal conservative. Your decisiveness on a sales tax would impress me to no end. And though I’m never likely to vote for you, it would make my heart sing knowing that you weren’t just-another-political-party focused on re-election. 

For the UCP, consider:

You hate the idea. And so do your tax-loathing followers. While it’s tempting to stay focused on Alberta’s spending problem, the idea of asking fellow Albertans for their opinion on the question of a sales tax—via a referendum—would appeal to your grassroots base. And you also know deep down it’s the right thing to do. 

Don’t set too high a hurdle (majority rules). Be very clear on what you will do with sales tax revenues (pay down debt; offset/reduce individual, corporate, small business tax rates; grow the Heritage Savings Trust Fund). Convince Albertans that you’re still obsessed with the spending side, and you’ll likely get the mandate to act. 

As for everyone else —Alberta Party and the Liberals (if there are any Greens in the house, call the doctor)—the word is you support a sales tax. You’ve said it’s the right thing to do. And it’s the kind of political risk you can take without fear because you’re not expected to form the next government.

2019 is just around the corner. And tick-tick-tick goes the deficit…

While you’re watching the chuckwagon races—politicians, please think of yourselves as skillful drivers with the right team making the brilliant moves to buck the sales tax bronco.

Donna Kennedy-Glans, July 1st 2018

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3 thoughts on “Buckin’ the sales tax bronco!

  1. Donna, you are right. This would certainly mean going beyond polarity. (too bad the Alberta Party did not come up with that slogan… its a perfect fit for them). I’m not sure it would be such a political risk. The Liberals took a similar risk by favouring deficits in the last election… and won.

  2. One of my rare disagreements with Donna.

    First off, imposing a provincial sales tax wouldn’t be politically ‘risky’, more like political suicide. Polling shows that only about one-in-four Albertans support the idea, which is a pretty significant barrier considering that current Alberta law requires a referendum before a sales tax be implemented. And while some ‘might’ be persuaded to change their minds in a campaign, for every voice arguing a sales tax is necessary, there will be at least one screaming that it’s an abomination! And if a government were to repeal that law in order to implement a sales tax without a referendum… well let’s just say that the fate of the post-GST federal PCs is probably the BEST case scenario one could expect!

    But even if I thought a sales tax was somehow politically feasible, I’d still be opposed. As Donna points out, one of Alberta’s biggest problems comes from the volatility of our natural resource revenues – some years we’re flush and some years we’re stony broke. But there are ways to deal with that issue – we’ve even tried a few but they all require some long-term fiscal discipline that time and again we’ve proven we just don’t have! That’s why a few years after bringing in the Heritage Trust Fund, we diverted the interest made from the fund (which should have been used to grow the fund) into general revenues. It’s also why, a few years after bringing in the Sustainability Fund, we used it to buy labour peace and make expensive election promises that we otherwise could not have afforded… And while PC governments made those decisions, those decisions were all endorsed by Albertans in subsequent provincial elections – hence my use of the term, ‘we’. Anyway, it all begs the question: if we can’t handle natural resource revenues responsibly over the long haul, what’s to make me think that we could do any better with revenues from a sales tax? And the answer I get is, NOTHING!

    So even if we introduced a sales tax to pay down the debt, reduce other taxes, grow the Heritage Fund (all worthy causes that I fully support), 5-10 years down the road, a new leader or government will be in power (or running for office) and then reducing debt and lower taxes won’t be nearly as important as a shiny new program like universal pharmacare or free PSE tuition. And since Albertans have (quite recently) shown that they’re no less willing than anyone else to be bribed their own money, the result will be bigger governments, and a return to deficit spending. And so, once again, we’ll find ourselves back where we started except that we’ll have the additional joy of having a sales tax burdening our fiscal capacity. As a fiscal conservative, I don’t find this prospect at all appealing…

    So, in short, if I thought Albertans and our governments had some long-term fiscal discipline, I’d probably be able to be convinced to bring in a sales tax. However, if we had such fiscal discipline, we probably wouldn’t need one! As Donna knows, I can usually find a Winston Churchill quote for almost every occasion – and I wouldn’t want to disappoint 😉 so I’ll close with this quote that’s a guiding principle for this fiscal conservative:

    “Taxes are an evil—a necessary evil, but still an evil, and the fewer we have of them the better.” – Winston Churchill, House of Commons, 1906.

    1. Thanks Quynn – appreciate you taking the time to disagree with me! Seriously. This is important. We need to normalize this conversation. It’s NOT taboo to talk of sales taxes in Alberta!

      Fiscal discipline could have saved us a lot of headache, agree with you there.

      And, also agree with the need for a referendum to decide something this important. But, structurally, a sales tax would make things tick a lot better in Alberta. And a sales tax has a very wide base – so would be fairer in some ways. Just getting more money into the pot isn’t the goal; it’s the source of the money, the fiscal discipline and the commitment to use non-renewable energy resources for the clear purposes Albertans define (which should include well-site reclamation, education, future generations etc).

      Love Churchill quotes, so thanks for that too!

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