From the Canadian Taxpayers Federation

By Franco Terrazzano

The Canadian Taxpayers Federation is applauding Conservative Party Leader Pierre Poilievre’s promise to reverse the capital gains tax hike. Taxpayers are also demanding the Canada Revenue Agency immediately halt enforcement for the proposed tax increase.

“Poilievre is right to oppose the capital gains tax hike that will punish Canadian doctors, entrepreneurs and people saving for their retirement,” said Franco Terrazzano, CTF Federal Director. “The capital gains tax hike will blow a huge hole in Canada’s economy that we can’t afford.

“It’s great that Poilievre plans to scrap the capital gains tax hike, but he shouldn’t have to because the legislation has never passed and the CRA shouldn’t be enforcing it.”

Today, Poilievre announced he “will reverse last June’s Liberal tax hike on capital gains,” if he becomes prime minister.

A new report from the CD Howe Institute shows the capital gains tax hike will result in more than 400,000 fewer jobs and shrink Canada’s GDP by nearly $90 billion.

This report was completed in response to the Trudeau government’s plan to raise the capital gains inclusion rate for the first time in 25 years.

While a ways and means motion for the tax increase passed last year, the government failed to introduce or pass necessary legislation. Despite this, the CRA is pushing ahead with enforcement of the tax hike.

“The CRA must immediately halt its plans to enforce this unapproved tax hike, which threatens to undemocratically take billions from Canadians and cripple our economy,” said Devin Drover, CTF General Counsel. “It’s Parliament’s responsibility to approve tax increases before they’re implemented, not unelected government bureaucrats in Ottawa.

“The proposed capital gains tax hike must be stopped.”

From the Fraser Institute

By Tegan Hill

After recently meeting with president-elect Donald Trump, Premier Danielle Smith warned that Trump’s tariffs could include oil. That’s just one more risk factor added to Alberta’s already precarious fiscal situation, which could mean red ink in the near future.

Trump has threatened a 25 per cent tariff on Canadian goods, which includes oil, and could come as early as January 20 when he’s sworn in as president. Such tariffs would likely widen the price differential between U.S. West Texas Intermediate (WTI) crude oil and Alberta’s Western Canadian select (WCS) heavy oil.

In other words, the average price difference between Canadian oil (WCS) and U.S. oil (WTI) could increase, reflecting a larger discount on Canadian oil. According to the Alberta government’s estimate, every $1 that WCS is sold at discount is a $600 million hit to the government’s budget.

To maintain its $4.6 billion projected budget surplus this fiscal year (2024/25), the Smith government is banking on oil prices (WTI) averaging US$74.00 per barrel in 2024/25. But every $1 decline in oil prices leads to a $630 million swing in Alberta’s bottom line. And WTI has dropped as low as US$67.00 per barrel in recent months.

Put simply, Trump’s proposed tariffs would flip Alberta’s budget surplus to a budget deficit, particularly if paired with lower oil prices.

While Smith has been aggressively trying to engage with lawmakers in the United States regarding the tariffs and the inclusion of oil, there’s not much she can do in the short-run to mitigate the effects if Trump’s tariff plan becomes a reality. But the Smith government can still help stabilize Alberta’s finances over the longer term. The key is spending restraint.

For decades, Alberta governments have increased spending when resource revenues were relatively high, as they are today, but do not commensurately reduce spending when resource revenues inevitably decline, which results in periods of persistent budget deficits and debt accumulation. And Albertans already pay approximately $650 each in provincial government debt interest each year.

To its credit, the Smith government has recognized the risk of financing ongoing spending with onetime windfalls in resource revenue and introduced a rule to limit increases in operating spending (e.g. spending on annual items such as government employee compensation) to the rate of population growth and inflation. Unfortunately, the government’s current plan for restraint is starting from a higher base level of spending (compared to its original plan) due to spending increases over the past two years.

Indeed, the government will spend a projected $1,603 more per Albertan (inflation-adjusted) this fiscal year than the Smith government originally planned in its 2022 mid-year budget update. And higher spending means the government has increased its reliance on volatile resource revenue—not reduced it. Put simply, Smith’s plan to grow spending below the rate of inflation and population growth isn’t enough to avoid budget deficits—more work must be done to rein in high spending.

Trump’s tariffs could help plunge Alberta back into deficit. To help stabilize provincial finances over the longer term, the Smith government should focus on what it can control—and that means reining in spending.

Tegan Hill

Director, Alberta Policy, Fraser Institute