Alberta
Alberta government should finally undo tax hikes and help restore province’s advantage
From the Fraser Institute
By Tegan Hill
During the election campaign, Danielle Smith promised to create a new 8 per cent tax bracket for personal income below $60,000. While the Smith government’s 2024 budget delayed this tax cut, the premier recently said a “substantial” cut is coming soon. That’s good news, but Smith shouldn’t stop at introducing a new bottom rate. It’s time to finally undo the NDP tax hikes and restore Alberta’s tax advantage.
As recently as 2014, Alberta had the lowest top combined (that is, provincial and federal) personal income tax (PIT) rate in North America. Paired with a low business income tax rate and no sales tax, Alberta had a powerful tax advantage that made the province a very attractive place to work and invest.
Back in 2015, however, the NDP government replaced Alberta’s single personal income tax rate of 10 per cent with a five-bracket system including a top marginal rate of 15 per cent.
Now Alberta has the 10th-highest combined PIT rate in North America. And crucially, we’re less competitive than key U.S. energy jurisdictions such as Texas, Wyoming, Oklahoma, Colorado, Louisiana, North Dakota and Alaska, which compete with Alberta for talent and investment.
Again, Premier Smith plans to create a new 8 per cent tax bracket for personal income below $60,000, which would be lower than the current bottom rate of 10 per cent, and save Albertans earning $60,000 or more an estimated $760 annually. That’s an important first step. However, Alberta still has the higher income tax rates introduced by the NDP—12 per cent, 13 per cent, 14 per cent and the top rate of 15 per cent.
To truly undo the NDP tax hikes, Smith should replace Alberta’s current multi-bracket PIT system with a single rate of 8 per cent, which would be the lowest provincial rate in Canada and one of the lowest top combined PIT rates in North America. The change would help restore Alberta’s tax advantage while saving approximately 2.3 million Albertans $1,573 per year (on average).
The tax change would also help boost the Albertan economy because high tax rates discourage economic growth by reducing after-tax income from work, savings, investment and entrepreneurship while lower tax rates help attract high-skilled workers and investment, which fuels innovation, job creation and strong economic growth, and ultimately higher incomes for Albertans.
Fortunately, this tax change may be more fiscally feasible than one might think. Based on 2023/24 data from the Smith government, replacing Alberta’s multi-bracket PIT system with a single rate of 8 per cent would lead to an estimated revenue loss of $3.8 billion (or approximately 5 per cent of total provincial government revenue that year). But after factoring in the positive effects of increased work, savings and investment, the amount of revenue lost could be significantly lower.
According to Premier Smith, Alberta’s long-awaited income tax cut is on its way—and that’s good news for Albertans. But to undo the NDP tax hikes and reap the benefits of tax reductions, Smith should go further and replace the current system with a single 8 per cent rate.
Author:
Premier Danielle Smith issued the following statement on the April 2, 2025 U.S. tariff announcement:
“Today was an important win for Canada and Alberta, as it appears the United States has decided to uphold the majority of the free trade agreement (CUSMA) between our two nations. It also appears this will continue to be the case until after the Canadian federal election has concluded and the newly elected Canadian government is able to renegotiate CUSMA with the U.S. administration.
“This is precisely what I have been advocating for from the U.S. administration for months.
“It means that the majority of goods sold into the United States from Canada will have no tariffs applied to them, including zero per cent tariffs on energy, minerals, agricultural products, uranium, seafood, potash and host of other Canadian goods.
“There is still work to be done, of course. Unfortunately, tariffs previously announced by the United States on Canadian automobiles, steel and aluminum have not been removed. The efforts of premiers and the federal government should therefore shift towards removing or significantly reducing these remaining tariffs as we go forward and ensuring affected workers across Canada are generously supported until the situation is resolved.
“I again call on all involved in our national advocacy efforts to focus on diplomacy and persuasion while avoiding unnecessary escalation. Clearly, this strategy has been the most effective to this point.
“As it appears the worst of this tariff dispute is behind us (though there is still work to be done), it is my sincere hope that we, as Canadians, can abandon the disastrous policies that have made Canada vulnerable to and overly dependent on the United States, fast-track national resource corridors, get out of the way of provincial resource development and turn our country into an independent economic juggernaut and energy superpower.”
From the Fraser Institute
By any measure, Alberta is an energy powerhouse—within Canada, but also on a global scale. In 2023, it produced 85 per cent of Canada’s oil and three-fifths of the country’s natural gas. Most of Canada’s oil reserves are in Alberta, along with a majority of natural gas reserves. Alberta is the beating heart of the Canadian energy economy. And energy, in turn, accounts for one-quarter of Canada’s international exports.
Consider some key facts about the province’s energy landscape, as noted in the Alberta Energy Regulator’s (AER) 2023 annual report. Oil and natural gas production continued to rise (on a volume basis) in 2023, on the heels of steady increases over the preceding half decade. However, the dollar value of Alberta’s oil and gas production fell in 2023, as the surging prices recorded in 2022 following Russia’s invasion of Ukraine retreated. Capital spending in the province’s energy sector reached $30 billion in 2023, making it the leading driver of private-sector investment. And completion of the Trans Mountain pipeline expansion project has opened new offshore export avenues for Canada’s oil industry and should boost Alberta’s energy production and exports going forward.
In a world striving to address climate change, Alberta’s hydrocarbon-heavy energy sector faces challenges. At some point, the world may start to consume less oil and, later, less natural gas (in absolute terms). But such “peak” consumption hasn’t arrived yet, nor does it appear imminent. While the demand for certain refined petroleum products is trending down in some advanced economies, particularly in Europe, we should take a broader global perspective when assessing energy demand and supply trends.
Looking at the worldwide picture, Goldman Sachs’ 2024 global energy forecast predicts that “oil usage will increase through 2034” thanks to strong demand in emerging markets and growing production of petrochemicals that depend on oil as the principal feedstock. Global demand for natural gas (including LNG) will also continue to increase, particularly since natural gas is the least carbon-intensive fossil fuel and more of it is being traded in the form of liquefied natural gas (LNG).
Against this backdrop, there are reasons to be optimistic about the prospects for Alberta’s energy sector, particularly if the federal government dials back some of the economically destructive energy and climate policies adopted by the last government. According to the AER’s “base case” forecast, overall energy output will expand over the next 10 years. Oilsands output is projected to grow modestly; natural gas production will also rise, in part due to greater demand for Alberta’s upstream gas from LNG operators in British Columbia.
The AER’s forecast also points to a positive trajectory for capital spending across the province’s energy sector. The agency sees annual investment rising from almost $30 billion to $40 billion by 2033. Most of this takes place in the oil and gas industry, but “emerging” energy resources and projects aimed at climate mitigation are expected to represent a bigger slice of energy-related capital spending going forward.
Like many other oil and gas producing jurisdictions, Alberta must navigate the bumpy journey to a lower-carbon future. But the world is set to remain dependent on fossil fuels for decades to come. This suggests the energy sector will continue to underpin not only the Alberta economy but also Canada’s export portfolio for the foreseeable future.
Jock Finlayson
Senior Fellow, Fraser Institute
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