Alberta government should undo personal income tax hikes

If the Smith government reduced Alberta’s top PIT rate to 8 per cent, it would be the lowest provincial rate in Canada and Alberta would have one of the lowest top combined PIT rates in North America (41.0 per cent). Put simply, the change would go a long way to restoring Alberta’s previous tax advantage. And approximately 2.3 million Albertans would save $1,573 per year (on average)

On the campaign trail, Danielle Smith promised to create a new 8 per cent tax bracket for personal income below $60,000. While the tax cut was delayed in the recently tabled 2024 budget, it remains a good idea—in fact, Premier Smith should go a step further and create a single tax rate of 8 per cent for personal income.

First, some context.

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.

But in 2015, 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.

As a result, as noted in a new study published by the Fraser Institute, Alberta now has the 10th highest combined PIT rate in North America. And crucially, higher than rates in U.S. energy jurisdictions such as Texas, Wyoming, Oklahoma, Colorado, Louisiana, North Dakota and Alaska, which compete with Alberta for talent and investment.

If the Smith government reduced Alberta’s top PIT rate to 8 per cent, it would be the lowest provincial rate in Canada and Alberta would have one of the lowest top combined PIT rates in North America (41.0 per cent). Put simply, the change would go a long way to restoring Alberta’s previous tax advantage. And approximately 2.3 million Albertans would save $1,573 per year (on average), which means more money in the pockets of Albertans.

Moreover, a significant body of research finds that high income tax rates discourage economic growth by reducing after-tax income from work, savings, investment and entrepreneurship. Correspondingly, high income tax rates tend to negatively affect economic growth while lower rates stimulate economic activity. In other words, this tax change could come with big economic benefits to Albertans by attracting investment and high-skilled workers that fuel innovation and job creation.

Finally, this tax change may be more fiscally feasible than one might think. Based on budget data from the Smith government, reducing Alberta’s multi-bracket PIT system to a single rate of 8 per cent would’ve led to an estimated revenue loss of $3.8 billion in 2023/24, which is equivalent to just 5.1 per cent of total provincial government revenue that year. And the behavioural affect from lower taxes—increased work, savings and investment—could dramatically reduce the amount of revenue lost.

It’s time the Smith government make good on its campaign promise and finally undo the personal income tax hikes by the previous NDP government. Returning to a single-rate personal income tax system would help restore the province’s lost tax advantage and attract the entrepreneurs, businesses and investment that fuel a strong economy.

Authors:

Tegan Hill

Associate Director, Alberta Policy, Fraser Institute

Nathaniel Li

Senior Economist, Fraser Institute

Related Topics:#AlbertaIncomeTax #CanadianTaxpayersFederation #FlatTax #NathanielLi #TeganHill

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Is There Any Canadian Province More Proud of their Premier Today…

Published on January 21, 2025

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Prior to Trumps inauguration event and announcement was made that Trump would not be imposing the 25% tariffs…

Which means, Canada seriously dodged a bullet here.

And while the Liberals will most likely frame this as, their success in showing, Bad Orange Man, that they’re tough and ready to burn down what is left of our economy, throwing Alberta under the bus, first…through a nuclear option…

Premier Smith rode this challenge out like the true champion we knew that she would be.

It’s hard to say if this was a legality matter in the grander scheme…or if the 25% tariffs would have truly been as big of an impact on the US…

One thing is clear, however…

Smith was ready to go to the tables with the Trump administration and opt for diplomacy over threats…which should be what we expect from our leaders.

And should these 25% tariffs have gone through…I’m more than sure a Plan B would have been brought out in civil conversations, over screeching rhetoric.

“She’s treasonous”, they screeched.

“She’s supporting her friends in Oil and Gas”, they relent.

“She should put Canada first”, they echo…

And let’s just address these…

Is Walmart beholden to Campbells soup? Fruit of the Loom? Kraft?

Or does Walmart sell products that helps keep their doors open?

Walmart is not beholden to any product…just like Premier Smith isn’t. We have 26% of our GDP – the largest portion – owed to Alberta O&G, something that we have a limited trade partner with, due to the Liberal – Anti-Alberta/Anti-O&G/Anti-Pipeline attitude that wants to spend us further in debt with unreliable and expensive “Renewables”.

What does Alberta get from renewables?

A higher cost for energy, in an affordability crisis, created by the same people who continue to push them…sounds like a terrible deal, for Albertans, and something a true leader would Not Favor.

When Walmart sits down to hash out a deal with Heinz, are they committing treason because they haven’t shown their allegiance to their own, ‘Great Value’ brand Ketchup?

No…other provinces have their own industries and resources, which they are free to continue developing independent of the federal government, as is suitable and supportive of their own economies…Alberta isn’t competing with them, nor Canada as a whole.

Alberta through industry and resource, actually supports Canada through a grand imbalance on “Equalization Payments”…

As do we through paying 50% more into the Canada Pension Plan, than we actually get out of the Canada Pension Plan…to the tune of a $334 Billion Dollars.

And as for this “Team Canada”, horseshit…

The title Premier of Alberta, should hold some clues as to who Premier Smith should be advocating for…as she is the Premier of Alberta and Not the Prime Minister, nor leader in the Liberal Party that has created this fiasco, to begin with.

Rail, as they may…other provinces can’t cast a vote in her support, either way…

None of the other provinces, through Members of Parliament, nor through Premiers, came to support Alberta and our economy through a number of Federal Bills that railed on our provincial resources…

Worse yet…these hypocrites cash cheques from our province, while telling us how to diversify our economy…to which I’d state one thing unequivocally…

If we wanted to be a Have Not Province…like you are…we’ll come and ask you for your advice.

Until then…

I’ll hold my Alberta Flag Higher than my Canadian…

And be proud today, of having the only Premier in the country of Canada, worthy of any praise today!