Opinion
UCP Tax Cut Hits the Target but Misses the Mark
Opinion by Cory G. Litzenberger
Well for fear of being lynched, let me talk about how I think the UCP’s Job Creation Tax Cut may be (partially) incorrect.
While I applaud politicians for laying out their plans in advance of an election, my fear is that the plan is too slow in implementation and cuts too far.
I think a tax cut needs to be moderate and quick – not slow and deep.
Here are my thoughts for various tax changes we need to do in Alberta:
General Corporate Income Tax Rate:
Instead of cutting by 1% per year over 4 years, bring it back by 2% to 10% from 12% in the first year and keep it there.
By delaying the cut as the UCP currently proposes, it could reduce the impact it will have on the economy as the change to the bottom line will not be impacted enough for a corporation to make larger investment until year two or three of the plan.
Quicker action by government will result in quicker action by business, resulting in quicker action in the economy and job creation.
10% also still makes us the lowest jurisdiction in Canada.
Personal Income Tax change to 3 brackets:
– 8% for first $50k
– 10% for the next $100k
– 12% for over $150k
This reduction from 10% on the first $50,000 saves roughly $600 in personal income tax (after factoring in the basic personal tax credit) for every individual making more than $50,000 a year.
It also saves 2% for those making under $50,000 currently.
This is an important cut in order to reward people that call Alberta home, as you will see below.
A rich person paying 12% in Alberta on their personal income is better than them paying 0% because they live somewhere else.
Harmonized Sales Tax (HST) 5%
Yes, I think we need to remove the inflationary and regressive carbon tax as it is way too high of a burden and causes a ripple effect in inflationary pricing how it was implemented.
However, I suggest we implement a 5% HST (which is a flow-through for businesses and does not have the same impact on pricing).
Now, hear me out before you break out the yellow vest!
Currently, anyone visiting our province as either a tourist or a temporary worker from another province are using our infrastructure like roads, water, and yes, even hospital emergency rooms.
When these non-Alberta residents file their personal tax returns, they file it based on their home province of residence as of December 31. Since most of them don’t have a permanent residence in Alberta, this results is them paying income taxes to other provinces, while using our infrastructure for free.
Other provincial residents not paying any taxes in Alberta while here unfairly puts the cost on all of us that live here.
If we implemented an HST similar to the GST program, low income households would still receive credit back (just like GST credit) to offset most (if not all) of any HST they pay.
The $600 in income tax savings we mentioned above for everyone else, is equivalent to $12,000 of taxable supplies consumed ($24,000 in a double income household where they each make over $50,000 of income).
Don’t forget that basic grocery and shelter do not have sales taxes, and if Andrew Scheer gets elected, neither will basic home heating.(https://twitter.com/andrewscheer/status/854364648388182016)
This income tax reduction of $600 to $1,200 would offset much of the sales tax you would pay, but would now start to charge non-Alberta resident visitors and workers.
The reason for an HST instead of a PST is that currently, an HST is required to be charged by all GST registrants across Canada. If you are a GST registrant, you are automatically an HST registrant.
For example, in my office in Red Deer, I have to charge my Ontario customers HST and send it in to the government even though my business is in Alberta.
An HST could reduce the potential for tax leakage out of our province by funneling it back to Alberta because of other retailers in other provinces requiring to charge it on things purchased outside of, or shipped to, Alberta.
Results
– a competitive corporate tax rate to attract investment and do it quicker than the original UCP plan;
– low personal income tax to attract wealthy individuals (and their tax residency) back to Alberta to make it their place of residence, again, quickly;
– removal of the inflationary carbon tax;
– insertion of a relatively low cost HST so that we can get back some of that transfer payment money from the residents of other provinces.
In Summary
– Reduce Corporate moderately and quickly.
– Reduce Individual moderately and quickly.
– Remove Carbon tax.
– Implement an HST.
I know that the slight mention of a sales tax in Alberta makes the hair on the back of your neck stand straight up, and for many conservative politicians, they would resign before suggesting it. However, even as a fiscal-conservative tax accountant like myself, I believe that if it is implemented properly with tax reductions elsewhere, it can add to the bottom line for the province.
I also think it can do so without being a burden to those that live here by taxing those that don’t.
———
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html
Frontier Centre for Public Policy
Christmas: As Canadian as Hockey and Maple Syrup
From the Frontier Centre for Public Policy
By Gerry Bowler
Well, they’re at it again. A year after a Canadian Human Rights Commission position paper labeled Christmas “discriminatory” and an example of “colonialist religious intolerance”, an Alberta public school has cancelled a winter concert because marking Christmas isn’t inclusive enough. The principal of Whitecourt’s Pat Hardy Elementary stated, “Not all students celebrate Christmas, and their families may or may not choose to have them participate in the Christmas concert. Other families celebrate Christmas as a religious holiday but do not want children engaging in the non-religious parts such as Santa, Christmas trees, etc.” It was suggested that a spring concert might be more inclusive, presumably on the theory that no one gets too worked up about the vernal equinox.
The principal’s actions are scarcely news; for years schools and public officials have been reluctant to stage any activity around the celebration of the Nativity. “Christmas concerts” have been relabelled or cancelled; “Christmas trees” have been termed the “Holiday Tree.” Or a “Care Tree.” A “Multicultural Tree.” A “Tree of Lights.” A “Community Tree.” A “Winter Solstice Tree.” A “Grand Tree.” A “Special Tree.” A “Family Tree.” The “Annual Tree.” A “Festive Bush.” A “Unity Tree.” A “Culture Tree.” Activists in Saskatoon objected to city buses displaying a “Merry Christmas” wish; a Toronto judge ordered a Christmas tree removed from the courthouse lest it makes non-Christians feel unwelcome; inspired by the American school that mandated that the lyrics to “Silent Night” be changed to “Silent Night, mmm, mmm, mmm, / All is calm, all is bright, mmm, mmm, mmm”, a principal at an Ottawa school excised the C-word from the ditty “Silver Bells”. Thus: “Ring-a-ling, hear them sing; Soon it will be a festive day.”
There are several ways of dealing with this perennial issue. One is to remove religion from the public square altogether – that would certainly suit the secular fundamentalists – another is to play the majoritarian card and insist that since Christians outnumber other faith communities their will should hold sway. Some might want to dilute any mention of Christianity from the season while others might wish to include every other religion’s holy days on the school calendar.
I have a solution to this seasonal dilemma. It is to adopt the attitude taken by leaders of racial and religious minorities in Canada when asked if they are offended by mentions of Christmas. Their invariable answer is, of course not, Christmas is an integral part of Canadian culture.
Christmas is indeed Canadian, as native to our land as Hockey Night in Canada, Stompin’ Tom Connors, or pineapple on pizza. It has been Canadian longer than poutine, mediocre socialized healthcare, or the last time Toronto won the Stanley Cup. The Vikings who found a home in Newfoundland a thousand years ago likely celebrated Christmas, and there’s no doubt that the holiday has been observed for half a millennium by later European settlers.
Though a current American politician may regard Canada as the 51st state and a current Canadian politician may opine that we are a post-national entity with no core identity, Canada, over the centuries, has developed a unique Christmas culture. We have beautiful carols of our own – “D’où Viens-Tu Bergère?”, the “Huron Carol” (“Jesus Ahatonia”), the first ever written in a North American indigenous language, and J.P. Clarke’s 1853 “A Canadian Christmas Carol”– not to mention secular seasonal music such as “Voici Le Père Noël Qui Nous Arrive” by the legendary Mary Bolduc, the melancholy “River” by Joni Mitchell, Bob and Doug Mackenzie’s take on “The Twelve Days of Christmas” and the immortal “Honky the Christmas Goose,” as sung by Johnny Bower (the last Leaf goalie to win a Stanley Cup).
We have unique Christmas foods – the taffy pull on St Catherine’s day, the tourtière of the revéillon, rapee pie, cipâte, butter tarts, Nanaimo bars, ragoût de pattes, “chicken bones,” and “barley toys.”
Though Santa Claus has his own Canadian postal code (H0H 0H0), we do not count him as a citizen, but we do have our own native Gift-Bringer in the form of Mother Goody (also known as Aunt Nancy or Mother New Year).
Canada can boast the first Christmas tree in North America, the custom introduced by Baroness Frederika von Riedesel whose husband Baron Friedrich Adolphus von Riedesel had brought 4,000 German Brunswicker soldiers in 1776 to protect Canada from American invasion. The first department store Santa was employed in Fredericton, New Brunswick, in 1869. Our post office issued the world’s first Christmas stamp in 1898. Eaton’s department store in Toronto staged the first Santa Claus parade in 1905.
Only in Canada can we see mummers of all sorts at Christmas – Janneys, Ownshooks, Fools, Belsnicklers, and Naluyuks; only in Canada do door to-door canvassers under the guise of “la guignolée” solicit donations to charity while singing a song threatening to torture the oldest daughter of the house.
So the next time objections are raised to the appearance of Christmas in the public square, simply state that it’s a long-standing Canadian custom, sanctified by time and universal practice, as deeply embedded in our culture as the red maple leaf. It’s what we do. Canadians do Christmas.
Gerry Bowler, historian, is a Senior Fellow at the Frontier Centre for Public Policy
Business
Comparing four federal finance ministers in moments of crisis
From the Fraser Institute
By Grady Munro, Milagros Palacios and Jason Clemens
The sudden resignation of federal finance minister (and deputy prime minister) Chrystia Freeland, hours before the government was scheduled to release its fall economic update has thrown an already badly underperforming government into crisis. In her letter of resignation, Freeland criticized the government, and indirectly the prime minister, for “costly political gimmicks” and irresponsible handling of the country’s finances and economy during a period of great uncertainty.
But while Freeland’s criticism of recent poorly-designed federal policies is valid, her resignation, in some ways, tries to reshape her history into that of a more responsible finance minister. That is, however, ultimately an empirical question. If we contrast the performance of the last four long-serving (more than three years) federal finance ministers—Paul Martin (Liberal), Jim Flaherty (Conservative), Bill Morneau (Liberal) and Freeland (Liberal)—it’s clear that neither Freeland nor her predecessor (Morneau) were successful finance ministers in terms of imposing fiscal discipline or overseeing a strong Canadian economy.
Let’s first consider the most basic measure of economic performance, growth in per-person gross domestic product (GDP), adjusted for inflation. This is a broad measure of living standards that gauges the value of all goods and services produced in the economy adjusted for the population and inflation. The chart below shows the average annual growth in inflation-adjusted per-person GDP over the course of each finance minister’s term. (Adjustments are made to reflect the effects of temporary recessions or unique aspects of each minister’s tenure to make it easier to compare the performances of each finance minister.)
Sources: Statistics Canada Table 17-10-0005-01, Table 36-10-0222-01; 2024 Fall Economic Statement
By far Paul Martin oversaw the strongest growth in per-person GDP, with an average annual increase of 2.4 per cent. Over his entire tenure spanning a decade, living standards rose more than 25 per cent.
The average annual increase in per-person GDP under Flaherty was 0.6 per cent, although that includes the financial recession of 2008-09. If we adjust the data for the recession, average annual growth in per-person GDP was 1.4 per cent, still below Martin but more than double the rate if the effects of the recession are included.
During Bill Morneau’s term, average annual growth in per-person GDP was -0.5 per cent, although this includes the effects of the COVID recession. If we adjust to exclude 2020, Morneau averaged a 0.7 per cent annual increase—half the adjusted average annual growth rate under Flaherty.
Finally, Chrystia Freeland averaged annual growth in per-person GDP of -0.3 per cent during her tenure. And while the first 18 or so months of her time as finance minister, from the summer of 2020 through 2021, were affected by the COVID recession and the subsequent rebound, the average annual rate of per-person GDP growth was -0.2 per cent during her final three years. Consequently, at the time of her resignation from cabinet in 2024, Canadian living standards are projected to be 1.8 per cent lower than they were in 2019.
Let’s now consider some basic fiscal measures.
Martin is by far the strongest performing finance minister across almost every metric. Faced with a looming fiscal crisis brought about by decades of deficits and debt accumulation, he reduced spending both in nominal terms and as a share of the economy. For example, after adjusting for inflation, per-person spending on federal programs dropped by 5.9 per cent during his tenure as finance minister (see chart below). As a result, the federal government balanced the budget and lowered the national debt, ultimately freeing up resources via lower interest costs for personal and business tax relief that made the country more competitive and improved incentives for entrepreneurs, businessowners, investors and workers.
*Note: Freeland’s term began in 2020, but given the influence of COVID, 2019 is utilized as the baseline for the overall change in spending. Sources: Statistics Canada Table 17-10-0005-01, Table 36-10-0130-01; Fiscal Reference Tables 2024; 2024 Fall Economic Statement
Flaherty’s record as finance minister is mixed, in part due to the recession of 2008-09. Per-person program spending (inflation adjusted) increased by 11.6 per cent, and there was a slight (0.6 percentage point) increase in spending as a share of the economy. Debt also increased as a share of the economy, although again, much of the borrowing during Flaherty’s tenure was linked with the 2008-09 recession. Flaherty did implement tax relief, including extending the business income tax cuts started under Martin, which made Canada more competitive in attracting investment and fostering entrepreneurship.
Both Morneau and Freeland recorded much worse financial performances than Flaherty and Martin. Morneau increased per-person spending on programs (inflation adjusted) by 37.1 per cent after removing 2020 COVID-related expenditures. Even if a more generous assessment is used, specifically comparing spending in 2019 (prior to the effects of the pandemic and recession) per-person spending still increased by 18.1 per cent compared to the beginning of his tenure.
In his five years, Morneau oversaw an increase in total federal debt of more than $575 billion, some of which was linked with COVID spending in 2020. However, as multiple analyses have concluded, the Trudeau government spent more and accumulated more debt during COVID than most comparable industrialized countries, with little or nothing to show for it in terms of economic growth or better health performance. Simply put, had Morneau exercised more restraint, Canada would have accumulated less debt and likely performed better economically.
Freeland’s tenure as finance minister is the shortest of the four ministers examined. It’s nonetheless equally as unimpressive as that of her Trudeau government predecessor (Morneau). If we use baseline spending from 2019 to adjust for the spike in spending in 2020 when she was appointed finance minister, per-person spending on programs by the federal government (inflation adjusted) during Freeland’s term increased by 4.1 per cent. Total federal debt is expected to increase from $1.68 trillion when Freeland took over to an estimated $2.2 trillion this year, despite the absence of a recession or any other event that would impair federal finances since the end of COVID in 2021. For some perspective, the $470.8 billion in debt accumulated under Freeland is more than double the $220.3 billion accumulated under Morneau prior to COVID. And there’s an immediate cost to that debt in the form of $53.7 billion in expected federal debt interest costs this year. These are taxpayer resources unavailable for actual services such as health care.
Freeland’s resignation from cabinet sent shock waves throughout the country, perhaps relieving her of responsibility for the Trudeau government’s latest poorly-designed fiscal policies. However, cabinet ministers bear responsibility for the performance of their ministries—meaning Freeland must be held accountable for her previous budgets and the fiscal and economic performance of the government during her tenure. Compared to previous long-serving finances ministers, it’s clear that Chrystia Freeland, and her Trudeau predecessor Bill Morneau, failed to shepherd a strong economy or maintain responsible and prudent finances.
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