Should Alberta have a PST?

[Phil McAvity]

Originally Posted by Surrealplaces

I like the idea of sales taxes in principal. It'a a straight across fair tax, but I voted no because I worry that it would eventually becomes just another revenue source that disappears into bureaucratic oblivion. Once it's in you'll never get rid of it.

Not only are consumption taxes fairer than other taxes but they are often optional since many things people buy and thus pay the sales tax on, are not necessary.

I'm not a big fan of taxes usually but sales taxes seem to me to be the pick of the litter.

[MasterG]

Originally Posted by Doug

Of course. Every one tries to bargain for higher wages. Alberta politicians have had the luxury of bullish oil price forecasts so they could get away with being lazy and giving them what they wanted. Now they don't.

Premier Redford specifically called out that doctors and teachers in Alberta earn 20-30% more than in the nxt highest paying province.

I have found amongst my doctor - med school friends that pay is not a concern (I am not one, just accumulated 10 or so U of C med school students in my circle from everywhere across canada). 5 of 10 are leaving Alberta after, most returning to their home provinces because thats where they want to be. 3 are going to other cities because they are cool (Vancouver, Montreal) and 2 are staying because they are from here.

None ever made their decision on where to work by choosing between 250,000 and 350,000 a year. Highly paid doctors, and other locational independent skilled workers (i.e. they have to work somewhere because the oil is there etc.), dont choose based on salary.

There is no reason to pay more than the national average, it doesn't retain doctors or better skillsets. So for us that is a cut across the board of 10- 15% in doctor salaries is a no brainer.

That won't solve all the problems, but touches on the other issue of flat tax. "Can't raise taxes because the job-creators will leave!" We are way below everyone else in income taxes, that argument (if it was valid) means that you only have to have a marginal advantage.

Match the lower of either BC of Sask in income taxes and the fiscal problem is over immediately. No one is going anywhere.

[Tropics]

Originally Posted by MasterG

None ever made their decision on where to work by choosing between 250,000 and 350,000 a year. Highly paid doctors, and other locational independent skilled workers (i.e. they have to work somewhere because the oil is there etc.), dont choose based on salary.

There is no reason to pay more than the national average, it doesn't retain doctors or better skillsets. So for us that is a cut across the board of 10- 15% in doctor salaries is a no brainer.

You are not taking into account the average cost of living in Alberta compared to other provinces though. The cost of living is higher in Alberta then other provinces on average and as such the average salary for almost all of the industries is in turn higher.

Doctors make more here because it is more expensive to live here and the average earnings for Albertans as a whole (not just doctors) is higher then any other province in this country.

Asking doctors to be one of the few segments of Alberta industry that does not actually make more money then peers in other provinces is not going to work. A doctor making $250,000 a year working in Nova Scotia has more disposable income then a doctor making $250,000 a year in Alberta would make and that is thus not making things "equal".

[PoscStudent]

Never read through other posts but a PST would make a lot of sense, if the government reduced income and business taxes to make it revenue neutral to an extent. Personally I prefer consumption taxes over income taxes. However, I think Alberta could raise a fair bit of money from tourists and people visiting the province on business with a PST. As well there are people who work in Alberta but are paying income taxes in other provinces, so the Alberta government is losing money from them.

[Chadillaccc]

Originally Posted by Calgarian

With Oil revenue dropping, Alberta is looking at a potential deficit of $3 billion this year. Is it time to change how the province collects taxes? maybe even have a PST? Personally if it goes to providing services and stabilizes the budget, I'm for a PST if it is like 2%, though I don't know exactly how far that would go. Thoughts?

http://www.calgaryherald.com/news/Di...905/story.html

Why are revenues be dropping? Increase the government royalties for all new projects.

[MalcolmTucker]

Originally Posted by Chadillaccc

Why are revenues be dropping? Increase the government royalties for all new projects.

The overall revenue picture isn't as bad as projected in the spring. The issue isn't the rate (around 25% of profit (it is a sliding scale)) plus 10% income tax, it is that to get projects built in the first place the revenues are back loaded until the project has a profit equal to the capital cost. Changing that this late in the game would be disastrous.

Also, since the oil sands isn't nearly as cheap to extract as other oil, when the prices dip as much as they did in the spring, to below $60 a barrel, profit is pretty tiny.

Average value calculated for bitumen for royalty purposes (Bitumen Valuation Methodology) for the 12 months of 2013:
38.12
32.46
47.82
52.17
71.27
64.20
83.91
85.44
76.14
63.38
50.67
40.27

[Doug]

Originally Posted by MalcolmTucker

The overall revenue picture isn't as bad as projected in the spring. The issue isn't the rate (around 25% of profit (it is a sliding scale)) plus 10% income tax, it is that to get projects built in the first place the revenues are back loaded until the project has a profit equal to the capital cost. Changing that this late in the game would be disastrous.

Also, since the oil sands isn't nearly as cheap to extract as other oil, when the prices dip as much as they did in the spring, to below $60 a barrel, profit is pretty tiny.

Average value calculated for bitumen for royalty purposes (Bitumen Valuation Methodology) for the 12 months of 2013:
38.12
32.46
47.82
52.17
71.27
64.20
83.91
85.44
76.14
63.38
50.67
40.27

Back loading royalties does present disincentive for oil sands developers to control costs as the Province in effect picks up part of the overrun. Of course the Province and Feds would reclaim some of that lost royalty revenue from the windfall enjoyed by the construction contractors.

[MalcolmTucker]

Originally Posted by Doug

Back loading royalties does present disincentive for oil sands developers to control costs as the Province in effect picks up part of the overrun. Of course the Province and Feds would reclaim some of that lost royalty revenue from the windfall enjoyed by the construction contractors.

Changing the system would make it much harder for companies to justify investment. We would have to adjust rates lower to match current economics for current projects, and be willing to accept less projects going forward if we didn't do the same for new projects. I am not sure how much the province's piece of the pie can grow, but changes would certainly change the size of the pie.

[Mike K.]

Instead of implementing a PST why not implement a higher gas tax? Albertans pay the lowest gas prices in the country and several cents per liter would still maintain prices well below those of BC and Sask. As mentioned elsewhere in this thread road infrastructure is a huge component of the deficit.

[Canadian Mind]

Originally Posted by Mike K.

Instead of implementing a PST why not implement a higher gas tax? Albertans pay the lowest gas prices in the country and several cents per liter would still maintain prices well below those of BC and Sask. As mentioned elsewhere in this thread road infrastructure is a huge component of the deficit.

Not happening.



PST would be applied to fuel anyway. I'd support up to 5% PST if it means docking or outright eliminating the already low income taxes.

[MalcolmTucker]

5% wouldn't get the province there unfortunately. Would be able to raise the basic personal exemption a whole heck of a lot, which would have a similar effect for most people.

[Mike K.]

So there would be more support for a tax an virtually all goods and services but no support for only a gas tax?

If you must tax then tax gas. Introducing a PST is literally the opening of a floodgate.

[WhipperSnapper]

Alberta's income tax rate is quite high. The Alberta advantage is in the no sales tax.

[MalcolmTucker]

Originally Posted by WhipperSnapper

Alberta's income tax rate is quite high. The Alberta advantage is in the no sales tax.

The basic personal exemption is quite high though, which offsets it and provides some progressiveness. BC's income tax incidence at certain income levels is lower due to the carbon tax decreases, Ontario's is lower at some incomes if you don't include health premiums.

[Canadian Mind]

Originally Posted by Mike K.

So there would be more support for a tax an virtually all goods and services but no support for only a gas tax?

If you must tax then tax gas. Introducing a PST is literally the opening of a floodgate.

Taxing just gas would piss a lot of people off. Not to mention it takes fuel to make fuel. If you jack up the gas tax in Alberta, it'll be an excuse for the price of fuel to go up everywhere else whether it makes sense economically or not. At least PST is indiscriminate, and the government would make a small fortune off of everyone buying expensive pickups and commodities out here.

Raising the exemption is what I meant. No one can afford to live in Alberta with less than 30-40K a year, so why tax it? The income tax level itself is fine for the relative brackets after that.

[Chadillaccc]

I live in Alberta (Calgary) with just under 30k a year, unfortunately. I'm reasonably comfortable though, for a 23 year old.

[Canadian Mind]

Originally Posted by Chadillaccc

I live in Alberta (Calgary) with just under 30k a year, unfortunately. I'm reasonably comfortable though, for a 23 year old.

Heh, all this time I thought you were 28.

I live farther north in the rural areas. Unfortunately some things that make city living cheaper (no vehicle, apartments, etc) aren't available too me. Generally under 50k you are doing okay if you are single, 30k is about the lower limit to survive up here unless you live with family or 3+ roomies in 1 apartment.

[geotag277]

We should never have a conversation about taxes without a conversation about the budget.

Here is Alberta's latest budget summary:

http://www.finance.alberta.ca/public...cal-Update.pdf

It looks like there was a ~1 billion surplus in bitumen royalties compared to the forecast, and an operational surplus.

Before we talk about adding taxes, we should understand the major line items on the operational budget and whether we are getting our money's worth.

Why are we in a position where we are discussing raising taxes? Even if we do add tax, how do we avoid the need to increase tax in the future? Is our current tax revenue plan sustainable, and how can we adjust our budget to make it sustainable?

I'm very leery about adding new taxes. Once new taxes are introduced, the genie is out of the bottle and won't go back in. The government will find ways to use that money regardless if it's beneficial or not.

[MalcolmTucker]

Yeah, the problem is you add up all the hobby horses some point to as wasteful spending and you're at less than $500 million a year in spending. Unless you are going to try to lower wages in education and healthcare, you are going to have a hard time balancing the budget with current revenue.

The province is trying to get a three year freeze in compensation, and has been successful with some business units. To think rollbacks are possible, in this economy, you have to be a bit loopy. Or the Wildrose.

[Doug]

Originally Posted by MalcolmTucker

The province is trying to get a three year freeze in compensation, and has been successful with some business units. To think rollbacks are possible, in this economy, you have to be a bit loopy. Or the Wildrose.

Compensation in most of the public sector merely has to be competitive with other provinces and not with Alberta's private sector. It is highly unlikely that a teacher would pack up their bags and move to to Ft. McMurray to drive a truck for higher pay. It is also highly unlikely they would move to another province if they where only making say 15% more in AB than elsewhere instead of 20% more. Perhaps an even better approach would be to prune the low performers. I've worked for many organizations that ranked everyone and cut the lowest 10-15%. It worked extraordinarily well as few of those people were missed. AB desperately needs Right to Work.