Prentice government must not neglect prudent budget cuts

Hopefully the readers of the Sylvan Lake News understand that Mark Milke, your guest editorial of the past couple of weeks

Dear Editor,

Hopefully the readers of the Sylvan Lake News understand that Mark Milke, your guest editorial of the past couple of weeks, is a member of the Fraser Institute, which represents a right-of-center point of view on economic and political issues.

At least 90 per cent of the funding for this think tank comes from corporations and business-oriented foundations. Exxon Mobil is a contributor, as well as the American billionaire Kosh brothers who donated $500,000 between 2008 and 2010. The Koshes support the conservative views of the Republican Party and lobby against universal health care and climate change legislation.

Milke argues that the revenue shortfall can largely be solved by staff cuts and wage cuts to healthcare, education and social service workers. He neglected to mention that Alberta’s 42,000 teachers already took a three-year wage freeze in 2013. Nor did Milke mention that private sector salaries in Alberta are 26 per cent higher than the Canadian average while public sector salaries are only 12 per cent higher (according to the Alberta government). He did not mention that Alberta’s tax advantage compared to other provinces costs Albertans between $11 billion and $23 billion, depending on the province, respectively, B.C. and P.E.I. (Alberta Budget, 2012, page 97).

The Fraser Institute in a 2002 study did say that a sales tax causes the least “damage” to an economy. Per dollar collected, the institute said corporation taxes cause $1.55 in damage, income taxes $0.56, and sales taxes $0.17. Milke is quoted as saying “Pure consumption taxes such as the GST make more sense by design than business and corporation taxes”. Clearly, he makes a case for a sales tax over other forms of taxation. The regressive nature of the sales tax could be mitigated by rebates and exemptions similar to the GST. Harmonization with the GST would make collection very  efficient.

Changes to Alberta’s low personal income taxes, low corporation taxes, low fuel taxes, no capital tax, no payroll tax, no healthcare premiums, and low carbon tax could provide more revenue for the government. Eliminating the 10 per cent flat tax in favour of a progressive tax could raise at least $2 billion. This would be a fairer tax for lower and middle income Albertans. The income disparity between Albertans is the highest in Canada. The International Monetary Fund claims that taxing the rich is good for an economy. Income inequality is bad for an economy. Progressive taxation would help reduce this inequality. Combined with a sales tax this would give Alberta a dependable and fair source of revenue. Alberta is one of the few governments in the world that has a flat tax and no sales tax.

Milke is correct in pointing out that the poor in Alberta earning $17,787 or less pay no tax while British Columbians start paying tax at $9,938. But the B.C. tax rate starts at 5.06 per cent rising to 7.7 per cent at $37,869 to $75,740. At $37,869 an Albertan would pay $2,008 in tax. A taxpayer in B.C. would pay $1,413. British Columbia has the lowest personal income tax rate in Canada. So much for Milke’s argument that low income earners pay less tax in Alberta. In his article, Milke uses a $50,000 income as an example. An Albertan would pay $3,221 in taxes, a British Columbian $2,347. At a 10 per cent flat tax rate a low income Albertan will  be paying more tax than in British Columbia.

Clearly, the Alberta government has room to raise billions of dollars and provide Albertans with the infrastructure, industrial diversification, services, health care and education that are necessary in a progressive society. Albertans would still have the lowest taxes in Canada. The Prentice government must not neglect prudent budget cuts along with new revenue sources.

Ray Kowalski,

Sylvan Lake

 

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