2 The Political Suicide Tax?

A Complicated Relationship

A sales tax makes good sense, both economically and fiscally. Finance ministers know this. So do economists. Just about every economist who has studied the issue in Alberta has come to the conclusion that it’s time the province introduced a PST. Groups as disparate as the Calgary Chamber of Commerce and the Parkland Institute have argued in favour of a PST. Jack Mintz (2011), founding director of the University of Calgary’s School of Public Policy, delivered a lecture at the University of Alberta in which he advocated for a PST. Even the Premier’s Council for Economic Strategy (2011) argued the province must stop using revenue from oil and natural gas to fund its day-to-day operations, and should cover those expenses through a revamped tax system including, potentially, a sales tax. Yet in Alberta, PST has come to mean “political suicide tax.” The province even has a law in place—the Alberta Taxpayer Protection Act (SA 1995, c. A-37.8)—that dictates that the government must hold a referendum before introducing a sales tax. Why, then, do Alberta politicians have such a complicated relationship with PST?

Although the tax makes perfect sense in the ivory tower of academia, in the political arena the notion is—to put it mildly—problematic. Alberta politicians realize that adopting a consumption tax would be about as popular with voters as importing Norwegian rats into Alberta (a proudly rat-free province). What’s more, the moment a government raises the notion of a PST, even in the most cautious terms, it is assailed by its opposition. As a result, Alberta politicians have, by and large, taken a simplistic, hands-off approach to even talking about a sales tax. This despite the fact that, if a government could ever survive its implementation, a sales tax might solve the provincial deficit and once and for all help smooth out the resource revenue rollercoaster ride that is Alberta’s budgeting process. A sales tax must be to a finance minister what a neighbour’s unsupervised swimming pool is to an eight-year-old child: an attractive nuisance, seductive but potentially fatal. Finance ministers can look but they aren’t allowed to touch.

After she was elected premier in 2015, NDP leader Rachel Notley seemed willing, for a time, to buck this trend. In 2016, she dipped a toe into the PST swimming pool by saying she might be willing to talk about it in the 2019 election campaign. “We would have to in some fashion have a pretty upfront conversation with Albertans about the fiscal framework,” said Notley. “I don’t think, given the history of this province, that it would be respectful to voters to not talk to them about the issue if it was something that we were seriously looking at. I think that only makes sense” (quoted in Thomson 2016). However, by December 2018, after facing fierce opposition to the province’s new carbon tax, Notley began to sound more like her Progressive Conservative forebears. Asked in a television interview with CBC News about her previous musings on a PST, Notley (2018) was definitive. “No, no, no—I haven’t been talking about that,” she said. “Now is not the time to bring something like that in.”

Despite all this, some political parties in Alberta have, over the years, embraced the notion of a PST. In 2017, for example, Greg Clark, when he was still leader of the Alberta Party, said that “all options should be on the table” to increase government revenue, including looking at a sales tax. “I’m absolutely open to considering that,” he said. “We can no longer afford to avoid difficult conversations or to rule anything out, even if it’s politically unpopular” (quoted in Thomson 2017). Clark raised the notion of a dreaded PST for its shock value, if nothing else. He wanted to attract attention to the often-overlooked Alberta Party, apparently subscribing to Oscar Wilde’s oft-cited dictum: “There is only one thing in the world worse than being talked about, and that is not being talked about” (Wilde [1890] 2015, 2).

Provincial Survival Tax

After winning the 2019 provincial election and becoming premier of a UCP government, Jason Kenney offered a full-throated opposition to a PST, borrowing a mantra from the late former premier Ralph Klein: “We don’t have a revenue problem, we have a spending problem.” Like the many Conservative leaders before him, Kenney met the government’s volatile revenue streams with cuts, cuts, and more cuts.

Then, in 2020, the COVID-19 pandemic began. The price of oil dropped so low as to go negative for a time. The province’s deficit ballooned to a record $24 billion and the accumulated debt skyrocketed toward a record $100 billion. As Kenney pointed out repeatedly, Alberta was facing an economic crisis even greater than the Great Depression (see, e.g., “Premiers Seeking $70B” 2020). As it turns out, fiscal and economic distress can do funny things to hard-hitting Conservatives. The pressure on Kenney was so great it appeared to put a crack, however small, in his anti-PST armour. When asked point-blank whether it was time to introduce a PST, Kenney (2020) replied, predictably, “I do not believe that the right response in the midst of that economic crisis is to impose a new tax.” But then he added a caveat: “Now, when we get through all of this, I’ve said to Albertans that there will be a fiscal reckoning. Our government had committed in our [election] platform to have a tax reform panel at some point during our mandate. So that will be a debate that Albertans will have in the future.” For Kenney, any decision on a PST would have to be made by referendum, as per the Alberta Taxpayer Protection Act—but by admitting that such referendum was a possibility for the future, Kenney stopped short of slamming the door shut to a PST. In fact, it seems he may have even left it open a crack.

Some Conservatives—and stalwart ones at that—appear to agree with Kenney; a few have even advocated that the door be knocked down entirely. In an op-ed column during late summer 2020, former Wildrose Party leader Danielle Smith startled observers by calling for a fiscal overhaul of the government’s finances. Unsurprisingly, she supported cuts to health care and education. Surprisingly—nay, astoundingly—she also advocated for a PST. “Yes, a provincial sales tax,” she wrote. “Let’s not kid ourselves about that, either” (Smith 2020).

The year 2020, with its pandemic and seemingly endless litany of bad news, sent an economic shockwave through Alberta that arguably rattled the province more than any other jurisdiction in Canada. In this economic climate, to label a PST as inherent political suicide is to take a decidedly defeatist point of view. As Kenney’s and Smith’s comments seem to suggest, political opinion is, once again, edging ever closer to publicly contemplating the merits of such a tax. What we need now is for the voting public to do the same. They could, for instance, mull over the fact that an Albertan PST comparable to that of, say, British Columbia, could generate, as Snelgrove calculated, more than $7 billion a year for Alberta—a detail that is available for all to see in the UCP government’s own annual budget documents. The thing is, it is used there as a rhetorical tool to emphasize how fortunate Albertans are to live in a province with the lowest tax system in the country: $7 billion fortunate. Looked at from a different perspective, though, and the picture is less rosy. Without a PST, Alberta is passing up $7 billion a year in stable, predictable revenue. This revenue could solve many of the province’s fiscal problems, not least among them avoiding fiscal catastrophe in tough economic times. The economic upheaval of 2020 has demonstrated the shortcomings of Alberta’s current fiscal policy. In 2020, the federal government sent more money in transfers to Alberta than it collected from the province in taxes—the first time this has happened since the mid-1960s. More than this, Alberta saw the greatest per capita increase in federal spending of any province in the country (Dawson 2021).

Clearly, when the global economy goes haywire, resource revenues alone can’t keep the province afloat. Perhaps now Alberta’s political leaders will at last begin to look upon the PST as a life raft—not a “political suicide tax,” but a “provincial survival tax.”

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