Braid: Tax cut idea hints at UCP return to election politics as usual – Calgary Herald

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Fat trial balloons are suddenly floating high, just before Christmas and the start of a pre-election year.

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Premier Jason Kenney says the government is considering a return to a flat provincial income tax rate for everyone, most likely at 10 per cent, the rate that applied in Alberta from 2001 to 2015.

That system exempted the lowest earners from any tax, while the highest paid a pittance in proportion to their incomes.

Among conservatives, o ne argument for a flat tax was rarely mentioned aloud. Wealthy people will often move to a flat tax jurisdiction for the obvious reason.

They are expected to spend freely and use their wealth to generate economic activity at home.

Kenney came close to acknowledging this when he told the National Post in a year-end interview: “I think it was responsible for a huge amount of tax shifting to Alberta as people moved here to benefit …”

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It’s not clear there was ever a general economic benefit to the flat-tax era, but those were great years for the exotic car dealerships. You were as likely to get sideswiped by a Maserati as a Honda.

NDP Leader Rachel Notley had a quick response Friday.

“Going backwards to a flat tax would make working Alberta families pay even more every month so that the super-rich can get even richer,” she said.

“Under the UCP, Alberta families are already paying more income tax, more property tax, more school fees, more tuition, more interest on student debt, more camping fees, more for utilities and more for car insurance. A UCP flat tax would make life even more expensive for Albertans.”

And yet, the flat tax never hurt Alberta governments politically. The Progressive Conservatives ruled in their usual splendour during the whole period, winning four straight elections with ease.

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Then came PC Premier Jim Prentice, one of the very few leaders to be completely honest about Alberta’s finances in an election campaign.

In 2015 he ran on a budget that brought in progressive income tax to deal with weakening finances. The oil price crash was just sinking in.

Prentice also imposed hikes to more than 50 other fees and charges.

He said Albertans should think hard about finances “and look in the mirror” to see who’s responsible.

Famously, he asserted that Alberta “is not an NDP province.”

Then it was. Prentice’s unique tactic — seeking a mandate based on fiscal frankness — completely backfired.

He ended up scaring Albertans more than the NDP did. So ended a regime that had lasted 43 years, impaled on a spasm of honesty.

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Notley’s NDP, which has never believed in the flat tax, delightedly kept the core of what Prentice created. (In the cruellest twist of all, he died in a plane crash in October 2016.)

The progressive tax was designed to raise more money, which the Treasury desperately needed.

Today, the need is more serious still, but Kenney suggests abolishing a system that raises more money.

The UCP itself has kept the progressive tax for nearly three years, preaching restraint and spending cuts in all that time.

Taxes have also been de-indexed, effectively increasing what Albertans pay. Only corporate tax rates have been cut.

But as we edge closer to the election in the spring of 2023, the UCP won’t repeat the Prentice political mistake.

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The current provincial tax rate is 10 per cent up to earnings of $131,220; 12 per cent from $131,220.01 to $157,464; 13 per cent from $157,464.01 to $209,952; and 14 per cent from $209,952.01 up to $314,928.

Above $314,928, the provincial tax maxes out at 15 per cent.

The marginal rate for combined provincial and federal tax is 36 per cent. It’s clear who’s hauling off the most cash.

But a couple of points shaved off income tax would not be scorned by the middle-income earners who pay most of it.

Kenney surely knows that. He’d love to manoeuvre the NDP into opposing a tax cut. Politics as usual tends to work around here.

Don Braid’s column appears regularly in the Calgary Herald.

Twitter: @DonBraid

Facebook: Don Braid Politics