Alberta
Prove to us you’re listening! Alberta’s Finance Minister made these 5 requests to his Federal counterpart
From the Province of Alberta
Discussion with Minister Morneau: Minister Toews
President of Treasury Board and Minister of Finance Travis Toews issued the following statement on his discussion with federal Finance Minister Bill Morneau:
“Today, I was pleased to speak with federal Finance Minister Bill Morneau. We discussed the frustration Albertans are feeling over federal policies that are failing our province and the urgent need for action to support the Alberta economy.
“In particular, I asked Minister Morneau to:
“Provide Alberta an equalization rebate to address the problem that federal support for a hurting Alberta economy is arbitrarily capped, while transfer payments out of Alberta to other provinces continue without a cap. This can be solved by an immediate retroactive payment of $1.72 billion to cover what we should have received if the Fiscal Stabilization Program (FSP) were not capped for 2015-16 and 2016-17, plus the outstanding $251 million we are owed under the FSP for the year 2016-17.
“Respect provincial jurisdiction by removing natural resources from the calculation of equalization entitlements, and end the automatic escalation of the floor for equalization to ensure Albertans aren’t paying for ever-increasing equalization while struggling through the deepest recession in a generation.
“Address the inequity caused by the fall 2018 decision to favour manufacturing capital cost allowances over the energy industry when the energy industry was in the depths of an economic crisis. This decision irrationally favoured those who build vehicles that consume oil over the welfare of Albertans working in the energy industry. Providing the energy industry with an equal 100 per cent capital cost allowance would put them on even footing with manufacturers and American competitors.
“Follow through on the platform commitment to give ‘energy workers…training, support and new opportunities needed to succeed in the clean economy’ by investing in green jobs for well reclamation in Alberta.
“And finally, I reiterated that Minister Morneau needs to end the mortgage stress tests needlessly imposed on Albertans because of challenges in other parts of the country.
“Immediate action on these items would back up the words we heard from Prime Minister Trudeau on election night, that he has heard our frustration and wants to be there to support us. I look forward to working with Mr. Morneau on these policies, because a strong Alberta is good for Canada, and a strong Alberta economy will support jobs and growth across Canada.”
Alberta
Alberta government should eliminate corporate welfare to generate benefits for Albertans
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
Alberta
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