Alberta
Ottawa will provide “actuarial analysis” of Alberta’s CPP assets
Federal-provincial-territorial meeting on pensions: Minister HornerPresident of Treasury Board and Minister of Finance Nate Horner issued the following statement following the Nov. 3 federal-provincial- territorial (FPT) meeting of finance ministers: “This morning, I was able to participate in a federal-provincial-territorial (FPT) discussion with the country’s finance ministers to discuss pensions. “To be clear, Alberta is committed to making sure that any potential creation of an Alberta Pension Plan will not leave our fellow Canadians without a stable pension and its associated benefits. “For the past several weeks, Alberta has been having an open discussion about the possibility of establishing an Alberta Pension Plan that will benefit our seniors and workers. This will only happen if Albertans vote to do so in a referendum. “To help frame the conversation, we commissioned a report by an independent, expert actuary, Lifeworks (formerly known as Morneau-Shepell). The report provides details as to the asset transfer value that Alberta could expect to receive according to the withdrawal formula that was voluntarily agreed to by all Canadian provinces decades ago when the Canada Pension Plan (CPP) was established, and which was once again updated, with agreement by the provinces, in 1997. “We are encouraged to hear the federal government commit to providing a comprehensive actuarial analysis of the asset transfer value Alberta would be entitled to receive should it withdraw from the CPP. We’ve been asking for this for several weeks. It is critical for the ongoing discussion of an Alberta Pension Plan that we have a firm asset transfer number (and the potential benefit increases to Albertans stemming from that transfer amount) upon which Albertans can make an informed decision. “There are other critical conversations happening across the country, including the federal government’s changes to the carbon tax. We have all heard multiple premiers raise concerns about the federal government’s recent actions on carbon tax carve outs for some provinces, and several finance ministers again raised the urgency of this issue during our call, including me. “Canadians remain in the midst of an affordability crisis and the carbon tax continues to hurt us all. While a number of us had hoped to also address this issue during the call, I am very eager to have a fulsome conversation at our next FPT, scheduled for Dec. 14-15. At that time, I hope we can discuss cutting the carbon tax so Albertans and Canadians will no longer be penalized according to where they live, and which members of Parliament they elect.” |
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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