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Opinion

UCP Tax Cut Hits the Target but Misses the Mark

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Opinion by Cory G. Litzenberger

Well for fear of being lynched, let me talk about how I think the UCP’s Job Creation Tax Cut may be (partially) incorrect.

While I applaud politicians for laying out their plans in advance of an election, my fear is that the plan is too slow in implementation and cuts too far.

I think a tax cut needs to be moderate and quick – not slow and deep.

Here are my thoughts for various tax changes we need to do in Alberta:

General Corporate Income Tax Rate:

Instead of cutting by 1% per year over 4 years, bring it back by 2% to 10% from 12% in the first year and keep it there.

By delaying the cut as the UCP currently proposes, it could reduce the impact it will have on the economy as the change to the bottom line will not be impacted enough for a corporation to make larger investment until year two or three of the plan.

Quicker action by government will result in quicker action by business, resulting in quicker action in the economy and job creation.

10% also still makes us the lowest jurisdiction in Canada.

Personal Income Tax change to 3 brackets:

– 8% for first $50k
– 10% for the next $100k
– 12% for over $150k

This reduction from 10% on the first $50,000 saves roughly $600 in personal income tax (after factoring in the basic personal tax credit) for every individual making more than $50,000 a year.

It also saves 2% for those making under $50,000 currently.

This is an important cut in order to reward people that call Alberta home, as you will see below.

A rich person paying 12% in Alberta on their personal income is better than them paying 0% because they live somewhere else.

Harmonized Sales Tax (HST) 5%

Yes, I think we need to remove the inflationary and regressive carbon tax as it is way too high of a burden and causes a ripple effect in inflationary pricing how it was implemented.

However, I suggest we implement a 5% HST (which is a flow-through for businesses and does not have the same impact on pricing).

Now, hear me out before you break out the yellow vest!

Currently, anyone visiting our province as either a tourist or a temporary worker from another province are using our infrastructure like roads, water, and yes, even hospital emergency rooms.

When these non-Alberta residents file their personal tax returns, they file it based on their home province of residence as of December 31. Since most of them don’t have a permanent residence in Alberta, this results is them paying income taxes to other provinces, while using our infrastructure for free.

Other provincial residents not paying any taxes in Alberta while here unfairly puts the cost on all of us that live here.

If we implemented an HST similar to the GST program, low income households would still receive credit back (just like GST credit) to offset most (if not all) of any HST they pay.

The $600 in income tax savings we mentioned above for everyone else, is equivalent to $12,000 of taxable supplies consumed ($24,000 in a double income household where they each make over $50,000 of income).

Don’t forget that basic grocery and shelter do not have sales taxes, and if Andrew Scheer gets elected, neither will basic home heating.(https://twitter.com/andrewscheer/status/854364648388182016)

This income tax reduction of $600 to $1,200 would offset much of the sales tax you would pay, but would now start to charge non-Alberta resident visitors and workers.

The reason for an HST instead of a PST is that currently, an HST is required to be charged by all GST registrants across Canada. If you are a GST registrant, you are automatically an HST registrant.

For example, in my office in Red Deer, I have to charge my Ontario customers HST and send it in to the government even though my business is in Alberta.

An HST could reduce the potential for tax leakage out of our province by funneling it back to Alberta because of other retailers in other provinces requiring to charge it on things purchased outside of, or shipped to, Alberta.

Results

– a competitive corporate tax rate to attract investment and do it quicker than the original UCP plan;
– low personal income tax to attract wealthy individuals (and their tax residency) back to Alberta to make it their place of residence, again, quickly;
– removal of the inflationary carbon tax;
– insertion of a relatively low cost HST so that we can get back some of that transfer payment money from the residents of other provinces.

In Summary

– Reduce Corporate moderately and quickly.
– Reduce Individual moderately and quickly.
– Remove Carbon tax.
– Implement an HST.

I know that the slight mention of a sales tax in Alberta makes the hair on the back of your neck stand straight up, and for many conservative politicians, they would resign before suggesting it. However, even as a fiscal-conservative tax accountant like myself, I believe that if it is implemented properly with tax reductions elsewhere, it can add to the bottom line for the province.

I also think it can do so without being a burden to those that live here by taxing those that don’t.
———
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html

Opinion

Red Deer’s population grew by 195 since 2015

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2019 RED DEER MUNICIPAL CENSUS = 101,002

2016 RED DEER MUNICIPAL CENSUS= 99,832

2015 RED DEER MUNICIPAL CENSUS= 100,807

In the four years since 2015 Red Deer has grown by 195 residents or less than 0.2% in 4 years.

Timberlands grew from 1834 residents in 2015 to 3038 residents in 2019 or 1204 residents, for a growth of about 66% so where did we lose all our residents? Let us look at the neighbourhoods north of the river.

Residents living north of the river in 2015=32,005, 2016=31,228 and finally 2019= 30,576 for a total decline of 1,429 residents.

Let us break it down;

……YEAR………..2019.…………….2016.……………..2015

Kentwood-………….4235.……………4267.……………..4299

Glendale………..….4284.……………4288.……………..4430

Normandeau……….3275.……………3530.……………..3603

Pines……………..…1725.……………..1718.……………..1851

Highland Green……3896.…………….3920.……………4065

Oriole Park…………5200.…………..…5244.…………….5300

Riverside Meadows..3423.…………….3686.…………….3810

Fairview…………….733.………………710.……………..761

Johnstone…………..3805.……………..3865.…………….3886

Total……………….30,576.…………31,228.……………32,005

So it looks like we just relocated residents from north of the river to new subdivisions like Timberlands. In an age where we are trying to limit our footprint Red Deer expanded our footprint faster than our population growth demanded. New neighbourhoods require infrastructure ($), schools ($), sewers ($), water ($), roads ($), transit ($) etc.

30,000 plus people live north of the river down from 32,000 plus 4 years ago, but still a large community. I wrote about this very topic in 2016 and was given the brush off by many in city hall. One city councillor suggested that I have more children to populate the north side.

The issue was not taken seriously in 2016 and again in 2019.

I wrote that Lethbridge would overtake us and become the 3rd largest city in Alberta, and they did.

I dove deeper to see what was happening in local neighbourhoods and found that the north side of the river is being decimated and annexing or new neighbourhoods are fuelling our growth.

People keep telling me it is the provincial economy that is preventing growth. Lacombe grew by 7% last year, Blackfalds has seen record growth, Penhold, Sylvan Lake and the county grew in the same province, so I discount that theory.

My thinking is perhaps more closer to home. The other communities invested in their residents. New recreation complexes that required per capita investments that dwarf Red Deer’s by huge margins, up to 100s of percents.

Red Deer has neglected the residents north of the river. For every dollar they spend north of the river they spend 20 south of the river. No high school north of the river with 4 current and 2 planned, south of the river.

If the city could just bring their culture from 1980 to 2020 then maybe we will not lose so many residents from north of the river. It is time to stop neglecting the residents living north of the river.

Start investing in substantial recreational facilities north of the river after years of building so many south of the river. Build the next aquatic centre north of the river, build the next school, especially high school north of the river.

For the whole city the powers that be need to wake up, and invest in it’s residents. It has been said that insanity is doing the same thing over and over again and expecting different results. It is time to wake up, what the powers that be have been doing has not worked, the census proves it, it is time to do things differently.

No I am not having more children, councillor.

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Opinion

Politicians focus too much on the wallets of the few.

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We welcome opinions from our readers like this one from Garfield Marks of Red Deer, AB.

According to the Ethics Commissioner, Trudeau broke ethical guidelines on behalf of a big corporate entity, SNC-Lavalin, and as expected, it appears, everyone is calling for his resignation. I am confused, but hasn’t almost every politician of a major political party, for the last few decades, been advocating breaks for big corporations and the top 1%.

Didn’t Alberta elect a Premier who had to pay an ethics violation fine when he was a federal cabinet minister? Does he not lead a party who had issues with electoral fraud, kamikaze candidate and members issued $75,000 in fines by the ethics commissioner, due to actions during their leadership race?

Was it not a conservative government that supposedly just gave a $4.5 billion tax break to businesses? Was it not a conservative government that was supposedly lowering taxes for the top 1%? Was it not a conservative government(s) that was cutting services to everyone else to pay for these tax breaks?

Here in Alberta was there not lots of promises of jobs to rationalize billions in tax breaks for corporations only to find out that Alberta then subsequently lost 14,000 jobs in July alone?

I am not saying that Trudeau’s actions pressuring the Attorney General to give a deal to a big company is okay, but don’t they all do special deals for big corporations? Don’t we as tax payers subsidize the oil industry, cow tail to unions, pay homage to gun manufacturers, serve the auto industry, and placate the wealthy? The average voter just pays for them.

My wallet sure feels those political fingers. My costs keep going up, while my income hasn’t kept pace.

My mind has tuned out the politicians, and their desire to woo the rich and big corporations, and my heart is focused on the future, and my family.

Scientists and engineers have made great discoveries and given me some great things like cars, computers, cell phones and medical break-throughs but these same non-partisan intellectuals have also made huge unsettling discoveries, and given me causes for concern.

Issues like climate change, reminiscent of second hand smoke, are concerns to our health and our lives but are not given the same level of regard as tax breaks for the big corporations.

Second hand smoke was a major health care cost but tax breaks for cigarette companies and tobacco growers were the demands.

There is an election this fall and here in my riding there is no contest, as the conservatives will win, then become a seat warmer no one hears about, till the next election. My concerns will be ignored, my wallet will get thinner to placate the more well to do.

I do think it is about time to move on from focusing on the wallets of the few and focus on the health of the whole community. The person or party that can convince me that their focus is on the whole, for the future and not on big corporations and the wealthiest in a realistic manner, will get my support and vote.

Will my wallet survive the next election? I hope so, but I cannot be certain. I am worried we might get a Trump-like Prime Minister out of protest and the climate crisis will be pushed back and my wallet will be front and centre for political fingers for another few decades.

Is there another option?

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august, 2019

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