A way forward for “Political Suicide Tax” in Alberta

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Everywhere in Canada PST stands for provincial sales tax—except for in Alberta. Here it is better known as the Political Suicide Tax. For decades it has been such a taboo topic that public discourse around it is severely lacking.

With a provincial election just six months away, Ascah wants to change that. He recently edited A Sales Tax for Alberta: Why and How, which brings together some of the province’s leading voices to weigh in on the topic.

“The purpose of the book is to spur a wider debate of the fiscal situation of the province and how we might go about ameliorating some of the extremes that we see in our boom-and-bust economy,” says Ascah, a research fellow with The Parkland Institute.

Historically, Alberta has gotten away without a provincial sales tax thanks to its resource-rich economy. This has been the case since at least the 1920s, starting with grain, then moving to oil, natural gas and finally to bitumen, which currently accounts for 30 per cent of provincial revenue, excluding federal transfers.

Single-resource economies come with inevitable ups-and-downs. In the past year alone, Alberta’s finances have gone from a projected $18.2 billion deficit to a $3.9 billion surplus due to surging bitumen royalties as oil prices have risen dramatically

“Part of the solution to getting us off the rollercoaster is shifting our attention away from energy exclusively to other sources of wealth that can be exploited,” says Ascah.

“There are different arrows in the quiver of a finance minister. One of them is a sales tax … Roughly 1 per cent of sales tax is equivalent to about $1 billion coming into the provincial coffers.”

Despite the potential payoff, any past attempt to raise or introduce new taxes historically has been met with fierce resistance in the province. Take, for instance, when the new Social Credit government tried to implement a two per cent provincial sales tax back in 1936. The new tax proved to be so unpopular it only lasted about a year and a half. Shortly after it was introduced, the province defaulted on its debt, which lasted nearly a decade. Albertans have been against the tax ever since.

Ascah is the first to admit that there are many valid critiques of a sales tax, including that it may scare away business or that the tax is regressive, where people with lower incomes pay a higher proportion of their incomes than others. These concerns, however, all can be addressed by implementing the tax in a strategic and concerted manner. The biggest obstacle remains Alberta’s political culture, which is based in a myth of Alberta exceptionalism.

“Albertans view the province as a land of opportunity, where they see themselves as ‘haves’ not
‘have-nots’. There is a spirit of individualism and a long history of resenting government interventions,” says Ascah.

A Sales Tax for Alberta provides a detailed overview of this unique economic and political landscape, as well as the historical spending and revenue policies that have led to the province’s current economic dilemma. Beyond making the case for why PST should be embraced in Alberta, the book’s unique contribution to the public conversation lies in its emphasis on how this could be done.

“Alberta’s path to a new fiscal future requires stability in provincial finances, a clear transition plan to reduce its reliance on fossil fuels, and massive investments in public education about, and engagement on, the existential issues facing Alberta today,” writes Ascah in his introduction.

“Sales tax is not a panacea. It’s only part of a larger solution that looks at saving, spending and revenue.”