Good-bye flat tax and hello to a new progressive income tax.
At least it’s new to Alberta residents who have only lived in the province since 2001.
Albertans living in the province before that date, may remember the province had a progressive income tax structure before 2001. That is not the only thing in the 2015 Alberta budget, released on March 26, that has a nostalgic feel to it. Starting next year the Alberta government has reinstated health care premiums.
On Monday, March 30, the Barrhead Leader spoke to Maureen Kubinec, Minister of Culture and Tourism and MLA for Barrhead-Morinville-Westlock, to discuss some of the changes in this year’s budget.
The first thing Kubinec wanted to discuss was the province’s new health care levy.
She said there is some confusion on how the levy will be assessed. Most media outlets have reported that anyone making $50,000 or more will be assessed the new health care levy.
“That is $50,000 net income, meaning a person has to earn probably about $70,000 to $75,000 before it kicks in,” Kubinec said, adding that it is also a graduated scale, starting at $200 per year to a maximum of $1,000.
In February and early March, provincial MLAs were tasked with talking with their constituents to ask what suggestions they had to make up for the budgetary shortfall the government is facing due to lower than predicted commodity prices.
Kubinec said she was quite surprised that the majority were in favour of bringing back the health care levy.
In 2009, the Ed Stelmach led government did away with health care premiums. Prior to that, Albertans paid a flat rate levy of $1,056 for families and $200 for individuals.
“I heard from many, many people who said we should have never got rid of it and we need to bring it back,” she said, adding that while no one wants to pay extra taxes and fees they understand it is necessary to fund the health care system.
“I think this is a good balance,” Kubinec said. “Lower income families and the vulnerable are not going to be affected by this and it is a way we can recoup a lot of dollars.”
Kubinec said constituents had similar feelings about the government reinstating a form of the progressive income tax. For a number of decades, Alberta had a graduated tax rate based on how much a person earned. The more money a person earned, the higher the tax rate. In 2001, Alberta scrapped the system in favour of a 10 per cent flat tax.
Starting in 2016, Albertans earning $100,000 or more will see their tax rate gradually increase by half a percentage point each year until it reaches a maximum of 11.5 per cent. For those making $250,000 or more, the tax rate increases to 11 per cent in the first year, 11.5 per cent in year two and 12 per cent in year three.
“When I talked to people about our current situation, in meetings or at the grocery store, most expressed a feeling that those who make more money and can afford it should pay a little more,” she said.
When asked if the government considered increasing corporate taxes, Kubinec said they did, but decided against it. Currently Alberta’s corporate tax rate is 10 per cent.
“The research that we did and the experts we talked to told us that for every percentage point we increased the corporate tax rate it would cost 9,000 jobs,” she said, adding that the government didn’t want to lose the competitive advantage over the other provinces.
“B.C. and Saskatchewan are very close to our corporate tax structure and we didn’t want to see companies move their head offices or companies who wanted to start up somewhere in western Canada not choose Alberta,” she said.
Kubinec said the public has a misconception of what a corporation is.
“It is not just big oil companies,” she said. “It can be everyone from the McDonald’s franchise owner or an independent grocery store who is employing 20 to 40 people. We don’t want to have any impediment for anyone who wants to provide jobs to other people.”
As for the other increases, such as the what are commonly called the sin tax on alcohol and cigarettes, Kubinec believes they are modest.
“When you break it down, it works out to seven cents on a bottle of beer and 16 cents on a bottle of wine,” she said.
Kubinec also said the four cent increase on gasoline, along with other government fees, such as getting a wedding license or reserving a camping site, were long overdue.
“The gasoline tax hasn’t been increased since 1991 and a lot of the other service fees the government charges haven’t gone up in over a decade,” she said, adding that the province is moving towards more of a cost recovery model.
At the same time as increasing revenue, Kubinec said the government is trying to find more efficiencies.
In February, Premier Jim Prentice told Albertans there would be a nine per cent cut in government programs in the 2015 budget.
“I think there was a bit of confusion. A lot of people thought the cuts would be across the board,” she said, adding that it varied from department to department and when all the cuts are totalled it will be closer to five per cent.
For instance, Kubinec said Human Resources actually received a small increase.
“We made a commitment that we would not take this off the backs of the most vulnerable Albertans. People like the aged recipients or PDD (Persons with Developmental Disabilities) clients.”
In her own department, Kubinec said the cut was 3.5 per cent, adding that it wasn’t straight across the board.
“Where we made commitments, we honoured them,” she said, adding that two programs were cut altogether. “You can’t shave a program too thin, sometimes it is just better to eliminate a program.”
She also said when ever possible, the cuts were made through attrition, noting that in her department 17 positions were eliminated in this fashion.
Kubinec realizes not everyone is happy with the budget and that the next few years may be challenging, but when it is over Alberta will be stronger because of the issues that are addressed in the budget.
“We have a 10 year plan, with the next three years being the most difficult, but at the end of it we are going to get off the price of oil rollercoaster and on to a more stable source of revenue.”
