The Provincial government will be digging into Albertan’s wallets in an effort to bail itself out of a $7 billion revenue shortfall this year.
The “bad news budget” was delivered on March 26, and will see its first tax increases in years in addition to running a $5 billion deficit, the largest the province has ever seen.
Finance Minister Robin Campbell said the changes were necessary to make it through the next year.
“We've been lucky in recent years that resource revenues have provided a bonus that has allowed us to pay the bills,” he said. “As many Albertan's who work in the oil and gas sector now know, there will be no bonus this year. And for some there may not even be a weekly paycheque. We are now faced with a lifestyle and household expenses we can no longer afford.”
Despite stressing that Alberta would still retain the lowest taxes in the country, the flat tax structure was eliminated. Previously, all Albertans paid a 10 per cent income tax, but beginning Jan. 1, 2016 Albertans who make more than $100,000 will bump up to 10.5 per cent, and those bringing in more than $250,000 will pay 11 per cent.
The two new tax brackets will affect 330,000 residents, bringing in an additional $330 million in revenue for next year.
The government will also be holding the line on spending for the next three years, and ended up cutting $370 million from the health budget. Despite that, Campbell announced that the province will be reintroducing health premiums, but the payments will vary greatly from what Albertans were used to.
“Let me be clear this is not the system we have seen in the past, which was regressive and had sizable administrative cost,” he said. “The new health care contribution levy will have a progressive structure, will be based on the individuals ability to pay, and will ensure that we're not causing undue hardship for vulnerable Albertans.”
The new fee will only be in place for those bringing in more than $50,000, and will be paid through income tax with a cap of $1,000.
Highwood MLA Danielle Smith said while healthcare premiums were not a popular option in the past, she believes the new system is a more fair model, and will protect low income residents and small businesses.
“What happened before is most of the health premiums were actually paid by businesses so it was a big hit on small businesses as well as the government… we don't want to take money out of one pocket just to put it in the other,” she said. “And low income individuals will not have to pay it at all, and then modest income people will only pay a portion of it. So, it really is based on your ability to pay, which I think every good tax system should be based on.”
After the announcement on Thursday afternoon, many Albertans scrambled to stock up on items that were announced to have taxes increased, including booze, cigarettes and fuel, which all went up when the clock midnight on budget day.
Fuel is now four cents per litre more expensive, tobacco products went up $5 per carton, and liquor will see an average increase of 16 cents for bottles of wine and hard liquor, with a case of 12 beer going up by 90 cents.
“If you want to avoid the tax you don't have to buy that extra bottle of wine or that case of beer,” Smith said. “To me, looking at those charges I think that's relatively a small price to pay to be able to get additional revenues in.”
In terms of what Albertan’s were hoping to see fill the revenue gap, 69 per cent of the 40,000 Albertans who responded to a pre-budget survey said they’d like to see corporate taxes, which ended up being one of the only areas not to see an increase. Smith said that decision was made to help strengthen the Alberta economy.
“We can’t just keep on living off resource revenues, nor can we expect somebody else to pay, and corporations and businesses are suffering too with the downturn in the economy,” Smith said. “And every time you increase taxes on that sector you're going to end up losing jobs. We want to make sure that we maintain as many jobs as we possibly can during these next two years of turmoil.”
Despite seeing substantial tax increases and running a record deficit, Smith said she’s overall pleased with the way the government has handled the financial situation, and is optimistic that the 10-year-financial plan will help get Alberta off of the “resource revenue rollercoaster.”
“The problem is when you inherit a big mess, it takes a few years to figure it out and I’m just delighted that we've got a premier with the resolve to do it,” she said. “And do it in a way that preserves the investment in infrastructure so that we don't fall behind, ensures low income individuals are taken care of, and only those who are higher income and have the ability to shoulder the extra cost are doing so.”
