Alberta UCP introduces bill promising protection against tax hikes

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Alberta’s UCP government introduced legislation Monday that promises to handcuff future governments from hiking personal and business taxes without a vote.

Proposed changes to the Alberta Taxpayer Protection Act, if passed, will require the government to first get majority approval in a referendum before changing tax rates, reducing personal income tax bracket thresholds, or lowering basic personal and spousal credit amounts.

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Premier Danielle Smith said at a news conference before introducing the bill that it’s about providing certainty to Albertans.

“We’re not pursuing this course in the hope that it translates into growth, rather we’re doing it because we know it will,” said Smith, pointing also to her government’s guardrails against increasing spending above population growth and inflation.

The legislation fulfills a campaign pledge by the UCP but the tax cuts promised by Smith during May’s general election are expected later.

However, nothing in Bill 1: The Taxpayer Protection Amendment Act would prevent the government from de-indexing personal tax rates, a move that could add hundreds of millions of dollars in revenue to public coffers.

In 2019, the UCP did exactly this under former premier Jason Kenney — meaning personal tax levels were no longer tied to rises in inflation. Following years of political pressure and criticism that it was a backdoor tax hike, Kenney reindexed taxes in August 2022 as the province’s budget had moved back into surplus territory.

Smith said her government was keeping the option to de-index taxes on the table in order to be flexible, noting that in the past the move came in the midst of budget deficits.

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“The government of the time had to make the decision to allow for a period of time for the rates to stay where they were, so I think that that is a tool in extreme circumstances, ” she said.

The proposed bill also does nothing to prevent the government from creating brand new targeted taxes or fees, as has been done in the past with things like cigarettes, vaping products, and short-term rentals.

Shauna Feth, president and CEO of the Alberta Chambers of Commerce, said at the government news conference the legislation will help create certainty for businesses.

The legislation would expand on the Alberta Taxpayer Protection Act, which already protects against the creation of a provincial sales tax without a vote, but such a law could be repealed by future governments.

‘A gimmick’: Notley

Speaking to reporters after the throne speech, NDP Leader Rachel Notley called the government’s first bill of the session a “gimmick.”

“It chains Albertans to the revenue royalty rollercoaster, because it makes it impossible to confront and adapt to changing economic conditions,” said Notley, adding that Albertans have already had to face higher housing costs, power bills, insurance, tuition, and property taxes under the UCP.

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Albertan businesses already pay the lowest corporate tax rate in the country at eight per cent. It is 30 per cent lower than the next lowest jurisdiction.

Still, the government estimates that its corporate income tax revenue in 2022-23 was a record-high $8.2 billion.

Smith noted the province also has no payroll tax, capital tax or health premiums.

“Workers and businesses would pay $20 billion more if we had the same tax system as any other province,” she said.

The fall session is scheduled to sit until Dec. 7.

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