Alberta’s income tax system is serving the province well

A University of Alberta think-tank is blaming the province’s tax system for widening the gap between the richest and the poorest citizens. Indeed, the Parkland Institute calls Calgary the “most unequal city in the country,” calculating that the wealthiest one per cent took in 26 times more than what people in the bottom 90 per cent did in 2010.

Frankly, we’ve never considered a high number of corporate head offices and professionals to be a shortcoming. Like any diverse community, Calgary has lower income earners struggling to make ends meet, but the existence of hardship isn’t a compelling argument to increase taxes on the highly educated, the highly skilled and the highly creative. Jacking up taxes on the wealthy would go some distance to reducing the income gap, but it would do so only by dragging down top earners, not by putting wind in the sails of single-parent families or those whose skills don’t match the employment market.

“You can chalk it up to a mentality in the provincial government of winner takes all,” said the Parkland Institute’s David Campanella, pointing to Alberta’s flat income tax rate of 10 per cent and its energy royalty regime.

“By nature, it does away with the idea that those who could contribute more to the common good, should,” Campanella said.

The institute creates the impression that high income earners aren’t paying their way, but obviously someone who pays 10 per cent on a $250,000 income is contributing more to the Alberta treasury than someone earning $40,000. In fact, an individual can earn $17,593 before paying any provincial income tax at all.

By the Parkland Institute’s reckoning, a jurisdiction with high taxes but low incomes would appear to be preferable to Calgary. A community that could only offer seasonal employment would have a much smaller income gap than Calgary’s, but it would also offer fewer opportunities and less promise. Given the choice, we’d prefer to live in a dynamic city that continues to attract the best and brightest in myriad fields.

It’s worth noting that nationally, the top one per cent of earners paid 21.2 per cent of federal, provincial or territorial income taxes collected in 2010, according to Statistics Canada.

As a November 2011 Fraser Institute study found, over the decade of 1990 to 2000, 83 per cent of Canadians who started in the bottom 20 per cent of earners moved to a higher income group, with 21 per cent of those once lowest income earners reaching the highest income group of the top 20 per cent. In other words, low income Canadians do not perpetually remain in that income bracket.

Alberta’s tax system is serving the treasury well. Writing recently on these pages, Marc Henry of ThinkHQ Public Affairs calculated the Alberta government expects to receive revenue equivalent to $10,475 for every man, woman and child in the province this year. As a comparison, the next highest province, British Columbia, will take in $9,356 per capita.

It’s no secret that successive Alberta governments have relied too heavily on royalties from non-renewable resources, but it’s also a fact that Alberta families have incomes $15,520 higher than the national average.

We respectfully suggest the Alberta government ignore the carping of the Parkland Institute and keep a tax system — particularly as it relates to personal income taxes — that preserves some notion of the Alberta Advantage. Taxes are a means to an end, not an end in themselves.

Original Article
Source: calgary herald
Author: Editorial