The Alberta Advantage is no more, according to a new analysis from The Fraser Institute.
The think tank argues that the personal and corporate tax advantages that once attracted citizens and businesses to Alberta have been eroded almost entirely under the NDP government.
“Alberta used to enjoy some of the lowest tax rates in North America, which attracted investment and people to the province, but the current provincial government has quickly eroded that advantage by increasing taxes, which are hurting the economy,” said Ben Eisen, the Fraser Institute’s director of provincial prosperity studies and coauthor of "The End of the Alberta Tax Advantage", in a press release.
According to the study's findings, in 2014 Alberta had the lowest corporate tax rate in Canada — sitting at 10 per cent. However, the NDP raised that rate to 12 per cent in 2015, giving B.C. (11 per cent), Ontario (11.5 per cent) and Quebec (11.9 per cent) a more attractive rate than Alberta.
The province now has the same corporate tax rate as Saskatchewan and Manitoba.
A new report from The Fraser Institute argues that the only pillar in Alberta's former tax advantage not destroyed by the NDP government is the lack of provincial sales tax. (Photo: The Fraser Institute)
As well, says the study, Albertans enjoyed the lowest combined top personal income tax rate in the nation before the NDP took control, with a single rate of 10 per cent tax on all incomes. When the NDP introduced fixed tax rates and increased the top rate by 50 per cent, that changed.
As a result, the Fraser Institute says Alberta's top combined (federal plus state/provincial) marginal personal income tax rate went from being the lowest in North America in 2014 to the 16th highest.
“Until recently, Alberta held a competitive advantage on personal and corporate income taxes, which helped drive the province’s economic growth. That advantage is now gone,” said study co-author Steve Lafleur, a senior policy analyst with the Fraser Institute.
However, University of Calgary economist Trevor Tombe told the Edmonton Journal that the Fraser Institute's analysis isn't a fair estimate of the overall tax burden, and said investors should look at the marginal effective tax rates, instead.
"That advantage is now gone."
“Investment will go to where returns are highest at the margins. The return on investment is going to depend on so many things,” Tombe told the newspaper, citing production costs, regulations and tax rates.
“Being lowest doesn’t have any magical powers associated with it, relative to being second or third,” he said.
Eisen told 660 News that the government should avoid raising personal and corporate tax rates as a way to make up revenue shortfalls, and instead should consider cutting spending.
As well, the report points out that Alberta still holds one tax advantage over other Canadian provinces — it is still the only province that hasn't implemented a sales tax.