Premier Jason Kenney’s conservative ideology and long-term opposition to tax increases could work in his favour if he tries to introduce a provincial sales tax, political observers suggest.
The potential for voter backlash has made implementation of a PST a taboo subject for Alberta politicians, even though economists say it could help stabilize the province’s revenue stream without having to ride the booms and busts of world oil prices.
Alberta is the only province in Canada without a provincial or harmonized sales tax.
Kenney has not yet proposed a PST. But the veteran politician, who began public life heading up the Alberta Taxpayers Federation and its successor, the Canadian Taxpayers Federation (CTF), may be the leader to get it done.
“It’s like the old adage of ‘only Nixon could go to China,’ ” Calgary pollster Janet Brown, of Janet Brown Opinion Research, said in an interview.
“If Jason Kenney thinks there’s no other way out of this than a PST, then there’s probably no other way out of it.”
Alberta politicians from both sides of the political spectrum have ducked, deflected and denied the revenue issue for decades, saying the province has a spending problem.
WATCH | A history of Alberta politicians saying no to provincial sales tax:
The unprecedented $24.2-billion deficit forecast in the first quarter fiscal update may force the United Conservative government to admit Alberta also has a revenue problem.
The province is projected to take in just $1.2 billion in resource revenues this year, $3.9 billion lower than budgeted and the lowest amount since the early 1970s.
Oil prices are forecast at $22 a barrel lower than the February budget and the pandemic continues to wreak havoc on the economy.
Last year, Ken McKenzie, an economist at the University of Calgary’s School of Public Policy, estimated a five per cent PST would raise about $5 billion a year.
Zain Velji, a political strategist and partner at Northweather, a Calgary digital communications firm, suggests that if Kenney endorsed a PST, UCP supporters might be more likely to consider and ultimately accept the measure.
“If you’ve kind of bought into the Jason Kenney mould of government, maybe he’s the only one that could sell you a PST,” Velji said.
In his days with the CTF in the early 1990s, Kenney didn’t rule out a consumption tax as long as it was tied to cuts in personal income taxes.
In June, he said Alberta would not introduce a sales tax unless the majority of Albertans approved one in a referendum.
PST support increasing
In a poll released by CBC News in June, Brown found public opinion is softening toward a provincial tax. In 2018, only 25 per cent of people polled agreed Alberta should adopt a PST.
The 2020 poll suggests support has jumped to 40 per cent, a figure Brown notes is still not a majority. She said opposition to a consumption tax is split along partisan lines
“We’re still a long way from a government being able to sort of implement this without serious repercussions,” she said.
If Kenney and the UCP wanted to roll out a PST, they would have to do some work first “seeding the ground,” as Velji puts it.
As a first step, he said the government needs to get people on side by getting everyone to agree on what the problem is before even suggesting a solution.
The next step would be to get public figures outside government to start discussing the idea. Velji said validators could be people who were formerly opposed to the idea of a PST.
Radio host and former Wildrose leader Danielle Smith surprised many with a recent column in the Calgary Herald in which she called for a financial reset. Her plan included $5 billion in cuts to health and education and $5 billion in new taxes.
“Yes, a provincial sales tax,” she wrote. “Let’s not kid ourselves about that either.”
Velji said the province could even use the pandemic as an excuse for implementing the tax.
“Blame it on whoever you want,” he said. “We have to collectively, as a majority of society … agree on the problem definition. And this is extremely elementary.”
Not now, Toews said in August
Finance Minister Travis Toews may have taken a small step in that direction.
In a news conference last month before the first quarter update, Toews acknowledged the deficit was caused almost entirely by a collapse in provincial revenues.
But he still hewed to the message that government needs to make services “more efficient” and that attracting business growth would help close the deficit by increasing the tax base.
A discussion about the PST would occur later in the UCP’s mandate, he said.
“In terms of the discussion around revenue structure, income tax structure, that will be an important discussion for Albertans in the future,” he said. “This is not a time to talk about raising taxes.”
“This is a time to deliver government services most efficiently, this is a time to ensure we are doing everything we can to grow this economy.”
Melissa Caouette, vice-president in charge of business development and government relations at Canadian Strategy Group, said the government needs to be more straightforward with Albertans about its revenue prospects — for example, being conservative when estimating the future price of oil for budgets — and what extra taxes could pay for.
“A PST would generate estimates of $5 billion a year. That almost covers physician compensation. Or that builds X number of new schools or new hospitals, or allows us to invest this much money in a new sector,” she said.
“So I think talking about that in the public square helps the public better understand it.”
The introduction of a PST could also come in tandem with a pledge from the government to cut some spending, in an effort to make the tax more palatable to opponents, Velji said.
In her work with focus groups, Brown has learned that people who are against a PST believe the government isn’t doing a good enough job managing the money it already has and want proof the government is running efficiently before it asks for more tax revenue.
Brown said people have suggested they might consider a PST as long as it ended once the budget was balanced.
“People sort of know that even if government promises to remove it someday, it may never get removed,” she said. “But at least that promise that there’s a sunset clause and an end in sight could soften some people up.”
Toews is planning to introduce a three-year plan in November’s fiscal update. The province will bring in its next budget in February.
