By Rob South
Alberta may soon move to a "flat tax" model of income tax, a move that will have a widespread impact on government spending, personal wealth and the province’s economy. On May 23 the Progressive Conservative government tabled Bill 18, which proposes all Albertans pay a single tax rate of 10.5 per cent with personal and spousal exemption of $12,900.
"By cutting our income taxes we’re making our province far more competitive and adding to the quality of life of Albertans," said Provincial Treasurer Steve West. "They’ll have more cash in their pockets to spend, save or invest as they see fit."
Opposition parties are concerned Bill 18 will only substantially benefit high-income earners.
"I deeply regret the fact the government is rejecting out of hand, and without public debate, the progressive model of income tax in favour of the regressive model," said New Democrat Leader Raj Pannu. "[The flat tax] shifts the burden to the middle-income earner through increased user fees, health premiums and tuition fees."
Liberal leader Nancy MacBeth would like to see a tax break for Albertans, but wants to maintain a progressive model.
"We would prefer to see a tax break, but keep a lower rate for the middle-income earner and a slightly higher rate for high-income earners."
The Liberals proposed an alternative tax break that would reduce provincial revenue by $1.4 billion, slightly more than Bill 18. Under the Liberal proposal, a tax rate of 10 per cent would be charged on all income taxable under $100,000 and a rate of 12 per cent for all taxable income over $100,000.
"Flat taxes are invariably biased against middle and low income earners in favour of the top income categories," said MacBeth. "Our ‘0-10-12’ structure is simple and far more fair to all Albertans than the Klein flat tax."
This drew criticism from other parties.
"The way the Liberals intend the system to work is that a tax filer with $99,999 income would pay $8,643 in tax while a filer with an income of $100,000–that’s one dollar more of income–would pay $10,372," said West. "Do they understand this tax system at all?"
The Tories believe that in addition to reducing the tax burden, Bill 18 will create 30,000 jobs in the next five years.
Pannu is concerned about a decline in government revenue, believing that reducing health-care premiums and tuition fees would be a better use of the money. The flat tax will not be very beneficial to students, said Pannu.
"It says to [students] don’t expect any tuition freeze," said Pannu. "Students should expect very little."