Alberta can restore its tax advantage but it would take a big cut

Report calls for bold move to boost competitive edge

Alberta can restore its tax advantage but it would take a big cut
Steve Randall

Restoring Alberta’s tax advantage following tax reforms in the US would mean a bold move for the provincial government.

That’s according to a report from the Fraser Institute which notes that the province was one of the lowest tax jurisdictions in North America just 5 years ago.

But following hikes to both provincial and federal personal income and corporate taxes, Alberta has slipped sharply; ranking 52nd in Canada and the US for the top personal income tax rate.

“Alberta’s now-defunct tax advantages over other Canadian provinces and US states contributed to the province’s economic competitiveness and prosperity, but now those advantages are gone,” said Ben Eisen, director of the Fraser Institute’s Alberta Prosperity Initiative and co-author of Can Alberta Restore Its Tax Advantage?

How low must they go?
The report finds that simply going back to Alberta’s previous single personal income tax rate of 10% won’t restore the tax advantage on income tax rates.

It would instead need to cut to just 6%. That would mean a rate just 2 percentage points below US states that do not have a state income tax and would position Alberta as the 8th lowest tax jurisdiction in North America – rather than the current position as one of the top 10 highest.

A 6% rate for corporate tax would further boost the province’s competitiveness by bringing it in line with the lowest statutory rates in North America.

Restoring a 10% rate for personal income tax with a matching corporate rate would return Alberta to the top 10 lowest jurisdictions.

“With the Alberta economy struggling, policymakers should consider reducing personal and corporate income tax rates to help attract entrepreneurs, investment and skilled-workers, which would grow the economy and increase prosperity for Albertans,” said Steve Lafleur, Fraser Institute senior policy analyst and study co-author.