According to a study by The Guardian, the world’s top 100 oil and gas companies collected more than $30-million every hour in “unearned” profit during the first month of the Iran war, and stand to make “$230-billion by the end of the year if the price of oil continues to average $100.” That’s a pretty big “if”—but it does put an eye-watering number on the potential windfall for companies in 2026 compared to anticipated profits before the war started. And it’s why people began talking about a “windfall tax” on the companies.

“As the owners of the resource, Albertans should get the lion’s share of those profits,” wrote Alberta Federation of Labour president Gil McGowan in the first week of the war. “And the way to do that is to introduce a windfall profits tax on top of the royalties that oil companies pay in exchange for the right to exploit publicly owned assets.”

This wasn’t a sudden revelation but rather part of McGowan’s long-standing argument that Alberta must increase oil and gas royalty rates. And he’s not alone. A long list of prominent economists have been saying the same thing for years—and they doubled down as the Iran war dragged on into April. “Taxing windfall profits won’t worsen inflation; it will recapture unearned gains from corporations and resource owners and can be used to protect vulnerable populations,” declared a group of economists led by Nobel-prize-winner Joseph Stiglitz.

It all sounds straightforward. Indeed, about 25 countries had already introduced a windfall tax well before Donald Trump’s misadventure in Iran. And Alberta does have a sliding scale for oil sands royalty rates, where they increase relative to the price of oil. But this isn’t enough for critics such as McGowan.

Oil companies are suddenly awash in windfall profits—while we’re paying near-record prices for gas.

Oil companies are pushing back, arguing windfall taxes discourage investment. They quote University of Calgary economist Trevor Tombe, who in 2022 said in an interview that “having a government just enact an ad hoc tax out of nowhere based on just whatever they think the rate should be—that’s problematic because it creates uncertainty.”

We also bump up against the “symmetry argument,” in which oil companies, facing a windfall tax from governments during boom times, could then demand some sort of “calamity compensation” from governments when oil prices collapse—as they did during the COVID-19 pandemic.

To save ourselves from jumping on the never-ending merry-go-round of arguments for and against a windfall profits tax, let’s just ask one short question: Would a windfall tax ever fly in Alberta The even shorter answer: No.

That’s not just because Alberta is governed by the fossil-fuel champion Danielle Smith. A windfall tax is part of a political suicide trifecta, along with raising royalty rates and introducing a provincial sales tax. The provincial NDP has also shied away from the trifecta. After campaigning in 2015 on implementing “competitive, realistic royalty rates as prices rise,” NDP leader Rachel Notley then performed a whiplash-inducing policy shift upon becoming premier. She went through the motions of a royalty review, then concluded the rates under previous Progressive Conservative governments were suddenly okay.

At the time, an irate McGowan complained that the NDP government was committing a “profound political mistake.” McGowan vowed to continue the battle for higher royalties, a fight that now extends to a windfall tax.

The public appetite for higher royalties comes and goes in direct relation to the world price of oil. When it’s over US$100 a barrel, Albertans practically march on the legislature, demanding a bigger share of energy revenues. When the price drops, so does the appetite. We felt the hunger pangs return last spring, watching our wallets drain as our tanks filled. In that context a tax on skyrocketing oil profits looked pretty good.

But even if there were a windfall profits tax, how would you, as an inflation-pummelled Albertan, benefit Alberta governments in the past have tended to spend windfall revenue to avoid making hard political decisions. The nadir of that unofficial policy came in 2006, with “Ralph Bucks.” Premier Klein, trying to boost his flagging popularity, gave a $400 “prosperity” cheque to pretty much everyone in the province. A lot of Albertans were happy. Like McGowan today, they saw it as a just counterbalance to high oil prices.

But there was no long-term plan, no saving for a rainy day; just a cheap political stunt. You could still argue a windfall tax is a good idea—but you can’t deny that Alberta has a poor track record of dealing with windfall revenues in the past.

Graham Thomson is an Edmonton-based political commentator who has covered Alberta politics since the early Don Getty era.

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The post Protecting the Local appeared first on Alberta Views.

Wright is far from alone in feeling the impact of a high price of electricity. Over the past three years Albertans have suffered a wild ride. Just eight years ago the price reached an historic low of 2.88 cents per kilowatt hour (kWh). Since then, the transient retail price of electricity—the price you pay if you don’t have a contract with an electricity retailer—has skyrocketed. By December 2022 it peaked at 12 times the 2017 rate: 37.46 cents/kWh.

No other province in Canada has seen such dizzying swings. And Albertans can pay high rates even when others don’t. Jim Wachowich, an Edmonton lawyer specializing in public utility regulation and a spokesman for the independent Consumers’ Coalition of Alberta (CCA), notes that while Alberta’s wholesale electricity price surged to 24.3 cents/kWh at its peak in late 2022, for example, its neighbour Saskatchewan’s sat at 12.2 cents. Other provinces were even lower.

A typical Alberta home consumes about 900 kWh of electricity each month. That means the average monthly cost of electricity in this province was as low as $29.92 in 2017 (all prices are before administration and delivery charges). It reached a high of $337.17 in late 2022.

This year the transient rate has averaged 12.01 cents/kWh. The provincial government calls this price the “Rate of Last Resort.” About one-quarter of Albertan power users pay this rate, because they don’t have (and often don’t qualify for) a contract with an electricity retailer. Contract prices have lately been 6–9 cents/kWh, depending on the retailer and length of term.

Alberta’s price turmoil has triggered a debate on the wisdom of the provincial government’s decision 24 years ago to invite private companies to compete in an unregulated market, the only one of its kind in Canada. Critics say the price shocks and supply insecurity that have occurred here since then prove deregulation and privatization were failures. Advocates of deregulation, however, say there’s no going back; that restoring a large public power-generating authority, like Alberta had in the past and like most other provinces continue to have, has too many downsides.

The price of electricity in Alberta has skyrocketed. No other province has seen such dizzying swings.

There’s no question Albertans have been paying more for power than people in other provinces. In a November 2024 study for the Alberta Federation of Labour (AFL), Edgardo Sepulveda, a telecommunications and electricity economist, calculated that since 2001 Albertans have paid about $24-billion more for their electricity than if they had paid the same prices as other Canadians.

We’ve also experienced critical supply gaps. The system has at times been dangerously unreliable. On two days in January 2024, the Alberta Emergency Management Agency issued an alert that our grid was at “high risk” of rotating power outages as a result of extreme cold, high demand and less access to power from other provinces. It urged consumers to immediately limit their electricity use to essential needs only. Supply also fell short. The privately owned H.R. Milner power plant near Grande Cache was producing around one-tenth to one-quarter of its 300-megawatt capacity, and Alberta experienced a near-total lack of wind and solar generation.

Such supply crises were apparently unforeseen when then-premier Ralph Klein set the stage for deregulation way back in 1996. His government created a competitive market for power generation, then fully deregulated pricing in 2001. Klein believed deregulation would attract more power-generating companies to the province. That, in turn, would increase competition, driving down prices for consumers and making Alberta more attractive to business.

“It was an ideological leap of faith,” Sepulveda tells me in an interview. “They (the Klein government) believed the state could do no good. And the grifters latched on to that.”

The grifters, he says, included Enron, the now bankrupt US-based utility that found a way to manipulate and profit from Alberta’s power purchase agreements, a mechanism that was put in place ostensibly to protect electricity consumers.

Klein’s government divided the electricity sector into four parts: generation, transmission, distribution and retail. Generation is now basically completely deregulated, transmission and distribution almost fully regulated and retail is a mix of the two. (That’s why today your utility bill reflects charges for each.) But the massive influx of investment promised by deregulation never came, leaving the market concentrated in the hands of a few large players. “They said there would be lower prices and increased reliability,” says Sepulveda. “That promise did not deliver.”

Deregulation has fallen short of its promise. Could reregulation get us out of this mess Sepulveda believes so, and he lays out a path in his AFL report.

His plan has two key components: reregulation of the market and a gradual increase in public ownership of generating capacity. A new public power company would compete on price and service with private generators. Reregulation could be done fairly quickly—in a year or two, in Sepulveda’s view, since the Alberta Utilities Commission (AUC, a regulator overseen by but independent of the provincial government) already exists. But increasing the public share of power generation could take years if not decades. That’s because Sepulveda recommends buying power plants and “wires”—the distribution network—only when they come up for sale, not forcing private companies to sell assets to the province.

From time to time generating facilities do come up for sale. For example, Edmonton-based Epcor, Canada’s first public electrical utility when it was formed in 1902, spun off its generating arm, Capital Power, in 2009. It was bought by private investors. A public power utility could have bought it instead, had such an entity existed, Sepulveda says. The same is true for Heartland Generation Ltd., Alberta’s third-largest power-generating company. In December 2024 it was sold to TransAlta Corp., the province’s largest generator, which further reduced competition. The sale left just 9 per cent of Alberta’s generating capacity in public hands—Calgary-based Enmax serves about 700,000 customers, mostly in the province’s south.

A new Alberta power authority could also be the exclusive holder of new capacity, gradually growing its share of power generation over decades. This, says Sepulveda, is exactly what BC Hydro is doing.

Albertans have been paying more for our electricity—since 2001, about $24-billion more than other Canadians.

The price spiral is not entirely the Alberta government’s fault. One of the biggest hits came from Alberta’s phase-out of cheap coal generation, a change mandated in 2012 by the federal government of Stephen Harper. While phasing out coal was an important environmental move, most of the remaining power generators were vulnerable to fluctuations in the price of natural gas. In 2001 coal-fired generators had accounted for as much as 80 per cent of the electricity on the province’s grid, but the last coal-fired plant closed in June 2024. The conversion also cost the provincial government an estimated $2-billion, according to Nathan Neudorf, the UCP government’s affordability and utilities minister.

But natural gas price fluctuations became a handy excuse for private electricity generators to jack up power prices, Sepulveda charges. Although Saskatchewan and Nova Scotia also rely heavily on natural gas for power generation, rates there increased about 20 per cent. Alberta’s private operators, Sepulveda says, have never been made to explain why their price increases are so much higher than those other provinces’. “Commercial operators don’t have to make excuses,” he says.

And private-sector opportunism isn’t the only cause of soaring electricity prices. Government decisions on power generation have limited Alberta’s resistance to price spikes. With vast reserves of coal, oil and natural gas, the province never took advantage of its hydroelectric power potential—a fuel-free source of electricity. Today just 3–5 per cent of Alberta’s electrical power is sourced from hydro, while 85 per cent of its power comes from fossil fuels. Almost all of the electricity generated in Manitoba, Quebec, BC and Newfoundland and Labrador, by comparison, comes from hydro. It’s an opportunity lost, because, according to a 2010 estimate prepared for the AUC, Alberta has an estimated 42,000 gigawatt-hours per year of developable hydroelectric energy potential, enough to power 5.8 million homes. But to develop those sites now would take decades, face regulatory challenges and environmental concerns, and cost billions.

The biggest impediment to price stability and reliability, however, is the way the province has taken away the incentive for private generators to build more capacity. When Alberta opened its doors to private electricity, it created an “energy market.” In simple terms, this means generators are paid only for the electricity they produce and sell into the market. They aren’t paid, Sepulveda points out, for having more capacity than is needed. This differs from many publicly owned generators in other provinces, which operate in a “capacity market.” There, publicly owned generators are given a fair rate of return not only for the power they produce but also for making sure a little extra capacity is on hand should a crisis—e.g., Alberta’s January 2024 cold snap—arise.

The risk with energy markets is obvious, says Sepulveda: “Companies aren’t paid to be reliable.” They aren’t incentivized to create surplus power. The market governs when private firms decide to build more capacity, leaving the risk of supply at times running dangerously low—and of prices shooting through the roof.

Private generators also engage in a practice called “economic withholding,” explains Nagwan Al-Guneid, the NDP opposition’s energy critic. Those companies hold back some of their supply, offering it at a higher price. She says government efforts to limit economic withholding, introduced in 2024, have been only partially successful.

Sepulveda’s ideas face plenty of skeptics who dismiss the notion that publicly owned and regulated electricity generation would make life more affordable.

“I think it would be a crazy idea,” says Nigel Bankes, professor emeritus of law at the University of Calgary, who has worked in electricity regulation. The generation of power, Bankes argues, “is not a natural monopoly.” In other words, the more producers competing with each other, the better.

With a public utility, he says, “you lose all the benefits of the market: there’s no innovation and competition. Over time they settle into a fixed way of doing business,” and that leads to a “fossilized” approach. Look at BC Hydro, Bankes says. “It took them forever to look at small hydro options. Why All they thought of was building big stuff. It took them forever to take wind seriously. Why Because it wasn’t in their wheelhouse. They didn’t do wind.”

Although Bankes acknowledges the wide-open generation market has faults, he says these can be resolved through better design. “You don’t throw the baby out with the bathwater,” he says. Price fluctuations aren’t even all bad, he argues, because high prices spur investment in new infrastructure. “You’re naturally going to see some of this spiking anyway,” he says. “Without the spikes, [companies] wouldn’t build.”

With dozens of companies in Alberta’s generation and distribution game, reregulation would be like trying to close the barn door after the livestock has already bolted, says CCA spokesman Wachowich. “OK, it’s possible. We can get those horses back in the barn. But isn’t it better to just optimize the existing system?”

Sepulveda says he’s disappointed the ideas in his report haven’t yet gained more traction. Even Al-Guneid admits she hasn’t read the report: “I scanned it awhile back. I don’t remember every detail.”

Was the province wise to invite private companies to compete in an unregulated market, the only one of its kind in Canada?

The skeptics claim Sepulveda’s recommendations overlook how much more complex the system has become. “You just can’t fathom the complexity of the system today,” Wachowich says. A lot has changed since deregulation, including higher costs driven by stricter safety regulations, input costs beyond government’s control, longer waits for essential equipment, and supply chain issues. “It’s not like the good old days,” he says. “You’d have to become an expert in all these costs.”

Affordability and utilities minister Neudorf wasn’t available for an interview, but he sent a statement saying Alberta’s open and competitive electricity market has attracted “roughly $40-billion in new power generation projects, including $6-billion currently in development, entirely through private investment—not taxpayer dollars.” He noted that Alberta “is the only province free from debt on power generation.” We consumers may be paying much higher power bills, in other words, but our government doesn’t need to finance the construction of new power plants.

Demand for more electricity in Alberta seems relentless. Society is moving toward what Wachowich calls “the electrification of everything.” The Alberta Electric System Operator (AESO, a non-profit responsible for operating our grid and prohibited from owning any generation or transmission itself) estimates demand will grow by 1.2 per cent annually over the next 20 years as Alberta soars past five million people, industry grows, more people use air conditioning (thanks to a warming climate) and more electric vehicles hit the road.

The province also aims to attract $100-billion worth of artificial intelligence data centres over the next five years—facilities that gobble massive amounts of electricity.

Sepulveda says such demand growth will trigger more price increases—shocks that a publicly owned generator could help ease. He says deregulation’s expensive 24-year history proves his point. “This (study) was showing whether or not that promise of innovation, lower prices, better reliability was actually achieved in practice,” he says. “And the answer is no.”

Faith in the private sector runs deep in Alberta. “People will not be persuaded, regardless of the evidence that’s put in front of them… that this an inferior system by any metric,” Sepulveda says. As far as he’s concerned, “To this day, no one has refuted [my report].”

Sure, Alberta’s electricity prices have been volatile, says Blake Shaffer, associate professor of economics at the University of Calgary, where he conducts research on electricity markets. But the fixed rates of 6–9 cents/kWh currently available through the province’s retailers are “pretty reasonable.”

That’s only now, however, and only for a portion of Albertans. Many low-income Albertans can’t get a fixed-rate contract because they don’t have a good enough credit rating, Sepulveda says. And during those all-too-frequent times when all Albertans are paying too much for electricity, “marginalized residents are paying [even] higher prices.”

Al-Guneid says the government could help protect the most vulnerable consumers from price spikes by overcoming the credit-check barrier, perhaps by underwriting the risk of default.

Shaffer agrees with Bankes that periods of high prices have stimulated rapid growth in capacity, notably in renewables, where capacity has doubled in Alberta since deregulation. The province has since throttled that growth, however, through strict new limits on where wind and solar can be located. Conventional supply has also increased by 3,500 megawatts through Suncor’s cogeneration facility in Fort McMurray and Capital Power’s expansion of its Genesee generating station.

Shaffer favours staying with Alberta’s deregulated model, with adjustments to meet the rapidly evolving market landscape. To better assure supply, for example, he suggests signing long-term contracts with built-in supply obligations.

For her part, however, Wright, the retired homeowner, is just looking for a way to stay in her half-duplex. “I can manage it because I don’t have a mortgage to pay,” she says. “But [utility bills] keep going up.… I can remember when electricity was a provincial government entity. The people and the province should own it. We should build it and not give it away to private companies.”

Doug Firby was editorial pages editor at the Calgary Herald (2001–2008) and taught journalism at the post-secondary level.

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Jeffrey Dvorkin says YES

The Massey College senior fellow and former director of the journalism program at U of T

Government in Canada has been funding the media for 100 years. There has always been a postal subsidy for newspaper distribution. More recently, the Canada Periodical Fund has helped magazines, newspapers (non-daily) and digital periodicals overcome market disadvantages. And, of course, there is the CBC, which gets more than a billion dollars a year from a direct government subsidy.

Conservative and Liberal governments alike have seen support for media as an urgent part of maintaining democracy in Canada. There is widespread agreement among parties and beyond that without a vigorous journalistic culture, democracy here would suffer. US studies, for example, show that less journalism results in more frequent reelection of incumbents.

The question of government funding of media is increasingly about whether Canadian media has become—or is in danger of becoming—an arm of government. Meanwhile the digital transformation of media continues, convergence has given us fewer choices, and so-called “news deserts” spread. Over 500 news outlets in Canada shut down between 2008 and 2024.

How to correct this And what would be the consequences of less government support for media?

It’s worth looking at how other aspects of our society would function with less support. If government stopped funding public education, the private school business would boom. The privatization of hospitals would take us into a vastly poorer version of US healthcare—a life-threatening outcome. What about privatizing the military Let’s not go there.

A free press is a critical element of democracy. We don’t need more government-funded news or pro-government messages. We do need better ways to fund media—and they should involve thoughtful support from government.

Our government gives tax credits to media organizations for labour and technology costs and to invest in regions ill-served with news. Subscriptions to credible media earn individuals a tax benefit. In addition to this, the public should be allowed to donate to the CBC to enable the removal of ads. This would end CBC’s competition for ads with commercial news publishers, which is contributing to the spread of news deserts, and make the public broadcaster more accountable to its audience. A Crown-funded national public broadcaster must do what commercial outlets can’t: develop unique programming to serve the needs of local audiences for information, reflection and perspectives that enable effective participation in democracy and cultural life. Programming must be decentralized while budgets focus on strong local/regional news and information. Local stations must program the needs of a local audience.

We must restore public confidence while deepening journalism and reporting on government. If our democracy is to survive, media as an agency of citizenship must be brought up to date, not defunded.

Peter Menzies says no

The Macdonald–Laurier Institute senior fellow and former Calgary Herald publisher

Not long ago, anyone arguing Canada’s news media should depend on a buffet of taxpayer money controlled by politicians would’ve been labelled a traitor to the craft. In the meantime, a great many moral contortions have brought us to where the matter is even up for debate. But here we are: the vast majority of Canada’s news organizations now depend upon politicians for their existence. They have submitted to the humiliation of applying to the government to become a Qualified Canadian Journalism Organization. They did so to avail themselves of the Journalism Labour Tax Credit and the Local Journalism Initiative. Others shape their content to qualify for the Canada Periodical Fund. Licensed broadcasters queue for assistance at the government-appointed Canadian Radio-television and Telecommunications Commission.

It requires some imagination to square this with statements like this one from the Toronto Star’s Standards and Practices: “Independence from those we cover is a key principle of journalistic integrity. We avoid conflicts of interest and the appearance of such conflicts. …These policies apply to all outside interests that could cause our audiences to question the fairness and independence of our journalism.”

Journalists argue they can’t be bought. But the near-total absence of commentary arguing against these funds within the pages and platforms of organizations bearing the government’s stamp of approval indicates that debate can most certainly be stifled. And what journalists believe on this file is inconsequential. All that matters when it comes to subsidies and journalism is what the news-consuming public believes. And polling suggests the subsidies aren’t saving journalism; they’re killing it. Oh, the husks of once-magnificent titles still stumble around like zombies, but without trust—the bond tying journalists to readers, viewers and listeners—it’s all a charade.

In 2024 The Hub, a subscriber-based platform that eschews government funding (disclosure: I write for it), polled Canadians. Seventy-six per cent of respondents believe subsidies could undermine journalists’ ability to report objectively. Seventy per cent oppose the funding, including 75 per cent of Liberal voters and 86 per cent of Conservatives; 73 per cent say subsidies hamper journalists’ ability to challenge the government. Reuters, meanwhile, reports that Canadians’ trust in journalism fell from 55 per cent in 2016—before the latest subsidies were announced—to just 39 per cent in 2024.

If government and the news industry want trusted news to survive, subsidizing its production is counterproductive. If anything should be subsidized, it should be the consumption of news, through deductibility of subscription costs and other mechanisms, forcing platforms to compete for, and build, public trust. As for the CBC, its primary source of revenue must similarly be detached from the vicarious whims of Parliament and its sustenance placed squarely in the hands of the public.

jeffrey dvorkin responds to peter menzies

As a former managing editor of CBC Radio and former VP of News and Information at National Public Radio (NPR) in Washington, DC, I’m arguing yes to government funding for media—with strict limits.

In the 1990s we operated at CBC on the premise of maintaining an arm’s length relationship with government. We understood, as did our bosses, that our credibility as a provider of reliable information depended on maintaining public trust. The journalists who created our programs and reported the news for CBC had to act without “fear or favour” toward the government. One example of how CBC remained resistant to government pressure was during the Somalia affair. In 1993 a Somali teenager was beaten to death by two Canadian peacekeepers who were part of humanitarian efforts in that country. Captured by photos, the killing revealed internal problems in the Canadian Airborne Regiment. A CBC reporter received and reported on altered military documents, which led to allegations of a cover-up.

In the early 2000s, after moving to NPR, I found that mainstream media believed the first amendment to the US constitution gave journalists a measure of protection. American suspicion of government (quite different from the more accepting Canadian attitude) meant that US media were, for the most part, vigilant in maintaining independence.

But one particularly effective guarantee of public broadcasting’s independence from government in the US is the Corporation for Public Broadcasting. CPB dubs itself “the steward of the federal government’s investment in public broadcasting,” and it distributes public money to some 1,220 public radio stations and 361 public TV stations. These stations can raise their own operational money. Stations (notably PBS, as NPR gets less than 1 per cent of its budget from CPB) that exist in markets where fundraising is limited can ask for government funding in the form of a top-up from the CPB. This includes stations in rural areas, Indigenous communities etc. Congress allocates public funding once a year and CPB distributes it. CPB ensures that public funding is done at arm’s length from government.

Similarly, CBC’s credibility might be improved if its budgets came from an openly neutral source, one that is at arm’s length from the federal government.

Funding from government sources needs to be seen to be free from the influence of government

CBC journalists are of course aware that funding for their work comes directly from a parliamentary allocation, now more than $1-billion a year. Upper management, including the CBC’s president, go before a Heritage committee to press their case for continued annual funding for both CBC and Radio-Canada. English and French TV services alike are allowed to air ads, which bring in a few hundred million dollars. With the ad market softening, that amount has been declining.

Canadian media are suffering. The financial weakness of our broadcasters and newspapers is revealed daily. The spread of news deserts continues apace. Even the CBC is feeling the pinch. In frequent presentations to Parliament and reports to the public, the CBC says it tries to do “all things for all people,” with a range of offerings in two official languages and several Indigenous ones. This goal is clearly impossible when eyeballs and ears are attracted to social media’s more entertaining qualities.

Indeed the internet bears unique responsibility for this collapse of traditional media. Canada’s government is attempting to remedy this by redirecting funds from Meta, X and other deep-pocketed sources that it says are taking advantage of traditional news media. This hasn’t worked, as Meta won’t co-operate and most of the Google funding hasn’t yet been distributed. Increasingly in Canada, as in the US, suspicion is growing about the motives for government largesse. Sequential Heritage ministers haven’t made a strong case for how that funding will come without strings or government interference.

Meanwhile other sources of new income haven’t appreciably boosted circulation numbers or broadcast audiences. Public trust in media continues to decline due to the heightened suspicion of all major institutions, especially government. And digital continues to be the accelerant on a widespread media fire.

One solution Government could play a better role by acting in an arm’s length manner. We need a Canadian version of CPB, for all media. Funding from government sources needs to be seen to be free from the influence of government. A “blue ribbon” panel of citizens could determine how much money should be allocated to various media, including the CBC. This would help restore public trust in journalism by acting as a neutral and accountable supporter of independent media. In turn, news media must foster an environment of contextual, local and investigative journalism by and for Canadians—because the future of our democracy depends on it.

peter menzies responds to jeffrey dvorkin

There is no reason why citizens should have their tax dollars used to prop up media promoting policies—left or right—to which they are opposed. Canadians who lean to the left shouldn’t have to pay taxes to support the National Post, which leans to the right, any more than conservative-minded Canadians should have to feed the bottom line of the Toronto Star, dedicated to the advancement of left-leaning causes.

This doesn’t mean that public policy support should not be provided for the consumption of news and a shared set of facts. As I will show, the current problem is that assistance is being provided at the wrong end of the food chain and is suppressing the innovation needed during a time of historic transition. In the meantime, I will challenge a couple of points.

Yes, the government has always “funded media,” but postal subsidies were never about subsidizing journalism; they were about subsidizing access to journalism by consumers. Newspapers would have been unharmed without these subsidies, while readers in rural and remote areas would have been burdened, having to pay more for local news. The case can similarly be made regarding magazines, although, as they have transitioned to online entities, this rationale has become more questionable.

It’s true that hundreds of publications have shut down in Canada. What needs to be added to the conversation is that somewhere in the neighbourhood of 250 new platforms—most of which are better equipped for the realities of the 21st century—have launched in Canada since 2008. It’s also important to note that Canadians now have access to news from thousands of global outlets. There is no shortage of news—except at the local level, where coverage of municipal councils and courts, for example, is often rudimentary. The more subsidy is given to prop up proprietors who aren’t meeting the public’s demand for this information, the less room there will be for innovators and entrepreneurs willing to do so. The government’s thumb, through subsidies, is permanently on the scale in favour of old structures struggling to innovate while suppressing startups with new energy and ideas.

The government’s thumb, through subsidies, is on the scale in favour of old, struggling media.

Journalism is not fundamental to democracy. It exists and even thrives in authoritarian regimes. Freedom of speech, civil rights, free and fair elections and an independent judiciary are the fundamentals of democracy. Provided journalism supports those fundamentals and delivers news in an objective fashion, it is useful to democracy. When it doesn’t do so, it can harm democracy. The Tehran Times and Pyongyang Times are both examples. Pravda, of course, is legendary. All employ journalists.

Among the civil rights most vital to democracy is a free press. Our democracy guarantees that people who distribute the news are free to do so in whatever fashion they please, moderated only by their ability to meet public—and not government—expectations. Studies invariably show that consumers want news that is thorough, objective and accompanied by a balance of opinion and analysis from a variety of perspectives. Some bias one way or the other in the opinion offerings is tolerated and even rewarded, provided the news can be trusted. The greater the pressure to be trusted and serve readers/consumers in the manner they wish to be served, the better those services will be. Subsidies lessen that pressure, because they decrease news organizations’ need to build trust with the public.

The more the media is funded by the government and politicians, the less people will trust it to hold government to account.

As for the CBC, it’s one thing for a public broadcaster to exist within a news ecosystem rich with independent organizations—a mix that imposes discipline on all involved. It is quite another to declare there can be no ill effects when the entire news industry exists only thanks to subsidy. All this situation does is diminish trust, which reduces public consumption of the news, which increases demands for subsidies. It’s also worth noting that the CBC was born of a desire on the part of the government of the day to control content on the airwaves.

We agree that societies function better when citizens have a shared set of facts they can use to organize their lives and that a stable news industry supportive of democratic principles serves the public good in providing that information. What needs public policy support, however, is the consumption, not the production, of that information. Allowing each citizen to deduct the cost of subscriptions up to $1,000 annually (up from the current $500) would provide such an incentive without the damage to trust and innovation that is being inflicted by current practices. Let the most trusted news providers win and the least trusted and incapable of adaptation lose.

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It wasn’t until I went to university that I found out most of the people I knew from Calgary thought Pierre Trudeau was all but a criminal. No one in my family had much to do with the oil patch, even though in the early 1980s I did have a summer office job at Gulf Oil. During that time I was vaguely aware of this thing called the National Energy Program (NEP) that people were mad about, but the province seemed prosperous enough and so did Canada. From the point of view of a young Canadian living in Alberta, Canada seemed like a pretty great place to hail from, a plucky country that punched above its weight and mattered in a moral sense, a country the rest of the world looked up to and admired.

Unfortunately, this was also when the hypersensitive Alberta psyche was in its most malleable state, a time when our provincial lava boiled out onto the open prairie and got moulded into something angry and contorted. Ottawa was the enemy. We were getting ripped off. We were being exploited. The feds were taking us for suckers. Trudeau gave some western Canadian protesters the finger and we were going to let those eastern bastards freeze in the dark. End of story.

Except it wasn’t. Grievance politics became entrenched in our brains, and it has warped our entire political outlook ever since. There’s always a fight. Take your pick. The NEP. Equalization payments. A provincial police force. Senate reform. Carbon taxes. Pipelines. Health transfers. Quebec favouritism. The latest expression of this irascible political posture is the United Conservative Party proposal to decouple Alberta from the Canada Pension Plan and create our own Alberta Pension Plan. It’s an idea so dumb, so patently immature, it almost doesn’t merit discussion. But it is evidence of something it pains me to say, which is that we are suckers, and we are being exploited. Ottawa, however, isn’t the perpetrator. We’re being exploited by our own victim narrative. And it’s hurting us in the long run, no matter how satisfying the rage and self-pity feel in the moment. The current conflict is being dressed up by Danielle Smith as fighting for Alberta, but in reality she’s taking advantage of our inclination to be aggrieved.

We are not victims. We are not persecuted. We are not hard done by. We’re missing the point.

Alberta became a province on September 1, 1905. On September 2, 1905, Alexander Rutherford, the province’s new premier, lashed out at the federal government for ignoring the long-standing concerns of Albertans. I’m joking, but only partly. Over the ensuing decades, various skirmishes broke out between the province and Ottawa, becoming a coherent pattern after Leduc #1 in 1947, and erupting into open battle with the unlocking of the oil sands in the 1970s—once Alberta became flush with money, in other words. Money it began to resent having to share.

The never fully settled question hovering over this decades-long pattern is not so much whether the disagreement(s) actually exist, but rather which larger forces are generating them. Having your car break down is the problem immediately in front of you, but it might not be the manufacturer’s fault if you’ve never changed your oil. If Alberta has a problem with Ottawa, what is the problem, and what caused it?

The briefest answer to whether Alberta has a problem with Ottawa is to just say yes. That’s reality. But so does every other province. It’s inherent in the nature of the relationship. We must bear in mind that provinces are not partners with the federal government, or at least not equivalent partners. The federal government necessarily has a different set of concerns and responsibilities than a provincial government, a broader scope, a wider lens. If it didn’t, our country would turn inward and parochial (as many others have). But too often both levels of government use this difference in roles to generate friction and feign action, rather than as a platform for collaboration and compromise. The process morphs from policy into theatre.

“I do think the APP idea is grievance politics,” says the Globe and Mail’s Calgary correspondent, Kelly Cryderman. “If you look at it from Danielle Smith’s point of view, we’re talking about an Alberta-first policy. Alberta does have the power to withdraw, but everybody agrees it would be detrimental to the national plan. It’s absolutely about making a point.”

It was Albert Camus who said, “The need to be right is the sign of a vulgar mind.” There is, increasingly it seems, a petulance to the never-ending hue and cry from Alberta that we are hard done by. Where is this from, this aggrieved sense of injustice that comes across too often as immaturity, like a teenager yelling that no one understands them and it’s all so unfair and they’re just going to move out and show you and then when they’re gone, you’ll be sorry!

In diagnosing the root causes of our provincial persecution complex, so that we can assess more clearly how even floating, let alone implementing, the APP might (further) damage Alberta reputationally, we can probably limit ourselves to the two most significant contributors. Those would be the NEP and equalization payments.

The rest of the country probably already considers Alberta unreliable and possibly even unhinged.

Make no mistake, the NEP was panic-driven by the skyrocketing cost of imported oil at the time. The National Energy Program, federal policy from 1980 through 1985, was intended to keep energy affordable for all Canadians and to secure our supply independent of the world oil market. It harmed Alberta’s economy not just through enforced pricing but because Lougheed cut production to force Trudeau to the negotiating table. This negotiation did eventually happen and resulted in the Western Accord in 1985, a deal that mitigated but didn’t repair the harm. However, for a Canadian prime minister not to have taken every step possible around national energy security in the late 1970s and early 1980s would have been political malpractice. The way Trudeau went about it was haughty and he got the process wrong, but the overarching goal made sense in context.

The real problem is that the NEP is too often viewed as a simplistic, binary issue. Ottawa was evil and Alberta got screwed. Except that’s not quite how it went. We know that Suncor and Syncrude drove the development of the oil sands and therefore created much of Alberta’s prosperity. What people forget, or don’t know, is that when Syncrude was under construction in the mid-1970s, it had four partners—Cities Service, Imperial Oil, Royalite/Gulf and Atlantic-Richfield. One day in late 1974, suddenly and with very little notice to its partners, Atlantic-Richfield pulled out, citing a shift to Alaskan exploration (which may have been simply the excuse it used, as it was unhappy with Lougheed’s royalty terms). A mad scramble ensued, as Lougheed’s dream for Alberta’s resource prosperity looked to be in jeopardy.

And who stepped in to save the project The federal government, that’s who. Yes, Pierre Trudeau. Atlantic-Richfield owned 30 per cent of the Syncrude venture. Trudeau and his government quickly agreed to make up half of the shortfall, buying 15 per cent. The Lougheed government invested 10 per cent, and the province of Ontario chipped in 5 per cent. In other words, Syncrude, the giant of the Alberta oil sands, might have foundered had Ottawa not stepped up to the plate.

But that’s not all. Lougheed also negotiated a new deal with the Trudeau government to let Syncrude treat profit-sharing between Syncrude and Alberta as a standard royalty for tax purposes, thereby allowing for the deduction of royalty payments from federal tax owed. This was a substantial concession from Ottawa, one that Syncrude might have been dead without.

Did the NEP harm Alberta Yes. Was it about snooty Ottawa trying to stick it to those hicks in Alberta No. Trudeau simply put national interests ahead of provincial interests, as you would expect any prime minister to do. (Note that Conservative leader and would-be-PM Pierre Poilievre opposes Alberta creating its own pension plan.) To claim that the NEP, as bad a policy as it was, was evidence that Ottawa had it in for Alberta is to misread events. It was simply that one province had what all of Canada desperately needed, and the prime minister made that one province supply it cheaply.

To use the NEP as a stick to continue to beat the feds with, without seeing the larger context, is to misinterpret both the symbolism and the actual development of the industry. The oil sands resource has been responsible for the prosperity of millions of Albertans and other Canadians, but it would probably not exist in its present form without the direct financial investment of the federal government. The NEP was a bad policy and Brian Mulroney was right to kill it after he got elected (though he did leave parts of it in place for over two years), but it was not evidence of an Ottawa conspiracy to defraud Alberta of its rightful assets.

What happens if the UCP goes through with the APP and Alberta gains but the rest of Canada suffers?

The other Ottawa bone of contention Alberta has been gnawing on for decades is that of equalization. This one is dealt with rather easily since the gripe most Albertans have is due to a misunderstanding of the concept. University of Calgary economics professor Trevor Tombe has said that most people don’t understand how equalization works. In 2018 he wrote, “Much of the anger—especially in Alberta and Saskatchewan—is stoked by commentators and politicians who are deliberately fanning the flames,” and that, “it’s up to each of us to be informed about how equalization actually works.”

The three major transfer programs in Canada are the Canada Health Transfer, the Canada Social Transfer, and Equalization. The first two distribute funds according to population. If Ontario’s population is three times that of Alberta, it will get three times the money. Roughly 75 per cent of all federal transfer payments are bound up in these first two programs. Equalization payments comprise the other 25 per cent and they are distributed through a formula based on what a province’s revenue would be if all its tax rates tracked the national average. Again, simple math. Equalization, Tombe writes, simply tops up provinces whose tax revenue falls below the national average.

In a country as vast and disparate as Canada, a strong nation-building case can be made for such federal transfers. A Canadian living in Moncton, New Brunswick, should have access to roughly the same level of services as someone living in Regina, Saskatchewan. Equalization payments are the financial weave of the broader social fabric we profess to embrace as Canadians; namely, a dignified existence and fair opportunity for all.

We in Alberta do pay more into equalization (gross, not rate), but as Andrew Coyne so succinctly put it in a September 27, 2023, Globe and Mail column, Albertans pay more simply because we make more money. “As a federal program,” he writes, equalization “is funded out of federal taxes, which, again, Albertans pay at the same rates as citizens of other provinces… And yet people who should know better, including some economists, continue to bandy about [the idea that Albertans pay more into the federation than they get out] as if it held any meaning. It might politely be described as a false correlation—it’s not Albertans, as a group, who pay more than they draw out, but rich people. Less politely, it’s a lie. But it’s a useful lie, as we can see in its latest deployment.”

The point, writes Tombe in a different article, is that being part of a federation allows us to pool and therefore dilute risk. A rich province contributes when it’s doing well and receives funds when it isn’t. Even after a recession, Alberta’s economy remains stronger than any other province’s, which is why we continue to be net contributors to equalization. “Recognizing this is not defeatist or anti-Albertan,” Tombe writes. “We have to recognize our strong position in Canada relative to other provinces if we’re to have any hope of understanding why fiscal balances are what they are. The pandemic may have upended the typical patterns, but it also starkly revealed the value of being part of a broader whole. When grievances directed at Ottawa are inflamed once again, we should keep this value in mind.”

The offices of federal Minister of Finance Chrystia Freeland and the Alberta Pension Plan panel were quick to respond to my questions, though the promptness of their replies was not matched by their specificity. Freeland’s office referred me to a press conference she’d given after a finance ministers’ meeting in December, in which they’d kicked the APP can down the road by saying their staff were going to hold further meetings to talk about how to talk to the chief actuary at some unspecified future date. Freeland’s office’s response to me was the definition of slow-walking an issue in the hope it might dry up and blow away.

The APP panel’s response to numerous pointed questions was even more content-free. They wrote, graciously, that “the panel is giving the office of the chief actuary of Canada some time to release its findings” and hopes “to hear back soon.” The actuary is determining what percentage of the CPP’s assets Alberta would be entitled to take if it left the plan. Smith’s government claims the province could keep $334-billion, or just over half of the CPP’s total assets.

Graham Thomson, a long-time political commentator, did not resort to similarly analgesic language when asked about the APP and the overall pattern the idea falls into with the UCP. Thomson notes that Alberta premiers have usually favoured pragmatism over ideology. Small-government Peter Lougheed bought airlines and pipeline companies because he thought Alberta wasn’t being well served by the market. Environmentalist Rachel Notley supported the oilpatch because she knew the local economy would collapse if she didn’t. Where does Danielle Smith fit into this pattern?

“Her ideology is purely situational,” said Thomson. “She talks like a libertarian but will give Calgary $300-million for a new arena. This is someone who isn’t very nuanced, who was pushing Ivermectin and hydroxychloroquine during the pandemic, who tends to look at things very superficially. I don’t think she’s actually thought through this APP idea thoroughly, even though she’s been talking about it for awhile.”

Ken Boessenkool, an influential conservative activist who tried to get Smith kicked out of the UCP leadership race, co-wrote an article with University of Alberta professor Jared Wesley positing that Smith could not even really be called a conservative and that her politics amounted to “libertarian-laced populism, directly opposed to the sort of principled, incrementalist politics Albertans have appreciated from conservative governments in the past.” Smith, they wrote, “shows little understanding or respect for the rules and norms that guide our democracy,” and that her attraction to quackery and plain lack of knowledge raise “serious questions about her judgment and the ability of her advisers to provide her with a factual basis to make important decisions.”

I don’t know about you, but that sounds like exactly the type of person I’d want in charge of my pension.

Says the Globe and Mail’s Cryderman, very few people inside or outside Alberta want the province to pull out of the CPP, simply because “nobody wants the chaos.” And while “energy policy or climate policy might not affect every person in this country in a real individual way, pensions do.”

Thomson has no doubt the issue is further damaging Alberta’s already tarnished reputation across Canada, possibly irreparably. “Of course it is,” he says. “I mean, Smith wants other Canadians to join in a fight with the federal government. But, ‘Oh, hang on a minute; do you mind if we completely undermine your pension plan while we’re at it?’” Smith just doesn’t have the political imagination to see shades of grey, he says. She’s in the cab of an Albertans-only train running out of control and thinks pulling the airhorn demonstrates a steady hand on the throttle. “There is so much risk in [the Smith government’s] APP strategy, but if you try and put it in terms of common sense to them, they don’t hear you.”

The APP toothpaste isn’t going back in the tube.

It’s also common sense to look at the plain facts on the ground. If Alberta were being so appallingly exploited by those Upper Canadian parasites, wouldn’t this be a pretty dire place to live Why do people continue to flock to this province, why do we have the youngest and best-educated population in Canada, how does Edmonton now have the largest office tower in Canada west of Toronto, how did Calgary manage to create such a thriving film and television production scene, how is it that such prominent political leaders as Pierre Poilievre and Chrystia Freeland hail from Alberta How have we managed all this under the tyranny of Ottawa I guess it must be because we’re so exceptional, so extraordinary, so Albertan, that we can thrive even under this obscene oppression.

Or—here’s an idea—could it be that we’re doing okay because we’re part of Canada?

Sadly, the damage to our reputation has surely already been done. Whether Alberta leaves the CPP or not, the rest of the country probably already considers Alberta unreliable, a less than trustworthy member of the confederation and possibly even unhinged. The APP toothpaste isn’t going back in the tube. It’s not like chatting about which movie to watch on Netflix. If you say to your partner over dinner one night, “I wonder what our lives would be like if I left you and took all my possessions and lived my own life but still wanted to have sex with you every now and then We’d still be happy, right I mean, I’m not saying I’m going to do it. But, you know, legally, I could.”

Imagine an alternative universe, one in which a premier of Alberta declared the province a proud member of Confederation willing to do whatever it took to make Canada successful, not just Alberta. Imagine the goodwill. Ottawa doesn’t put Alberta first, but that’s not Ottawa’s job. Alberta doesn’t put Ottawa first, because that’s not Alberta’s job. I get it. But aren’t we all Canadians The point is Alberta benefits from being part of Canada.

What happens if the UCP goes through with this and Alberta gains but the rest of Canada suffers If we as a province think we’re already targeted, just wait until every other Canadian’s pension is worth less and costs more. If portability annoyances can’t be resolved or if the APP creates more red tape, not only will non-Albertans be furious, so too will Albertans. Merely floating the APP question has already demonstrated to the rest of Canada that we’re not all that committed to the relationship. Real-world problems will generate even less goodwill toward us.

The small house of my youth on the slopes of Nose Hill was packed full of optimism and goodwill towards my province and my country, both of which I grew up believing were examples of good sense and shared purpose at home and abroad. I don’t feel that way anymore.

Edmonton’s Curtis Gillespie has written five books of fiction and non-fiction. His magazine writing has won seven National Magazine Awards.

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I hoped they would think I had money.

In reality, anybody back then could have a money man. I don’t know for certain that money men were obliged to take on people of small portfolio, but I never heard of anyone being turned down.

So, at the time I’m going to tell you about, I’d had the same money man for decades. It went back to when I first had enough money to be concerned about taxes. The federal government was advertising that you could save on income tax by contributing to a retirement savings plan. I’m a cautious fellow, and the idea of building up a fund of money to help me in my old age appealed.

Did I know anything about investing at that time Doodly. I clearly needed help. I called my tax accountant, a friend of the family, and he listed off some companies that did this sort of work. One of them had an agent near my home, and so I dropped in to his office. I told him what I was after. He cheerfully welcomed my business. As simple as that.

We scheduled a meeting to which I was to bring my bank statements and so on. On that day, he gave me a lengthy quiz about my financial goals, short- and long-term. Another test measured my “risk tolerance.” It became obvious that my risk tolerance was very low. The idea that my portfolio might shrink gave me the frights. Slow growth as safe as possible was the investment path for me.

Our relationship proceeded. In each meeting over the years—until recently—my money man never once failed to say, “This is your money, Mr. Stenson. Not mine.” Another refrain: “I give you alternatives and advice. The choice is always yours.”

This lasted ever so long—decades—until, about a month ago, I got a call from his secretary. The money man wanted a meeting, and it was more like an order than a request.

In his office, the change in him was obvious. He looked me boldly in the eye and said:

“I now belong to an organization called TBC. This stands for Take Back Control. As a group, we’ve agreed on a new approach with clients. No more kid gloves. No namby-pamby. From now on, we’re not going to ask you what you want done with your money; we’re going to tell you. As for pretending to care about your risk-aversion, there will be no more of that. We’ll be using our time to talk to giants of industry.”

“We’ll invest in big industries. Right here in our backyard. We’ll have inside dope. Be bullish. Johnny-on-the-spot.”

I was floored. I managed to fumble out, “But what about it being my money?”

He fixed me with a terrible look. “Did you ever think how much money I could have made you, and me, if I’d ignored your wimpy risk tolerance All the crafty tricks I could have employed to keep money out of the hands of the rapacious feds But, no, all you ever wanted was to play it safe.”

“I still want to play it safe.”

“That’s not how it’s going to work from now on.”

“Uh… how will it work?”

“Under TBC, we’ll be treating your money as if it were ours. We AIM to make it big. We’re not monkeys, and we’re tired of peanuts.”

“What will you invest in?”

“We’ll team up with big companies. Big industries. Right here in our backyard. That way, we’ll have inside dope. We’ll invest accordingly, and we won’t be shy. Bullish. Johnny-on-the-spot.”

“But won’t big companies just tell you to invest in them?”

“I suppose you think that’s astute. Who do you think would know better what a company’s growth potential is than that company What could be more secure than investing in the projects of the biggest industries in the province?”

“But which companies Which projects?”

“That’s inside info, buster. But since you’re such an ignorant muffin, I’ll give you a hint. Think pipelines. Think nukes.”

“Wasn’t there something awhile back about a pipeline that didn’t go anywhere A billion dollars lost…?”

“That kind of talk is why we won’t be listening to you.”

Once out of his office, I was shaking. I started chanting the old mantra. “It’s my money. It’s my money.” That calmed me down. I won’t bore you with the details, but help was enlisted. In a couple of days my relationship with my money man was over. I was out of the hands of the TBC.

In time, I came to think of how lucky I was that it was just my money man. What if it had been my government… Too scary a thought altogether.

Fred Stenson’s novels include Who By Fire, The Trade, Lightning and The Great Karoo.

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David Moscrop says yes

The contributing columnist for the Washington Post and author of Too Dumb For Democracy?

Intergenerational wealth transfer is central to perpetuating wealth inequality. Passing assets along—not the cash your grandmother left you or family heirlooms from parents, but high-value property and financial holdings—maintains family wealth and, through it, power. As Baby Boomers die, many countries are preparing for a massive intergenerational wealth transfer. In the US, in the next few decades, analysts are expecting $68-trillion to be passed along. In Canada, over the next decade, that number could hit CAD $1-trillion.

Canada has neither an inheritance tax nor an estate tax. Rather than levy a tax on the beneficiary, the Income Tax Act applies a “deemed disposition” at the time of death as if the assets had been sold at fair market value. There are limits, including spousal transfer and a principal residence exemption. The estate transferring the assets is taxed on the deemed disposition on any de facto capital gains when filing income tax.

In 2018 the Canadian Centre for Policy Alternatives made the case for tax reforms aimed at reducing wealth inequality. In “Born to Win: Wealth Concentration in Canada Since 1999,” David Macdonald points out that Canadian estate tax policy “contrasts with the US, which maintains a 40 per cent tax on estates above $11.2-million, or Japan, which maintains a 55 per cent maximum rate.” Accordingly, he suggests a 45 per cent inheritance tax be adopted and applied to large estates—those with over $5-million in assets. This would be applied to the beneficiaries of an estate, tackling what is received both as an asset and a transfer of power, because wealth is more than an asset. It’s also a tool. As Macdonald notes, this policy would be consistent with the estate inheritance policies of other G7 countries and would raise some $2-billion in revenue annually.

Capitalism tends not only towards monopoly but to the general pooling of wealth and power into the hands of the few. Rather than a success, this is a market failure of the sort that worried not just Karl Marx but Adam Smith, who was concerned about inequality as a threat to the market. The same logic can be applied to the health of our democratic institutions, which rely on (but rarely realize) the principles of both formal equality and broadly equal opportunity to influence social, political and economic outcomes in the public interest.

Massive wealth transfers through inheritance drive inequality, undermining the market and our democratic institutions, concentrating not just assets but power into the hands of the few. Not only is there a fundamental moral reason to tax and redistribute to help those in need, there is also a functional one: we need to protect our institutions. Taxing inheritance on the beneficiary side offsets the concentration of power and could even be designed to eliminate it if we so wished. At the very least we need a rebalancing—and we need it now.

Franco Terrazzano says no

Federal director of the Canadian Taxpayers Federation,

There are two key challenges for Canada as we move beyond the pandemic: growing the economy and addressing government debt. A death tax won’t achieve either.

A death tax won’t come close to balancing the budget, never mind paying down a $1-trillion federal debt. A death tax on estates valued over $5-million would generate $2-billion per year for the feds, according to the Canadian Centre for Policy Alternatives (CCPA). For context, the federal government adds $424-million to its debt every day. So even if Justin Trudeau received all the death tax money Monday morning, he would blow through it by the end of happy hour on Friday.

In 2018 Canada’s inflation-adjusted per-person spending reached an all-time high. Even before COVID-19, the federal government was spending more than it did during any year of the Second World War.

Politicians would try to sell a death tax as a tax on high earners, similar to the CCPA proposal. But history shows that once politicians are done soaking the rich they quickly set their sights on the wallets of average citizens. Ottawa, for example, imposed its first income tax in 1917 to help pay war expenses. Very few Canadians had to pay the tax, because of its high exemptions. More than a century after the war ended, most Canadians with paycheques now make more than the income-tax-free threshold because of the lower personal exemption.

Similarly, when France introduced its wealth tax in 1988, it was indexed to inflation. But in 1997 the threshold stopped moving with inflation, and as property values rose, more families were hit by the tax.

During Canada’s 2019 federal election, the NDP proposed a tax on wealth over $20-million. In 2021 they promised a lower threshold of $10-million. How long before a Canadian party follows New Zealand’s Green Party and demands a wealth tax starting at $1-million, including the value of primary homes?

A death tax won’t fix the nation’s finances. It would, however, discourage the savings and investment sorely needed for job creation. The Tax Foundation’s 2021 International Tax Competitiveness Index ranked Canada 20th out of 37 OECD countries. After falling two spots this year, Canada is in the bottom half of the pack of developed countries on tax competitiveness. The index noted that a rare bright spot is that “Canada does not levy wealth, estate or inheritance taxes.”

Even Prime Minister Trudeau has dismissed the idea of more taxes on the wealthy. “People know we need to have economic growth in order to create jobs, opportunities,” he said during the 2021 election. “The idea that you can go with unlimited zeal against the successful and wealthy in this country to pay for everything else is an idea that reaches its limit at [some] point.”

Any politician looking to grow investment and recover the economy should prioritize tax relief instead of looking for new schemes to punish hard-working Canadians.

David Moscrop responds to Franco Terrazzano

An inheritance tax—often called a “death tax” by those who oppose the measure, and who wish it to sound like one’s end itself is being taxed—offers at least two sorts of public goods. First, it raises revenue. Second, it redistributes wealth and thus balances power. Either good on its own is sufficient reason to adopt an inheritance tax, but combined they make the policy particularly appealing—as long as you don’t expect it to do everything on its own.

Franco Terrazzano argues that while an inheritance tax would raise revenue, it would not raise sufficient revenue to pay down the national debt or even balance the federal budget. But, I’d add, nor should it. Few tax measures on their own can address such aims or, for that matter, are designed to. An inheritance tax would add to the federal treasury and would in fact contribute to debt reduction and a balanced budget if we should decide that such things are necessary in the short, medium or long term. Indeed, if combined with cuts to federal spending—which I’m not advocating—the measure would be all the more effective at such aims, though it would come at some expense: the opportunity costs that accompany spending cuts. There are, however, better ways to spend such funds.

Inheritance taxes are designed to redistribute wealth from people who have been fortunate enough to take advantage of public infrastructure— and who no doubt have benefited from a dollop of their own fortune and hard work—back to the public that provided that infrastructure, once those people are, well, done with their wealth. Our government can then use that money to support citizens who need it or to build out more and better infrastructure. This redistribution is fundamental to contemporary conceptions of fairness that rest on the idea that the people who are served most by our society owe the most back to it. Moreover, since workers generate wealth that flows to owners, this redistribution is essential to pay to them what the system extracts from them. No single tax can do that on its own, but an inheritance tax can play its part when properly constructed and applied.

As Terrazzano notes, the federal New Democratic Party proposed a $10-million threshold for applying a wealth tax. Indeed, he worried that it could be reduced to $1-million. Well, reduce it further still and you’ll have the £325,000 ($535,000) threshold used in the United Kingdom to tax estates at death. In 2019 the UK’s inheritance tax raised over £5-billion ($8.5-billion), which the Office for Budget Responsibility notes is “0.6 per cent of all receipts and was equivalent to 0.2 per cent of national income.” Not a paltry sum. And the UK threshold is plenty reasonable, ensuring that smaller estates are left untouched in a country where the average income is roughly £31,000 ($53,000) per year.

And while an inheritance tax would redistribute wealth and, through it, power, this doesn’t have to come at the expense of economic competitiveness or economic investment. For instance, Terrazzano notes that Canada ranked 20th of 37 OECD countries in the Tax Foundation’s 2021 International Tax Competitiveness rankings. A handful of countries ahead of Canada on that list have inheritance taxes, including Ireland (19th), Turkey (17th), Germany (16th), Finland (15th), the Netherlands (12th) and Switzerland (4th). Those countries apply a tax ranging from a low of 7 per cent in Switzerland to a high of 33 per cent in Ireland. Of note, the annual growth rate of GDP per capita was 7.2 per cent in Ireland in 2018 and over 4 per cent in 2019, pre-pandemic. Those figures are not representative of all states with inheritance taxes, but they certainly suggest that having such a tax is no barrier to robust growth.

The goal should be to rebalance wealth and power from year to year, and also from one generation to the next.

An inheritance tax ought to be established with the goal of rebalancing wealth and power from year to year, and also from one generation to the next. We must ensure that wealth flows through a society and doesn’t become stagnant and used to create economic blocs that prevent not just economic growth and innovation but also social mobility. Regrettably, Canada already has a problem with both. And each is keeping people down. In Canada, social mobility is in decline. As Statistics Canada reports, “Canada and all its provinces have been ‘going up the Great Gatsby Curve’ ”—that is, it’s getting harder for people to be upwardly mobile across generations.

Fixing our social, economic and political problems requires us to rebalance wealth and power, and that requires that we break up dynasties and the economic monopolies they tend to create while freeing up resources for everyone and growing the economy. And while an inheritance tax would be no panacea, it could play an important part in creating a fairer, more inclusive society for everyone.

Franco Terrazzano responds to David Moscrop.

A death tax that takes $2-billion a year from Canadian families is the wrong way to address inequality and will make it harder to grow our way out of the pandemic downturn. Death taxes are effectively a form of double taxation and create strong perverse incentives against the savings needed for long-term investment and a post-pandemic recovery. That’s because death taxes impose a penalty on future consumption by taxing it at a much higher rate than current consumption, meaning thrifty people who save and invest end up paying far more tax than people who fritter their money away.

Death taxes create incentives for aggressive estate planning, ensuring that wealth is allocated in less-efficient but more-protected ways. This also reduces economic growth while simultaneously minimizing the government’s eventual take. The proportion of total government revenues raised by such taxes has been falling in OECD countries since the 1960s.

What empirical evidence suggests that a Canadian death tax would minimize inequality Post-death-tax Sweden remains a relatively egalitarian country, while the US and the UK, which both have death taxes, remain more unequal than death-tax-free Australia, Norway and Canada.

A 2018 study from the Canadian Centre for Policy Alternatives shows that nearly half of Canada’s 87 richest families weren’t heirs to a fortune, and that by the third generation, only 18 per cent of the ultra-rich owed their status to having wealthy forebears. That means the advantage of inherited wealth tends to dissipate over time, and income inequality doesn’t automatically perpetuate itself across generations.

Record spending didn’t solve inequality. But increasing Ottawa’s budget by less than half a per cent will…?

Giving politicians another $2-billion to spend won’t end inequality. The federal government was already spending at all-time highs before the pandemic. If record levels of government spending couldn’t solve inequality, what makes anyone think that increasing Ottawa’s budget by less than half a per cent will?

Even if the government directly transferred the $2-billion it took through a death tax to all impoverished Canadians, the result would be less than $8 every week for each Canadian living in poverty.

And that overstates the benefits. First, the new bureaucrats needed to administer the redistribution would eat away at the revenue. The number of federal bureaucrats grew by 43 per cent from 2006 to 2012.

Second, a new welfare program would encourage more Canadians to collect the new money, further reducing the per-person subsidy. This happened during the pandemic. Ontario’s auditor general report shows that 14,500 ineligible businesses collected the pandemic subsidies, while many businesses received more tax dollars than they lost in revenue. In March 2021 the office of the federal Auditor General said it counted 30,000 suspected cases of fraudulent Canada Emergency Response Benefit (CERB) claims.

Third, it’s a good bet that by reducing savings, the death tax would reduce charitable contributions that total five times more than estimated death tax revenues. In the US, 9 per cent of all charitable donations are bequests ($42-billion annually). If you knew the government was going to take more of your income after you die, would you allocate as much to charity?

It’s important to distinguish how incomes are created before advocating government action. If consumers are willing to exchange their money for goods and services that an entrepreneur provides, why should that entrepreneur be punished with a death tax on top of the great many taxes they’ve already paid, such as income taxes, corporate taxes and capital gains and property taxes The top 1 per cent already pay 22 per cent of all income taxes.

Accumulating wealth through government coercion is a different story. Ford Motor Company, for example, a Fortune 500 corporation whose CEO’s salary in 2019 was over 300 times the average Canadian household’s, recently received $590-million from the governments of Canada and Ontario. Just before the last federal election, the feds announced $440-million for aerospace companies and $420-million for Algoma Steel. Businesses receive $29-billion annually worth of special taxpayer treatment from the feds and four largest provinces, according to a 2018 University of Calgary report. That’s over 10 times more than the revenue that would be generated by a death tax.

Ending corporate welfare would be a much better way to reallocate spending to higher priorities. Meanwhile, Canada can grow its economy and combat negative forms of income inequality not by instituting a death tax but by removing government barriers to competition and opening opportunity for everyone in our economy.

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This unprecedented initiative was launched amid unprecedented crisis. In March 2020, with COVID-19 spreading quickly, Canada’s borders were closed, consumers began panic-buying and provinces announced lockdowns that immediately left millions of workers without an income. In normal times, unemployed Canadians apply for Employment Insurance (EI), which allows them to continue to pay their rent and feed their families. While imperfect, EI preserves livelihoods and prevents a deeper economic disaster.

By April 2020, 5.5 million Canadians had lost their jobs—one-third of all workers.

But EI wasn’t up to the challenge of so many Canadians, in so many different employment situations, losing their jobs at once. The CERB showed what an income support program truly focused on the needs of jobless Canadians could look like. Compared to EI, the CERB was more accessible, compassionate and straightforward. As we exit the pandemic, policymakers should overhaul the EI system—and look to the program that temporarily replaced it for inspiration.

The EI system has long been plague by systemic issues. Access to regular EI benefits—the financial support Canadians typically receive when they’ve been laid off—requires people to work from 420 to 700 hours each year, depending on the unemployment rate in their region. This requirement leaves out many part-time workers, the self-employed, and casual or multiple-job holders. Beneficiaries are also required to have paid premiums. Some low-income workers pay into the EI system but don’t generate enough insurable hours to become eligible for benefits.

Precarious work has been on the rise for years, but EI has no answer to it. According to Statistics Canada, about 1.7 million workers—8.2 per cent of the Canadian labour force—did some form of gig work in 2016, an increase from one million workers in 2005. The same report noted workers in the gig economy are more likely to be women and immigrants and to have lower incomes overall.

For low-income Canadians who can access EI, the program fails to provide anything close to a living wage (defined as the hourly wage a household requires to meet its basic needs). The amount of EI support one receives—known as the replacement rate—equals 55 per cent of average weekly earnings, up to a maximum (in 2021) of $595 per week, from 14 weeks to a maximum of 45 weeks, depending on the unemployment rate in the recipient’s region. A person who was earning $56,300 or more annually receives the maximum support. But a minimum-wage earner in Alberta who worked 40 hours each week would receive only $330. That amount falls below a living wage. EI was effectively made for jobless middle-income Canadians, not jobless low-income Canadians.

Even if they qualify, Canadians regularly wait a long time to get EI benefits. Prior to COVID-19, all EI applicants were subject to a waiting period of one week. After that week elapsed, applicants often waited another month or longer. According to data tabled in Parliament in April 2019, 16 per cent of all EI applications in 2018 took more than 28 days to process. Four weeks is the standard set by Ottawa for processing claims. But nearly half a million Canadians in 2018 had to wait longer than this.

Much of the wait has been due to Employment and Social Development Canada (ESDC) verifying claims. Our EI system has long prioritized fraud prevention over the quick delivery of essential support to jobless Canadians.

These issues bring us to March 2020, when COVID-19 hit Canada.

By April 2020, 5.5 million Canadians had lost their job or most of their working hours due to COVID-19 shutdowns. Over the course of just a few weeks, one-third of Canada’s workers were suddenly jobless and needed financial support. The sectors hit hardest were accommodation and food services, personal services (e.g., barbers and hair stylists), construction and culture/sports. The situation was worse still for workers paid at or near minimum wage: In the first month of the pandemic, half of these workers lost their job or most of their hours.

The crisis presented a unique challenge for the federal government: How do you get cheques to a large number of Canadians so quickly?

EI claims go up during normal economic recessions. But in those instances job losses typically occur over months, not days. The last time this many Canadians became unemployed in one fell swoop was the 1930s Great Depression. In the first week of the pandemic, mid-March 2020, the federal government received half a million EI applications. It had received 27,000 in the same week in 2019.

Benefits to these Canadians needed to be generous enough to preserve livelihoods and allow people to stay home during a public health emergency. An income replacement rate of 55 per cent wouldn’t be enough for Canadians to continue to pay for food and rent—especially for lower-income workers. Such a paltry amount would have incentivized people to seek whatever piecemeal work they could find, increasing their chances of catching or spreading the virus.

In early spring 2020, the flood of EI claims overwhelmed the federal government’s processing infrastructure, which includes computers dating back to the 1990s. Canadians waited hours to speak to call-centre agents.

The EI system was not up to the task.

At first, the government proposed two benefits to complement the EI system: the Emergency Care Benefit and Emergency Support Benefit. But given the urgency of the situation, it became clear that a new relief program had to be designed from scratch, and fast. The result was the $2,000-a-month Canada Emergency Response Benefit. Even if temporary, the program represented the first major change in income security for the jobless since the major cuts to EI, formerly known as Unemployment Insurance, of the 1990s. 

The CERB upended conventions that define EI. Instead of replacing 55 per cent of weekly earnings, it paid a flat rate of $500 a week, which for most Canadians was higher than what EI’s formula would have produced. To receive the CERB, individuals needed to have lost work due to COVID-19 and to have earned at least $5,000 in 2019 or the previous 12 months, an eligibility threshold much lower than required for EI. Tweaks to the program soon after its launch allowed Canadians to claim the CERB if they’d made $1,000 or less a month.

A significant change from previous benefit programs was that the CERB was attestation-based. Instead of ESDC agents verifying an applicant before sending them benefits, the government relied on claimants to attest to their eligibility. Verification was conducted after benefits went out, months later and closer to 2021’s tax filing time. This meant that jobless Canadians received cheques within two days instead of EI’s pre-pandemic average of three to four weeks.

The formula relied on beneficiaries to do the right thing. It also left open the risk of ineligible recipients and fraud. But that was the policy tradeoff: You could have fast cheques with minor potential for fraud (CERB), or you could have slow cheques with plenty of verification and little fraud (EI). You couldn’t have both. The right decision was to get support to Canadians as quickly as possible.

Approximately 6.7 million Canadians applied for the CERB in its first month. Of all workers who earned at least $5,000 in 2019, 35 per cent received at least one CERB payment. Some people required the support only once; others, locked in uncertainty as restrictions eased, then tightened, received the benefit for as long as it took to get their jobs back.

Who were these CERB recipients Women were slightly more likely than men to apply for and receive the benefit, reflecting the fact they were more likely to lose work from lockdowns. Two-thirds of workers employed in accommodation and food services in 2019 received CERB payments in 2020, the highest rate among all sectors. More than half of workers aged 15–24 received the CERB.

In Alberta, adults aged 25–44 were more likely than similarly aged Canadians to have received CERB support. Albertans younger than 25 were less likely to have received support than young Canadians in general. Female Albertans, however, were more likely to have received CERB than Canadian women in general.

Indigenous and racialized workers across the country, who were particularly overrepresented in hard-hit sectors, were also more likely to receive the CERB. About two-fifths of racialized people received the benefit (compared to only one-third of non-racialized people).

A significant number of recipients worked in the gig economy, such as artists and delivery people, or were part-time or contract workers.

The CERB more than offset lost income for the poorest 10 per cent of Canada’s families—for them, in fact, the benefit represented a net increase in income. Some observers have argued that the program was too generous in providing less-fortunate Canadians with a bit of financial breathing room. Still, some 422,000 CERB recipients remained below the poverty line in 2020—208,000 of them because they owe taxes on the benefit. We nevertheless shouldn’t be surprised if forthcoming data show the country’s poverty rate actually decreased in 2020.

People who had to leave work due to an illness or to care for family also qualified for the CERB. The program’s eligibility was universal across regions, sectors and different COVID-related reasons for lost work. The simple criteria made it easy for people to understand.

But even with CERB’s lower threshold, some people who needed support were nonetheless left out. About 604,000 Canadians were jobless before COVID-19 and, despite having no real prospect of getting a job, couldn’t claim EI or CERB during the pandemic.

The CERB was not without hiccups. At the start of the program about $500-million worth of double payments were accidentally sent to CERB recipients who had applied through both the CRA and ESDC. A week after the program launched, the federal government introduced a control to prevent such an error from repeating. The CRA subsequently asked Canadians who’d received double payments to return them.

A significant number of self-employed workers applied, thinking they were eligible. Some applicants were told by CRA call-centre agents that gross income—rather than net income—would be used to determine the $5,000 cutoff. Information on the CRA website initially didn’t specifically state net income was to be used. Only after some 440,000 CERB recipients were sent letters in November 2020, asking them to confirm their eligibility, did many discover they weren’t in fact eligible. But by then many of them had spent the money.

The CRA eventually admitted its messaging had been “unclear” and the lack of “consistent clarity led some self-employed individuals to mistakenly apply to the CERB.” Ottawa soon exempted those who had applied in good faith from repayment. The agency estimates 30,000 such recipients qualified, representing 0.3 per cent of all CERB claimants.

CERB was also criticized for its generosity, including by business owners who argued the financial support was too high and created a disincentive for employees to return to their jobs after workplaces reopened. A recent study in the US, however, showed no relationship between the replacement rate of pandemic jobless benefits and the length of time unemployment benefits were drawn. In other words, providing the jobless with adequate benefits doesn’t necessarily keep them from taking another job. Other factors, such as health concerns or a lack of childcare, are the most important drivers of a person’s decision to return to work.

What the CERB did do was make some workers less desperate during the pandemic than they would have been under the old EI system. The higher and more predictable payments of $500 a week also meant workers didn’t need to grab just any job, no matter how badly suited to them, simply to survive.

Some business owners blamed CERB for temporarily creating a worker shortage. Workers, on the other hand, tend to blame a business’s inability to hire on low wages and poor working conditions. Jobs in restaurants, retail and hospitality tend to be defined by difficult hours and low pay. One result of CERB may well be some efforts at reconciliation of these differences between workers and employers—perhaps wage bumps and improved conditions as the pandemic recedes.

The CERM ended in September 2020, but it influenced the “enhanced EI” system and recovery benefits that the program would transition into. The EI system Canada offered starting that month preserved a relatively low eligibility threshold. Instead of $5,000 of income, regular EI benefits effectively required 120 insurable hours of work over the previous year (the threshold is technically 420 hours, but the government offered a 300-hour temporary credit).

The Trudeau government originally announced that regular EI benefits would have a floor of $400 a week, with a weekly maximum of $573 ($595 in 2021). After pressure from the opposition NDP, the floor was increased to $500, in line with the CERB. Instead of having regional eligibility requirements, the EI threshold was uniform nationwide. ESDC also took advantage of the CERB period to make changes to EI’s processing system so it can handle a large number of claims quickly.

Ottawa also created three temporary recovery benefits: the Canada Recovery Benefit (CRB), for workers ineligible for EI, such as the self-employed; the Canada Recovery Sickness Benefit (CRSB); and the Canada Recovery Caregiving Benefit (CRCB). All provided $500 a week in support.

CERB showed what government can do if it wants to. Its legacy is the dramatic expansion of the realm of what’s possible in public policy.

If a person earned over $38,000 including both CRB and employment income, they had to start paying back their CRB. One major change from the CERB, however, was that these programs required more rigorous verification prior to payments being made. Some CRB recipients faced verification delays, which were flagged by the taxpayers’ ombudsperson in April 2021. But most EI and recovery benefit claims were processed quickly, thanks to improvements made over CERB’s seven-month period.

More than two million Canadians have applied for the CRB. More than 3.8 million have accessed EI since September 2020. The transition from CERB went well.

A sore spot was the CRSB, which only provided $500 a week for up to four weeks and had atrociously low take-up rates. The benefit become a political lightning rod as several provinces, including Ontario and BC, refused to implement paid sick days, instead pointing to the CRSB, which was hardly a substitute. The CRSB provided income support only if the applicant was sick and away from work for more than half of their scheduled work hours in a week. That didn’t help workers who stayed home and only missed a day or two of work. The CRA, which administers the CRSB, can’t make payments on a day-to-day basis. In spring 2021, Ontario and BC put forward their own paid sick-leave programs, albeit minimal in coverage.

On October 23, 2021, CERB’s replacements—the CRB, CRSB and CRCB—ceased to be offered, and new EI claims reverted to the old EI rules. The self-employed were once again without income support. Unemployed workers receive 55 per cent of previous earnings instead of $500 a week, and the duration of benefits is now less than 50 weeks.

One of my questions for judging pandemic-era policy responses is: Did we learn anything from the crisis When it came to support for unemployed Canadians, the pandemic showed us that the old EI system was slow; it didn’t cover insecurely employed workers; it didn’t cover self-employed or gig workers; and, for lower-income workers, it didn’t provide much actual benefit. At this point, we’ve learned two of these lessons—which isn’t half bad.

One major piece of the CERB that survives is universal and lower entrance requirements: these will be set at 420 hours, a big improvement over the 900+ hours required in the pre-pandemic EI system, though not as good as the 120 hours needed during the pandemic. This means part-time and insecurely employed workers who pay EI premiums will be much more likely to gain benefits when they become unemployed. This change isn’t permanent; it’s an extension into 2024. But the longer a change sticks around, the more likely it is to become permanent.

ESDC has also sped up its intake system for newly unemployed Canadians, which is positive. But it hasn’t managed to match the impressive two business days that it took for CERB payments to be sent out.

The federal Liberal Party’s 2021 election platform contained a promise to implement a new EI benefit for the self-employed. It would mirror regular EI in length and benefit level and would begin in January 2023. Plenty of details must be worked out, not least of which is how the self-employed will contribute.

Broadly speaking, the CERB and its descendant programs were an evolutionary line that leapt into life in spring 2020, and critical genetic material has made its way back into the EI system. Time will tell whether that line continues or ends up extinct in future iterations.

In the longer term, however, I hope the program illustrated just what a government can do when it wants to. In a matter of weeks, a massive new benefit was created and rolled out, completely replacing EI and substantially improving on it in key ways. CERB’s lasting legacy is the dramatic expansion of the realm of what’s possible in public policy.

David Macdonald is a senior economist with the Canadian Centre for Policy Alternatives.

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It didn’t escape attention that Kenney seemed to be predetermining the panel’s findings—that nowhere among the panel’s recommendations would citizens find “raise revenues.” As Maclean’s reporter Jason Markusoff wrote: “Kenney[’s] government may as well have announced a task force on nutrition, populated it with children and ice cream manufacturers, and limited their mandate to determining what we should eat for dinner.”

True to expectations, the MacKinnon report, released in August 2019, did not recommend any ways for Alberta to increase revenues. Instead it focused on “restructuring in order to achieve significant savings,” “efficiencies” and “reductions in spending,” and this advice has since informed provincial budgets in 2019 and 2020.

In both budgets, the UCP government made huge cuts. And in both cases it failed to balance the budget. In fact, deficits have only grown. In the wake of the latest dismal budget update, Alberta Views decided to strike its own “blue ribbon” panel, asking a selection of local experts for their ideas about how this province might raise revenues. (Think of this as the MacKinnon panel flipped on its head.)

“Our leaders have received lots of ideas about cutting and reducing,” I wrote to these experts. “What about the other side of the ledger?” Here are their ideas.

Raise income and corporate taxes, says Junaid Jahangir

I teach undergraduate economics students, but I was briefly involved in data analysis with former MLA Kevin Taft when he published Follow the Money: Where is Alberta’s Wealth Going? The book showed that whereas personal incomes in Alberta increased by 35 per cent from 1989 to 2009, corporate profits increased by 317 per cent. If Alberta didn’t have enough money to pay for public services, we concluded that it didn’t have a spending problem but rather a revenue problem.

Instead of focusing on revenues, the current UCP government, facing a fiscal crisis, has resuscitated the slice and dice approach of the Klein era, cutting taxes along with essential services such as education and healthcare. I’m particularly concerned about how cuts are affecting my students, many of whom earn a pittance as frontline essential workers.

The UCP government says it’s incentivizing job creation by cutting corporate taxes from 12 per cent to 8 per cent. Is this working For the first 11 months of UCP government, 35,700 full-time jobs were lost in Alberta and only 14,600 part time jobs were created. From the start of the pandemic until September, Alberta had the worst job recovery in Canada.

Many top economists reject the Klein/Kenney approach. Nobel laureate Paul Krugman has written on the austerity delusion and its destructive legacy. Fellow Nobel laureate Joseph Stiglitz has written that we need to restore balance by increasing public sector funding. 2019 Nobel laureate Abhijit Banerjee writes that we need to tax the wealthy, who are sitting on cash. Peter Diamond, Nobel laureate at MIT, Emmanuel Saez at Berkeley, Christina Romer, and the French economist Thomas Piketty have all argued for an optimal top marginal tax rate of 73 to 80 per cent or above.

Currently, the top marginal tax rate in Alberta (federal and provincial combined) is 48 per cent, the second-lowest among the provinces. And this rate only kicks in at $314,928—the Ontario threshold is $220,000. Canadian economist Lars Osberg has argued that the top marginal rate in Canada should be raised to 65 per cent on income over $205,000. This is still lower than the 70 per cent rate from 1940 to 1980, and would bring revenues from $15.8-billion to $26.1-billion.

The reasoning is simple. The marginal utility of an additional dollar is much lower for a wealthy person than it is for someone with meagre means. This means taxing the uber-wealthy doesn’t “hurt” them nearly as much as it benefits people near the poverty line.

Also, corporations don’t create jobs because of tax cuts but because of favourable economic conditions. This lesson should have been learned long ago. Despite fiscal stimulus during the financial crisis of 2007–2009, companies sat on huge piles of cash or funnelled financial incentives to overpaid CEOs and shareholders rather than invest in long-term projects. The stock market is performing quite well in the current pandemic even as millions of people have lost their jobs. Consider Husky, which got about $233-million in provincial tax cuts but laid off hundreds of workers. Or Cenovus, which saved $658-million from the Kenney tax cut, then announced in January 2021 it would be eliminating up to 2,150 jobs.

The risk of corporations leaving Alberta because of higher taxes is overblown. Osberg has argued that entrepreneurs shift to places with excellent public services including “pothole-free roads, nice parks and crime-free public spaces,” along with “orchestras, live theatre and opera.” Instead of tax cuts, this requires tax upkeep to sustain public services. Osberg highlighted that the highest top marginal tax rate jurisdictions of New York and California have a heavy corporate presence—Wall Street and Silicon Valley, respectively.

Some will argue that companies would hide their wealth in tax havens or through shell companies. But overdue reforms could treat multinationals as single entities for tax purposes, require them to publish tax accounts on a country-by-country basis, end Canada’s agreements with tax havens and give financial incentives to whistleblowers who expose tax fraud.

Let’s increase Alberta’s corporate tax rate back to 12 per cent and raise the top marginal tax rate to at least 65 per cent at a threshold of $220,000. Let’s also introduce more tiers beyond $220,000, and raise the top marginal rate to 90 per cent. Nobody deserves to hoard an obscene amount of wealth.

Junaid Jahangir is an assistant professor of economics at MacEwan University.

Bring in a sales tax, says Bob Ascah

The main arguments against a sales tax are basically political: No political party believes they would be re-elected if they introduce a sales tax, or elected if they propose one. Albertans oppose a sales tax. This, however, may be changing, as recent CBC polling shows a significant minority of Albertans now support the tax.

Nonetheless, a sales tax is regressive and represents an additional layer of regressive taxation on such items as tobacco, fuel, alcohol and vehicle registration fees. Imposing a sales tax to justify lower income taxes, as some economists propose, would only increase regressivity and income inequality. Provincial legislation requires a referendum on this issue.

Few Albertans know that in March 1936, Social Credit introduced the Ultimate Purchasers Tax Act, which imposed a 2 per cent retail sales tax on a range of goods. At that time, the Alberta government’s, municipalities’ and school boards’ finances were in terrible shape. The province was on the brink of default. The sales tax idea was supported by a government committee and by orthodox financial advisors. The law quickly passed and went into effect on May 1, 1936.

Almost immediately there was business and political opposition to the tax. The following year, the government decided it would rescind the tax, as it had many political and constitutional fights going on with the dominion government and the banks. However, the tax raised about 10–15 per cent of total government revenue over the 16 months it was collected.

There are a number of good reasons for Alberta again to implement a provincial sales tax, to be harmonized with the federal GST. These include:

■ The cost of raising a dollar of revenue from a sales tax is much lower than with other taxes.

■ A sales tax is a far more stable source of revenue than corporate and personal income taxes and non-renewable resource revenue. A 5 per cent rate would reliably raise about $5-billion each year.

■ Even with a 5 per cent sales tax, Alberta would still remain the lowest-taxed jurisdiction in Canada.

■ A sales tax would obtain revenue from visitors to the province, who use our public services and infrastructure.

■ The regressive nature of a sales tax can be mitigated by a refundable tax credit directed at low-income individuals and families. In addition, as with the GST, many necessities could be exempt from the tax.

■ A sales tax is efficient to collect and difficult to avoid.

While the Alberta government today isn’t approaching a default, its financial prospects remain dependent on volatile resource revenue. This dependency has, over the past half century, allowed Alberta to keep taxes low. Absent a sustained return to higher oil prices, we may have little choice but to bite the bullet and implement a sales tax as a remedy for our unstable revenue base.

Bob Ascah is editor of the forthcoming A Sales Tax for Alberta: Why and How (AUP). His blog is abpolecon.ca.

Institute a property transfer tax, says Greg Flanagan

A property (or land) transfer tax is not the property tax that is levied annually on the owner of a property by a municipal government based on the current assessed value. A property transfer tax (PTT) is imposed on the new owner of a residential property, assessed on its market value at the time of sale or transfer, and administered along with the registration of the title at a provincial land titles office.

A PTT is a type of wealth tax, although limited to one type of wealth—real estate. This wealth tax is warranted in that the Canadian tax system promotes home ownership as a form of wealth. Specifically, Canadians don’t pay tax on the imputed value of the shelter services a home provides; and upon sale, any capital gains realized on a principal residence are tax free. A PTT is usually structured to be progressive—that is, the marginal tax rate increases with the price of the residence.

The British Columbia Property Transfer Tax (then called the Property Purchase Tax) was first introduced in 1987 as a wealth tax to discourage speculation. The tax was set at 1 per cent of the first $200,000 and 2 per cent of the remainder of the selling price. At the time, approximately 95 per cent of home sales were below $200,000 and didn’t qualify for the PTT, so the tax had little effect, raising only a small amount of revenue. But as home prices have risen (and as changes have been made to the PTT), the tax now brings in considerable revenue.

The PTT in BC, to qualify as a wealth tax and to be truly fair, is imposed only on high-value properties for first-time buyers and on individuals who have owned property previously. Recently, similar ancillary property taxes have been levied in some regions of BC, including the foreign buyer tax, the vacancy tax and the speculation tax. These aren’t considered here for Alberta, but they have similar structures and purposes as the PPT—that is, they attempt to reduce inequality between people who own homes and those who can’t afford to.

First-time homebuyers in BC are exempt from paying the PTT if the price of the home is less than $500,000. There’s also a proportional exemption for homes priced between $500,000 and $525,000. A price exceeding $525,000 eliminates the first-time-buyer tax exemption. The first-time exemption only applies if you’ve never bought property anywhere, not just in BC.

To promote new home construction, BC exempts buyers of new homes from the PTT if the purchase price is less than $750,000 (with a proportional exemption for homes between $750,000 and $800,000). If the home costs more than $800,000, the buyer pays the PTT.

For people who formerly owned or currently own property, the tax rate of 1 per cent on the first $200,000 remains, while 2 per cent is now charged on the next range up to $2-million, 3 per cent on the next million, and 5 per cent on amounts greater than that.

The property transfer tax in BC contributed $1.8-billion to the public purse, approximately 3 per cent of BC government revenue in 2019. If we were to assume the same percentage of Alberta’s total revenue, then a PTT could possibly bring in $1.5-billion to Alberta. However, Alberta’s residential real estate costs less than BC’s and its population is smaller—85 per cent of BC’s. With a similar tax here, it wouldn’t be unreasonable to expect up to $1-billion in revenue.

A property transfer tax is politically supportable as fair and progressive. And it’s worth noting that the PTT has had little to no opposition in BC—unlike, for example, the implementation of the harmonized sales tax.

Greg Flanagan worked for 30 years in the Alberta post-secondary system, and retired from the University of Lethbridge. He is a distinguished research fellow with the Parkland Institute.

Take back control of the carbon tax, says Trevor Tombe

For most provinces, it’s fiscal fantasy to have high spending, low taxes and balanced budgets. But Alberta is not most provinces. Massive windfalls from non-renewable resource revenues and investment income meant that, historically, Albertans could live this fantasy. Over the past 50 years, non-renewable resource revenues alone contributed nearly 30 per cent of all government revenue in this province. Alberta hasn’t balanced the budget without resource revenues in generations.

But all good things must come to an end. Future resource revenues in Alberta are likely to disappoint. Luckily, there’s another (nearly) free fiscal lunch on offer, one that can increase government revenues and shrink Alberta’s deficit—without any new tax at all!

It’s simple: We take back control of the carbon tax.

Alberta’s first carbon tax was implemented under premier Ed Stelmach. The rate and scope of the tax were later expanded by premier Rachel Notley. With a new government in 2019, things changed again, but by less than you might think.

Contrary to popular opinion, Alberta’s current government is a strong supporter of some carbon taxes (in policy, if not rhetoric) so long as the public doesn’t see them at the pump or on heating bills. So, after their election in 2019, the UCP shrank the carbon tax coverage, removing it from gasoline, natural gas and other fuels while maintaining the carbon tax on large industrial emitters. But even the change at the retail level didn’t eliminate carbon taxation on fuels. It merely opened the door for Ottawa to step in and fill the gap. We still pay a carbon tax on fuel, only now it’s a federal tax—and slated to rise to $50 per tonne by 2022.

The trouble: Whereas previously Alberta received the revenues from a carbon tax, today the province gets none. Instead, the federal carbon tax is fully (and perfectly) revenue neutral. All proceeds are rebated directly to Alberta households and businesses—over 90 per cent to households in relatively flat amounts (in 2020, an average of $888 for a household of four).

It doesn’t have to be this way. Alberta can, if it chooses, take back control and use the revenues to shrink its deficit.

The amounts are large. By 2022 we’re talking about $2.4-billion per year. After the government takes, say, a sixth of this ($400-million) for boosted cash transfers to lower-income households to compensate for the tax’s regressive effect, we’d have $2-billion to shrink the deficit.

An increase in revenues, without a tax increase on Albertans…! We pay the tax already; we’d pay no more if this change were made.

Of course, this isn’t magic. There would certainly be a cost to Alberta households if the provincial government eliminated the current federal rebates. But two things work in Alberta’s favour here. First, the Kenney government regularly ignores the very existence of the generous federal household rebates, so many Albertans might not even notice the elimination of the rebates. (This is a political point, rather than an economic one.) Second, in both Budgets 2019 and 2020, spending reductions were the Kenney government’s priority. Provincial carbon rebates would be a type of spending. So, eliminating them would technically be a cut to provincial spending rather than a tax increase.

While $2-billion is not the entire fiscal gap we need to fill, it’s roughly one-quarter of the challenge. That’s meaningful improvement. Higher revenues and smaller deficits, all with no new taxes That’s an option worth considering.

Trevor Tombe is an associate professor of economics at the University of Calgary and a research fellow at the School of Public Policy.

Reduce TIER’s large-emitter subsidies, says Jennifer Winter

Solving Alberta’s budget challenges requires having another look at existing sources of revenue. The Technology Innovation and Emissions Reduction (TIER) regulation, Alberta’s greenhouse gas emissions pricing system for large emitters, is just such a potential source of additional revenue.

Briefly, the regulation covers onsite emissions of 34 GHGs from regulated facilities such as power plants and oil sands operations. Facilities are required to reduce their emissions below an emissions-intensity benchmark (emissions per unit of output, such as tonnes per barrel). Compliance can be via emissions reductions, use of emissions performance credits (purchased from facilities that exceed the emissions-reduction requirement), use of Alberta-based emissions offsets, or payment into the TIER fund. Facilities, however, are also granted a “free allocation” of emissions based on their output, which substantially lowers the cost of compliance. These free allocations are a subsidy to regulated facilities. The allocations also represent forgone revenue compared to full compliance.

TIER applies to facilities with emissions greater than 100,000 tonnes of CO₂e (carbon dioxide equivalent) per year, but facilities with lower annual emissions can opt in. Doing so exempts them from the federal fuel charge, or carbon price.

Based on 2018 emissions and data from Canada’s National Inventory Report and Greenhouse Gas Reporting Program, I estimate TIER covers 52 per cent of Alberta’s 272,555,000 tonnes of emissions. This increases by another 8–10 percentage points of coverage if all conventional oil and gas facilities opt in. At $40 per tonne (the price in 2021), expected revenue from full pricing of emissions covered by TIER would be $5.7-billion–$6.8 billion. (Recall that prior to COVID, Alberta’s estimated deficit for 2020–21 was $6.8-billion.)

Actual TIER compliance payments were estimated in Budget 2020 at $421-million for 2020–21, $463-million for 2021–22 and $485-million for 2022–23. (The 2020–21 first quarter fiscal update subsequently dropped expected TIER revenue to $298-million.) TIER is deliberately set up to reduce cost impacts to large emitters by protecting them from the competitiveness impacts of emissions pricing, but the consequence is forgoing quite a lot of revenue—literally billions of dollars.

Alberta’s TIER subsidies are set to taper over time, reducing the free allocations for emissions by 1 per cent annually starting in 2021. But a faster tightening rate would raise much-needed revenue—and as more countries enact climate policies, Alberta’s rationale for these subsidies disappears. Of course, the expected effect of increasing the cost of emissions is that facilities will start reducing emissions, which will have an offsetting effect on revenue. Nevertheless, reducing the subsidies to industry which result from TIER would be a significant source of revenue in the short and medium term.

Jennifer Winter is an associate professor of economics and Scientific Director of the Energy and Environmental Policy research division at the School of Public Policy, University of Calgary.

Put a tax on empty calories, says Kim Raine

Imagine a policy that would reduce healthcare costs in Alberta by more than $1-billion over 25 years and generate annual revenue to the province of $141-million. The 25-year health and economic impacts of this policy would provide a net benefit of over $4.6-billion to Alberta’s economy, an average of $185-million annually. Although it may sound too good to be true, this is the predicted outcome of a 20 per cent tax on sugar-sweetened beverages.

Sugar sweetened beverages (SSBs) contain added sugar, syrup or other caloric sweeteners, and include products such as soft drinks, sports and energy drinks, flavoured water, and sweetened fruit drinks and juices, as well as sweetened tea and coffee beverages. A growing body of research links SSB consumption to weight gain and obesity among children and adults alike. Independent of weight, SSB consumption is associated with a variety of nutritional health risks, including heart disease, hypertension and diabetes. SSBs are not the innocent treats we’ve been led to believe they are!

Sugar sweetened beverages are widely available and relatively inexpensive compared to healthier beverages such as milk, and this accessibility plays out in their consumption. The most recent (2015) estimates of dietary intake in Alberta show the average per capita daily intake of SSBs is 247 ml, which works out to 123 calories per day. The most frequent consumers are teenage boys, who take in over 600 ml (or 286 calories) per day, mostly in the form of soft drinks and sports drinks.

After a comprehensive tobacco control strategy was instituted, which included raising prices through taxes, tobacco use dramatically decreased in Canada. Taxes can similarly encourage healthy eating by decreasing demand for more expensive unhealthy foods and beverages. SSBs are an ideal target, as they’re clearly linked to health risks, they offer no nutritional value, and consumers of these products are sensitive to price increases. A 10 per cent price increase is expected to reduce SSB consumption by 10 per cent on average—and by even more among the most frequent consumers.

Over 20 jurisdictions around the world, from countries such as Mexico to cities like Berkeley, California, have implemented an SSB tax. Mexico’s six-year-old tax has driven down SSB purchases, while sales of (untaxed) bottled water have increased. Similar findings were observed in Berkeley after one year of the tax.

These findings can inform economic modelling studies to predict the health and economic outcomes of taxes elsewhere. In 2017 an Assessing Cost-Effectiveness model was used to simulate the impact of a tax on Alberta’s adult population. It estimated that a 20 per cent tax on SSBs would postpone 1,201 deaths in this province and prevent 61,324 cases of excessive weight gain, 21,661 new cases of type 2 diabetes, 5,700 cases of heart disease and 2,099 new cases of cancer over a 25-year period. This is where the $1.1-billion in health savings comes from.

These taxes are popular, too. In a 2019 survey of 1,200 Albertans, the majority of respondents (57 per cent) supported a tax on soft drinks and energy drinks. If revenue from taxes were reinvested in prevention, the public might be even more supportive. Even if only half of the revenue were reinvested, think of the possibilities of a $70-million annual infusion into subsidizing healthier foods or a universal school nutrition program.

It’s time to think of creative solutions to our health and economic crises, and leverage the beverage!

Kim Raine is a distinguished professor of public health and a researcher in the Centre for Healthy Communities at the University of Alberta.

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