Breakenridge: Kenney has ended the era of the sneaky back door tax increase
Author of the article:Rob Breakenridge • for the Calgary Herald
Publishing date:Sep 06, 2022 • 1 day ago • 3 minute read • 14 Comments
Publishing date:Sep 06, 2022 • 1 day ago • 3 minute read • 14 Comments
Premier Jason Kenney at the McDougall Centre in Calgary on April 12, 2022.
PHOTO BY DARREN MAKOWICHUK /Postmedia Archive
In what could be the final major decision of consequence from outgoing Premier Jason Kenney, his government is reversing one of its very first major decisions.
In 2019, the Kenney government introduced the very “bracket creep” that Kenney had once railed against as a federal member of Parliament. Specifically, the government deindexed taxes from inflation, meaning that many taxpayers found themselves pushed into higher tax brackets despite their purchasing power remaining more or less the same.
That may sound much more mundane than an actual increase in tax rates, but the effect has been the same: Albertans paid more in tax as a result.
In a video posted to social media last week just ahead of the province’s fiscal update, Kenney announced that because Alberta’s fiscal position has improved so significantly, “we are now able to restore full indexation of Alberta’s provincial personal income tax system.”
The decision will be retroactive to the start of this fiscal year, so Albertans will likely see an additional refund in the spring (just before the next provincial election, oddly enough).
The government surely deserves some credit for reversing a bad policy, but it doesn’t absolve them of responsibility for having made the choice in the first place. And while it may seem like a case of kicking a politician when he’s already down, it’s important to call attention to the flaws of this approach and to ensure that future governments are not tempted to go down this path.
There’s no doubt that Kenney inherited a very challenging fiscal situation in 2019 and his party had made a clear commitment to try to get Alberta’s books in order. However, Kenney had also made a clear promise that there would be no change to personal income tax rates under a UCP government.
And while arguably both promises were kept, the manoeuvring to keep the latter promise while at the same time increasing tax revenues is what led to the reliance on bracket creep — a rather “pernicious tax grab,” as Kenney once said.
If the premier believed that additional tax revenues were necessary to balance the budget, then the honest and transparent — and more efficient — approach would have been to raise tax rates. Of course, that would have been a much harder sell, and so we get the sneaky back door tax increase.
According to a study published in July by Gillian Petit and Lindsay Tedds at the University of Calgary’s School of Public Policy, Alberta’s brief flirtation with bracket creep has come at significant cost to Alberta taxpayers.
They estimate that between 2020 and 2022, the Alberta government brought in an additional $646 million in tax revenues.
With this announcement of reindexation being retroactive through 2022, the final revenue haul for the Alberta government will likely be less than $646 million. At this point, though, it’s unclear by how much. At the end of the day, Alberta taxpayers will still be out of pocket as a result of deindexation, not to mention all the additional costs we’ve had to bear as a result of this year’s pace of inflation.
Again, it could be argued that given the magnitude of the fiscal problems facing Alberta in 2019 (to say nothing of the challenges that followed), a temporary tax increase would be a necessary sacrifice to maintain program spending while helping to shrink the deficit.
But, of course, that’s not a case you’d ever hear the UCP make. When the blue ribbon panel on Alberta’s finances delivered its report in September 2019, the Alberta government made a point of highlighting this line in the report’s summary: “Raising taxes is not the answer.” It was the following month that the budget was tabled, ushering in the bracket creep tax increase.
The rhetoric we heard did not match the actions of the government. Albertans deserve better.
“Afternoons with Rob Breakenridge” airs weekdays 12:30-3 p.m. on 770CHQR and 2-3 p.m. on 630CHED rob.breakenridge@corusent.com Twitter: @RobBreakenridge
In what could be the final major decision of consequence from outgoing Premier Jason Kenney, his government is reversing one of its very first major decisions.
In 2019, the Kenney government introduced the very “bracket creep” that Kenney had once railed against as a federal member of Parliament. Specifically, the government deindexed taxes from inflation, meaning that many taxpayers found themselves pushed into higher tax brackets despite their purchasing power remaining more or less the same.
That may sound much more mundane than an actual increase in tax rates, but the effect has been the same: Albertans paid more in tax as a result.
In a video posted to social media last week just ahead of the province’s fiscal update, Kenney announced that because Alberta’s fiscal position has improved so significantly, “we are now able to restore full indexation of Alberta’s provincial personal income tax system.”
The decision will be retroactive to the start of this fiscal year, so Albertans will likely see an additional refund in the spring (just before the next provincial election, oddly enough).
The government surely deserves some credit for reversing a bad policy, but it doesn’t absolve them of responsibility for having made the choice in the first place. And while it may seem like a case of kicking a politician when he’s already down, it’s important to call attention to the flaws of this approach and to ensure that future governments are not tempted to go down this path.
There’s no doubt that Kenney inherited a very challenging fiscal situation in 2019 and his party had made a clear commitment to try to get Alberta’s books in order. However, Kenney had also made a clear promise that there would be no change to personal income tax rates under a UCP government.
And while arguably both promises were kept, the manoeuvring to keep the latter promise while at the same time increasing tax revenues is what led to the reliance on bracket creep — a rather “pernicious tax grab,” as Kenney once said.
If the premier believed that additional tax revenues were necessary to balance the budget, then the honest and transparent — and more efficient — approach would have been to raise tax rates. Of course, that would have been a much harder sell, and so we get the sneaky back door tax increase.
According to a study published in July by Gillian Petit and Lindsay Tedds at the University of Calgary’s School of Public Policy, Alberta’s brief flirtation with bracket creep has come at significant cost to Alberta taxpayers.
They estimate that between 2020 and 2022, the Alberta government brought in an additional $646 million in tax revenues.
With this announcement of reindexation being retroactive through 2022, the final revenue haul for the Alberta government will likely be less than $646 million. At this point, though, it’s unclear by how much. At the end of the day, Alberta taxpayers will still be out of pocket as a result of deindexation, not to mention all the additional costs we’ve had to bear as a result of this year’s pace of inflation.
Again, it could be argued that given the magnitude of the fiscal problems facing Alberta in 2019 (to say nothing of the challenges that followed), a temporary tax increase would be a necessary sacrifice to maintain program spending while helping to shrink the deficit.
But, of course, that’s not a case you’d ever hear the UCP make. When the blue ribbon panel on Alberta’s finances delivered its report in September 2019, the Alberta government made a point of highlighting this line in the report’s summary: “Raising taxes is not the answer.” It was the following month that the budget was tabled, ushering in the bracket creep tax increase.
The rhetoric we heard did not match the actions of the government. Albertans deserve better.
“Afternoons with Rob Breakenridge” airs weekdays 12:30-3 p.m. on 770CHQR and 2-3 p.m. on 630CHED rob.breakenridge@corusent.com Twitter: @RobBreakenridge
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