The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
ItÕs been known for years that oil-rich Alberta could not continue spending royalty revenues to fund day-to-day operations without eventually slashing spending or hiking taxes, but we didnÕt know how much or how soon. Thanks to a recently released report by a committee led by Dr. Jack Mintz, we now have some numbers: $5,800. ThatÕs how much (in todayÕs dollars) the average two-income family in Alberta will have to pay in additional taxes each year by 2030 if the Alberta government does not start saving today. The Mintz report projects what could be an approximate 40 per cent increase in the average provincial tax rate by 2030. Certainly not chump change for most families. While the report was held for nearly 10 months after receipt by the government, the timing of the release was very apt. Only 21 hours prior, the government announced the expected surplus for the province had dropped from $8.5 billion to $2 billion in just three months. Oil prices hit their peak in July at $147US per barrel. At that time, the Alberta government projected revenues for the year would be 21 percent higher than expected Ð an $8.5-billion surplus. Three months later, Alberta was almost back where it started as resource prices plummeted and oil hit its lowest price of the year at $50US per barrel. Just like that, more than $6 billion in expected revenues vanished. Foolishly, the government is maintaining its commitment to spend $3.8 billion of its $2-billion surplus on carbon capture and green transit. Since that math doesnÕt work, the remaining $1.8 billion will apparently come from the 2009-10 surplus. Unfortunately, taxpayers may not know the size or even the existence of the next surplus until the summer of 2010. The only solutions are to start cutting spending or start saving. Building up a savings account today so that Alberta can draw it down in the future when oil and gas revenues evaporate, is a stupid idea. A real savings plan wouldnÕt withdraw money ever. Albertans need to look at savings like an income generating investment, not a nest egg. The goal should be to replace oil and gas royalties as a source of revenues to fund spending, with a stable, steady stream of revenues from a long-term investment fund. The Mintz commission suggests AlbertaÕs Heritage Fund needs to reach a balance of $100-billion by 2030. The report demonstrates this modest target can be reached without cutting spending or hiking taxes. If Albertans arenÕt enticed by the positive prospect of sustainable future revenues, the negative alternatives are bad enough on their own. A $5,800 annual tax hike is one; drastic program slashing is the other. The choice is theirs: start saving today or start paying tomorrow.
