At least we can give him credit for honesty.
Local MLA Ted Morton, Alberta’s finance minister, opened the door to a provincial sales tax for Albertans last week.
While providing a fiscal update, pegging the big-government Tories’ embarrassing deficit at $4.8 billion, Morton said his government Tories won’t bring in a sales tax any time soon, but mused one may be necessary in the medium to long term.
He is absolutely right. If the big-spending Progressive Conservatives remain in power, a sales tax may be necessary to balance the budget. Led by Premier Stelmach, who once vowed “never” to allow the province to return to red ink, Alberta is set to post a record deficit this year. Government spending is forecast to hit $39.3 billion this year, about $609 million more than budgeted.
Faced with this situation, government has three options:
• The first, and arguably most painful in the short term, is to cut spending. This was the option favoured by Ralph Klein in the 1990s. It led to almost continuous striking by public sector unions, but successfully killed the deficit, laid the groundwork to retire the debt and build the $15-billion sustainability fund now under assault from this generation’s government.
• The second, and most dangerous in the long term, is to ignore the entire situation and let deficits become structural. Until the Stelmach government begins to outline plans to cut its deficit, Albertans must assume that this is the case.
• The third, and most politically dangerous, is to raise taxes. Although Morton has not outlined specific plans to raise taxes, he seems to be opening the door to a future sales tax. Whether the provincial income flat tax will be reduced to make up the difference is not clear.
The million-dollar question remains, how does the provincial government intend to proceed? The finance minister, a man with strong conservative credentials up to this point, seems to be of the “never-say-never” persuasion when it comes to tax increases. He deserves credit for his honesty. At least now Albertans know where he stands.
However, when it comes time to elect the next government, will the public accept a government that refuses to rule out a sales tax? Our bet is never.