Alberta businesses want costs reduced: CFIB

Posted on October 24, 2024 by Vauxhall Advance

By Heather Cameron
Vauxhall Advance
Local Journalism Initiative Reporter

Western Policy analyst Bradlee Whidden with the Canadian Federation of Independent Business (CFIB) says that the Province of Alberta is set to collect $74.614 billion in revenues in the next fiscal year, compared to their projected spending of just $73.170 billion, leaving them with nearly $1.5 billion in excess funds, and they are projecting to continue collecting more money than they spend over the next several fiscal years, resulting in additional surpluses.

“The province’s large budget creates a cushion for tax reduction to occur,” said Whidden. “This means the government can lower taxes and reduce its revenue without needing to borrow money or run a deficit to make up the difference.”

CFIB, Whidden says, has analyzed the Alberta government’s budget to determine how much tax rates could be reduced while still maintaining a large budget surplus in the report: Surplus of Opportunity: Tax Reduction in Alberta.

“Alberta’s surplus is large enough that even with the revenue reduction from creating a new eight per cent personal income tax bracket on the first $60,000 of income and lowering the small business and insurance premium tax by half is far lower than the total surplus amount,” said Whidden. “A new eight per cent  personal income tax bracket on income up to $60,000 would cost the Alberta government $1,400 million in revenues when fully phased in. Reducing the small business tax rate by one per cent  would reduce revenues by around $160 million each fiscal year. Reducing the four per cent insurance premium tax rate by two per cent would reduce revenues by around $400 million each year. 

Whidden says that CFIB projects the government would still have budgetary surpluses in 2025/26 ($745 million), 2026/27 ($1,218 million) and 2027/28 ($666 million).

While creating a new personal income tax bracket would lead to a substantial income loss, Whidden says, the government’s surplus is large enough that reducing the small business tax rate and the f our per cent insurance premium tax, wouldn’t significantly impact the surplus, especially since revenues from the small business tax rate are relatively small to begin with.

“The four per cent insurance premium tax rate is a tax Alberta businesses and residents pay on insurance premiums for insurance plans covering all risk except for accident, life and sickness,” said Whidden. “This tax raises the cost of insurance for all Albertans insuring their property, automobiles and belongings. Reducing or eliminating the insurance premium tax will lower the cost for Albertans to insure these things.”

“Both these costs illustrate that Alberta small businesses want costs to be reduced. Reducing taxes lowers costs in the present, reducing the amount of money they must forfeit to the government from their day-to-day operations,” said Whidden. “Paying down debt now reduces future costs by avoiding the need for tax increases later.”

Whidden says that inflation has made the goods and services that residents and small businesses buy more expensive, and high interest rates have made borrowing money more expensive as more most be paid back over time. 

“These factors reduce the amount of money Albertans spend, resulting in decreased consumer demand and less people buying goods and services from small businesses,” said Whidden. “High taxes exacerbate these issues, taking money from people’s paychecks and leaving Albertans with less money they can spend. Governments have done very little to help the affordability crisis facing small businesses and everyday Albertans. In fact, taxes have gone up with all levels of governments (i.e. federal carbon tax, CPP/EI, Alberta fuel tax, property taxes). In addition to inflation and high interest rates, Canadians are being hit from every angle with new costs, impeding their overall financial health.”

In terms of those who struggle with financial health, Whidden says, 40 per cent of Alberta small businesses report weak or critical financial health, more than the 26 per cent of Alberta small businesses reporting strong or very strong financial health, 77 per cent of Alberta small businesses cite tax/regulatory costs as a major cost constraint, the highest share since 2019. Residents are also struggling with affordability, with 24 per cent of households having to forgo expenses for basic necessities like food and medicine to pay for energy costs in 2023, higher than the national average of 15 per cent according to a Statistics Canada survey.

However, Whidden says, the Alberta Government has implemented an Affordability Action Plan composed of a variety of different cost saving measures for Albertans, but the source of Albertans’ affordability problems should be addressed by lowering taxes. The Alberta Government, Whidden says, has also previously committed to creating a new personal income tax bracket of eight per cent for income up to $60,000 and CFIB recommends the government follow through on this commitment. At this time, Whidden says, all Alberta income earners pay 10 per cent on this income. 

“While the new personal income tax bracket would reduce costs for residents, affordability for small businesses should also be addressed,” said Whidden. “CFIB recommends the Alberta government lower or eliminate the two per cent small business tax rate, bringing the province closer in line to PEI (which has a small business tax rate of one per cent) and Manitoba, which has no small business tax rate.”

“These actions would boost the Alberta economy by raising wages, increasing investment resulting in more money being paid to contactors and suppliers, and lower costs,” said Whidden. “This would help offset the factors contributing to the affordability crisis. Consequently, the Alberta Government should reduce taxes to boost the economy.”

Given the Alberta government’s current and upcoming surplus position, Whidden says, CFIB recommends several things to mitigate the affordability crisis Albertan citizens and business owners currently face including following through with the government’s commitment to create a new personal income tax bracket.

“This reduction will put more money into workers’ pockets, addressing the affordability crisis for individuals and indirectly boosting the local economy by facilitating more consumer spending,” said Whidden.

The CFIB, Whidden says, also recommends that the government also Reduce or eliminate the small business tax rate.

“This reduction would allow small businesses to keep more of the money they earn, allowing many to keep the doors open at a time when small businesses in the province are struggling,” said Whidden. “In addition to addressing the affordability crisis for these businesses, it will indirectly benefit individuals through higher compensation and lower prices.”

Last, but not least, Whidden says, the CFIB recommends that the government reduces or eliminates the four per cent Insurance premium tax rate, as the reduction would lower the artificial cost of insurance premiums caused by the tax rate in the province, thereby addressing high insurance costs for both individuals and small businesses.

“This is an opportunity to reduce taxes for small businesses,” said Whidden. “These large billion-dollar surpluses enable the government to cut taxes while maintaining a healthy budget, avoiding the need to go into deficit.”