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"A tax swap would better position the province for future economic growth and related tax revenues."

The 8 Percent Solution: A Sensible Tax Compromise for Albertans



A revenue-neutral tax swap would improve Alberta's fiscal prospects, according to a report released today by the C.D. Howe Institute. In "The 8 Percent Solution: A Sensible Tax Compromise for Albertans," authors Colin Busby and Alexandre Laurin propose a change that would better equip Alberta's government to meet its longer-term fiscal challenges, which include plunging resource revenues and growing budget deficits.

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"Beyond the financial damage caused by the flooding, Alberta will need to address its record of rapidly growing expenses and volatile revenue," said Colin Busby. "The surprisingly large deficit of $3.1 billion for fiscal year 2012/13, revealed in the Government of Alberta's report released last week, highlights the province's ongoing fiscal troubles. A tax swap would better position the province for future economic growth and related tax revenues." Financial trouble has led to calls for a broad-based sales tax in Alberta, and strong opposition to that proposal, note the authors. Most proponents favour a revenue-neutral tax swap that would see a sales tax introduced alongside a decrease in income taxes. Such a switch, they say, would lead to greater saving, investment, and result in less volatile government revenues. Those opposed are concerned about shifting costs onto lower- and middle-income Albertans, and the loss of Alberta's identity as the only province without a sales tax. The authors propose a solution that would break the deadlock between the two sides of the debate. They recommend Alberta introduce an 8 percent HST - by adding 3 percentage points to the existing federal GST of 5 percent - and lower its personal income tax rate to 8 percent, which would be revenue neutral. "By introducing a generous HST credit for low- and middle-income earners, the proposal would also limit the distributional problems associated with sales taxes like the HST, while creating a more competitive economy," concluded Alex Laurin. For the report, click here:


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C.D. Howe Institute -- Bio and Archives The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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