Put yourself in Premier Brad Wall’s shoes for a moment.
You’ve just won one of the largest majorities in Saskatchewan history, the provincial government is rolling in resource revenues and more and more people are investing in and moving back to Saskatchewan every day.
So now what should you do to make things even better?
First, it would be wise to pause for a moment and reflect on why Saskatchewan is doing so well.
The “Saskaboom” can be largely traced back to two significant factors – lower rates charged by the government on companies that pull resources from the ground and lower taxes.
Think about it. Potash, oil and other resources have always been in the ground, so why have they suddenly become huge industries in Saskatchewan? There are a few reasons why, but the most significant is that the former NDP government reduced rates that they charged businesses for extracting and selling resources like oil and potash.
As a result, private businesses have invested hundreds of millions in Saskatchewan, hired thousands of workers and paid billions to the government in additional taxes and fees.
Tax reductions by the provincial government went hand in hand with the new royalty structure. By reducing taxes, the province was able to lure investors and workers, as well as keeping existing ones in the province. For example, over the past decade, the business tax rate has dropped from 17 per cent to 12 and the small business tax rate is now just 2 per cent.
Both moves helped Saskatchewan close the gap with provinces that were charging lower tax rates or dropping their rates at the same time. Thus, it also helped Saskatchewan businesses improve their competitiveness.
On an individual level, taxpayers have saved thousands through lower personal income taxes, school taxes and through a lower sales tax. That has not only made Saskatchewan a more attractive place to live, it has given Saskatchewan entrepreneurs a solid crop of good workers who are no longer fleeing the province.
That brings us to the second point number for the premier to consider – there’s more work to do. Yes, Saskatchewan’s school taxes, business taxes, sales tax and personal income taxes are lower than they were five years ago, but they’re still higher than Alberta’s rates.
Closing the tax gap will help ensure Saskatchewan businesses compete, attract more businesses and keep people in the province.
One way for the government to do that is to continue to focus on debt repayment. After all, once the provincial government’s general revenue fund debt is paid off, it will free up over $400 million in annual interest charges. It’s very similar to paying off your credit card and no longer having monthly charges.
Just imagine if the province was able to put $400 million back in taxpayers’ pockets on an annual basis.
That brings us to the final major consideration – spending.
Next door in Alberta, they were able to pay off their debt and drop taxes to some of the lowest rates in Canada, but they also increased spending. And boy did they ever.
Over the past decade spending in Alberta has skyrocketed. So much so that when the revenue slowed down, the government couldn’t close the spending taps; they’ve rung up almost $7.5 billion in deficits over the last three years alone.
Learn from the past, continue to close the tax gap and be mindful of Alberta’s mistakes. If Mr. Wall can do that, the road ahead will be smooth for Sask taxpayers.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
