Canada needs a strong Alberta economy

The recent census gives Canadians a sense of the outsized role Alberta has played in powering Canada's economy

By Steve Lafleur
and Ben Eisen
The Fraser Institute

VANCOUVER, B.C. Feb. 17, 2017/ Troy Media/ – The first batch of census data was released recently, giving Canadians a peek at how the country evolved between 2011 and 2016. One of the biggest stories is the substantial growth of Alberta.

The province’s rapid population boom until 2015 helped re-shape the country as Alberta churned out high paying jobs while other provincial economies lagged behind. Unfortunately, Alberta’s economic growth has ground to a halt over the past two years, with implications far beyond Alberta’s borders.

Alberta’s population grew at an annual rate of 11.6 per cent between 2011 and 2016, compared to the FIVE per cent nationally. Alberta accounted for more than 25 per cent of Canada’s total population growth during that period, despite accounting for less than 11 per cent of the total population in 2011. Leading the way were Calgary (14.6 per cent) and Edmonton (13.9 per cent), the two fastest growing metropolitan areas in the country. Alberta added nearly 422,000 residents since the previous census, which is like adding a new city larger than Halifax in only five years.

alberta canada
Steve Lafleur

During the province’s boom, Alberta attracted people from across Canada and the world seeking better opportunities. With a per capita GDP nearly $23,000 higher (in 2015) than the national average and a low single-rate income tax, it was particularly appealing for Canadians from regions with less economic opportunity. And with the lowest corporate income tax rate on the continent, it was particularly appealing to business.

Of course, the sharp decline in oil prices that began in late 2014 has been a major blow to the province. But with the price of oil rebounding slightly over the past few months, and with a lot of highly skilled and motivated people looking for work, the province may have an opportunity to once again become an engine for job-growth and a magnet for workers – especially with the right tax policies.

Unfortunately, provincial tax policies have moved in the wrong direction, reducing the incentives to invest and create jobs. Consider two key provincial taxes that impact investment decisions – the corporate income tax and personal income tax.

While a lot goes into the decision to invest in any given jurisdiction, the top statutory rates in these tax categories are important metrics for businesses and entrepreneurs to consider. On the corporate side, Alberta had the lowest combined provincial/federal corporate income tax rate in 2014. Not so today. Alberta is now squarely in the middle of the pack among Canadian provinces.

canada alberta
Ben Eisen

The change in the top combined provincial/federal top personal income tax rate has been even more noticeable. In 2014, Alberta had the lowest top statutory personal income tax rate in North America. By 2016, it had fallen to the 45th lowest, eclipsing even high tax states such as Massachusetts – sometimes referred to as “Taxachussetts.” These two tax increases render obsolete the idea that Alberta is a uniquely low tax jurisdiction.

The census gives Canadians a sense of the outsized role Alberta has played in powering Canada’s economy. Without a strong Alberta, it’s difficult to have a strong Canada. As we leave the painful recession behind, the provincial government could help to accelerate the province’s recovery by restoring Alberta’s pro-growth tax policies of the recent past.

Steve Lafleur and Ben Eisen are analysts at the Fraser Institute.

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