Monday, October 26, 2009
Debunking the low taxes myth.
Albertan premiers have for a long time convinced Albertans that Alberta is the tax haven of North America. The last guy we had loved to talk about the Alberta advantage. The new guy wants us to think we have the freedom to achieve and tells us things like, "we have very low tax rates for people working in the province."
Either one of two things are happening for Premier Stelmach: he is trying to mislead us or he has no sense of what "working" people make.
He must not be talking about people who make between 30 and 80 thousand dollars a year. Because they could move to BC or Ontario and pay less in taxes.
This graph shows the amount of provincial personal income tax paid in 2008 by someone making $30,000, $50,000 and $70,000 of taxable income. If you're making $40,000 in Alberta you would pay $2,383.90 or 6% of your income to the province. Meanwhile, in BC you would be paying 4.2% and in Ontario you're paying 5%. (All data is calculated from Revenue Canada tax returns with only the personal deduction claimed)
In fact, as income levels rise, Albertans pay more tax than Ontarians until they start making $80,000. British Colombians save on taxes until they start making over $120,000.
The main reason for this, of course, is that Alberta has a flat income tax rate, while BC and Ontario have progressive tax rates. In fact, Alberta is the only province (and one of only a few jurisdictions) to have a flat tax.
We have it because we were duped.
In 2001 King Ralph moved Alberta to a flat tax and combined it with a tax cut. We bought the idea of a flat tax, because we liked the tax cut that happened to come with it. In actuality, the ones who really save with flat taxes are the wealthy.
To further support my claim that Alberta has revenue issues, this chart shows the 2008 personal income tax paid in 6 provinces, depending upon a person's taxable income.In all of the other provinces as an individual's income level rises, the proportion taken for provincial taxes also rises. Except for Alberta, represented by the blue line, where the more you make the more you save.
There is an Alberta advantage alright - it's just felt most by those people who make the most money. Here are the tax levels for people earning $150,000 and $200,000 in the various provinces:So while the Albertan making $40,000 is paying $693 a year more in taxes than his counterpart in BC, the Albertan who makes $200,000 is saving $3,874.
This provides for me two interesting alternatives. We could cut taxes for 6 Albertans by raising taxes on one siginificantly wealthier Albertan with no affect on the treasury. Or we could tax him at a level that all of the other provinces deem to be fair and save our public services.