ElvisL1ves: What if the situation were reversed, and the oil was found in Newfoundland? Well, I suspect that then Alberta would have been receiving a large amount of social assistance from Canada, and that would have impeded our need to diversify our economy. We’d have more farmers, but they’d have to be heavily subsidized because there would be more than the market can bear. We’d probably be in worse economic shape, DESPITE that fact that we might actually be receiving more money in equalization payments than we currently earn from our oil.
Alberta’s oil revenue is about 7.2 billion a year. We give over 3.5 billion dollars of this revenue to Canada to fund the equalization system, leaving us about 3,500 per person in revenue from oil.
But consider this: Nova Scotia receives more than $4,500 per person in equalization payments. So on a per-capita basis, they get more ‘windfall income’ than Alberta does. Ours comes from oil, theirs comes from a combination of our oil and Ontario’s industrial strength. Quebec is also a huge recipient of Equalization money, getting almost half of the 10 billion dollars or so that is collected from Alberta and Ontario.
So it’s not that Alberta is rich because we’re making money hand over fist from oil. Oil is certainly part of it, but Alberta also has the lowest taxes in Canada by far (and even so, we’d be running a balanced budget without oil revenue). We have no provincial sales tax. We operate in a low regulatory environment. The population is very entrepreneurial. Edmonton has been ranked as having the lowest costs for doing business of any city in all the G8 countries. As a result of these structural benefits, we tend to attract risk-takers and go-getters and larger businesses. Alberta’s population is growing faster than any province in Canada.
The Fraser Institute and CATO did a joint report on economic freedom in North America, measuring both tax rates and regulatory burdens on business. All of Canada’s provinces wound up at the very bottom of the list, except for one: Alberta was ranked 23rd, as I recall, meaning that it was not only the most economically free province in Canada, it was more economically free than more than half of the states in the U.S. Quite an achievement considering that we have high federal taxes, a federal sales tax, and public health care.
And it didn’t have to be that way. Before Ralph Klein was elected, Alberta was in real fiscal trouble. We had high deficits, a big debt, and a government that tied itself to the price of oil by constantly making rosy revenue projections and spending all of it. Klein came in, and cut government dramatically. My wife is a nurse, and she took a rollback of 4% of her salary, along with other public employees. There was much wailing and gnashing of teeth over all this, but Klein stood firm. So we cut spending, and diversified our economy, and revenue started to pick up. Eventually we ran big surpluses, and instead of spending it as the left was demanding, we paid down the debt. Now Alberta has almost no debt, we run surpluses, and our taxes are low. Corporate taxes are even lower than the U.S, and going lower. Corporate taxes in the U.S., between federal and state taxes, average 40%. In Alberta, it’s 33%, and we’re movng towards a target of 30%.
As a result of our aggressive lowering of taxes, we’ve seen our economy diversify dramatically. Alberta exports have doubled in the last ten years. In 1995, our energy revenues made up 36% of our overall revenues. Today, despite the fact that oil is priced higher, energy only makes up 22% of revenues. And as far as social justice goes, we may not have programs as extensive as other provinces, but then, we don’t have as many people on unemployment and welfare, either. Our unemployment rate is lower than Canada’s by a wide margin, and lower than the unemployment rate in the U.S.
Canada could learn some things from Alberta, if they were willing to listen and would stop characterizing us as a bunch of redneck cowboys. Conservative economic policies DO work. Low taxes and regulations create the conditions for economic growth, and it’s economic growth that ultimately benefits everyone. Alberta’s economy has grown at an average of 4.2% over the past ten years, which is an astounding rate.