Alberta Tables Legislation to Require Referendum for Future Tax Hikes

Alberta Premier Danielle Smith speaks during an event in Calgary on Oct. 5, 2023. The Canadian Press/Jeff McIntosh

The Alberta government is introducing legislation that would force the provincial government, current and future, to hold a referendum before personal and corporate income tax rates could be increased.

The proposed legislation is among the priorities announced in the government’s throne speech delivered by Lt.-Gov Salma Lakhani on Oct. 30.

The speech also included commitments to defend the province from federal overreach, and using the sovereignty act to do so if needed.

No Tax Raises Without Referendum

Bill 1, the Alberta Taxpayer Protection Amendment Act, was introduced as the first bill of the fall legislature session on Oct. 30, and if passed, would fulfill earlier campaign promises made by Alberta Premier Danielle Smith.

“Albertans are not interested in higher taxes and that’s one of the reasons they elected us in the spring: we promised to reduce the taxes they pay and protect them from future tax increases,” said Ms. Smith in a news release announcing the bill.

At a news conference on Oct. 30, Ms. Smith said Alberta has no payroll tax, no capital tax, and no health premiums, and its tax exemption income amounts are higher than in any other province.

“Workers and businesses would pay $20 billion more if we had the same tax system as any other province,” said the premier.

If the bill passes, the government would not be able to change tax rates, reduce personal income tax bracket thresholds, or change basic personal, spousal, and equivalent-to-spouse amounts without a referendum.

The current legislation already bans the introduction of a provincial sales tax without a referendum.

Bill 1 does not prevent the province from tying personal tax levels to rises in inflation, a process known as de-indexation. The premier said that past governments had that option for extreme circumstances and the province needed the flexibility in the event of an issue in the future to maintain a balanced budget.

“I have to look at our history ... there was a point where [Alberta] ended up running a $14 billion deficit ... That is a tool that, in extreme circumstances, remains as part of this act,” said Mrs. Smith.

Low Taxes

Nate Horner, minister of finance and president of the Treasury Board, also spoke at the news conference and said that Alberta has the lowest overall taxes in the country, giving it a clear “tax advantage.”

The Alberta government has an 8 percent general corporate income tax rate, which is 30 percent lower than the next lowest province.

“Our low tax environment is a major reason why we’re seeing more people from other provinces and countries choosing to make Alberta their home and more job creators and innovators choosing to invest in our province,” said Mr. Horner.

The province said its combined federal-provincial general corporate tax rate is lower than the combined federal-state rate of 44 U.S. jurisdictions.

The province’s corporate income tax revenue was $8.2 billion in 2022, the highest amount that Alberta has recorded in any single fiscal year. The province said that the number of business incorporations in the province is up for the third year in a row.

“By protecting Albertans and Alberta businesses from future tax rate increases, we’re furthering our commitment to Alberta’s low-tax, pro-growth environment,” said Mr. Horner.

The Canadian Federation of Independent Business (CFIB) welcomed the move, stating their own survey following the election indicated that 80 percent of Alberta small businesses were in favour of the legislation.

“Alberta small businesses continue to struggle with economic recovery and are faced with new challenges that are putting cost pressures on their business. The Alberta Taxpayer Protection Amendment Act, 2023 will provide Albertans and Alberta small businesses with greater certainty of any future tax increases, which they cannot afford,” said Annie Dormuth, CFIB provincial affairs director.

NDP Leader Rachel Notley said that Bill 1 was a “gimmick,” speaking to reporters at the legislature following the throne speech.

“It chains Albertans to the revenue royalty rollercoaster, because it makes it impossible to confront and adapt to changing economic conditions,” said Ms. Notley, who was defeated in the May provincial election.

The fall session of the 31st legislature will end on Dec. 7, and seven to nine government bills are expected to be proposed during the session, most focused on affordability.