The Alberta Box Step

The Box dance step is named after the pattern it creates on the floor, which is a square or box. It is used in a number of ballroom dances: rumba, waltz and foxtrot.

The UCP Alberta government is moving at a foxtrot pace to fulfill its central campaign promises.  It has launched four pieces of legislation:

Step One – The carbon tax on consumers and businesses (not heavy industry) repealed on May 30, 2019.

Step Two – Make Alberta business friendly by changing the calculations of employee overtime and banked holiday pay to favor employers. The legislation would also roll-back the NDP’s recent changes to union certification rules.

Step Three – Lower the corporate tax rate from 12% to 8% over the next 4 years.

Step Four – Reduce business and industry regulations by one third.

The rationale behind this is two-fold: first as a job-creating economic stimulus and second, it’s an election campaign promise. 

And there are political dancing moves at play:

  • The UCP won 55% of the popular vote based on its platform (1million votes of 2 million voters – while a million voters stayed home).
  • Wrapping the legislation in the mantra of job creation and small business growth has appeal to those seeking relief from Alberta’s economic malaise.
  • Reducing the revenue stream (carbon tax $1.4 billion annually) and corporate tax (perhaps $400 million in year one) has implications for balancing the budget. And the government’s ‘Blue Ribbon Panel’ is looking at government expenses. They will find that the revenue cupboard is bare. Thus, deeper program and staffing cuts will be needed to fulfill their mandate.
  • Smaller government achieved by any means will be appealing to the core of the UCP base.

But the dance floor is slippery:

  • Now the federal carbon tax will kick in and the likelihood that the Supreme Court will decide that the tax is unconstitutional is remote.  
  • Heaping the responsibility for emission reductions on Alberta industry instead of the final emitters has considerable downside risk; as does relying on technological silver bullets.
  • The assertions that corporate tax reductions will generate jobs and pay for themselves is up for grabs. For every economist that says it works – there is another that disputes ‘trickle down’ economics. 
  • In Alberta, big investment decisions rely on the price of oil and pipeline access, not necessarily tax breaks.
  • There is an assumption that a conservative government can restore business confidence, leading to investment and job creation.
  • There is a risk that the jobs created by the NDP’s carbon tax incentives and petrochemical programs will not come to fruition.

Forecasts for economic growth are not very strong. ATB Financial forecasts 0.7% economic growth in 2019 and 1.6% for 2020. 

Alberta’s low tax environment and business friendly approach has stimulated considerable investment in the past. But Severely Normal Albertans ought to recognise that there is some “spin”, ideology, and hopeful thinking in the legislative package.  

So, while government policies can help …. Severely Normal Albertans and Alberta Finance Minister Toews would be wise to hope for: 

  • Recovering oil and gas prices,
  • Positive oilsands investment decisions,
  • TransMountain pipeline approval,
  • A decent 2019 crop and farm returns (along with stable Asian markets),
  • Growth in manufacturing, technology and service exports, and
  • The layoffs in the public sector don’t create a drag on economic growth.