The NDP would make corporate tax rates Alberta's new revenue roller-coaster

For weeks now, NDP Leader Rachel Notley pledged she'd balance the budget while boosting spending in several areas and not touching personal income tax rates. This all left a big elliptical dot-dot-dot on corporate taxes — and a question of whether that key missing bit of info would be filled in during the election campaign, or after it.

On Tuesday, the Alberta NDP filled in that blank, and gambled that Alberta voters' famed aversion to taxes doesn't include dinging corporations.

A day after saying it would axe the small-business tax entirely, Notley's party pledged to subsidize its ambitious upgrades on health, childcare and more by boosting the rate larger companies pay on profits to 11 per cent, up from the eight per cent it had been slashed to by former UCP premier Jason Kenney.

A yoyo-ing back and forth between conservative and New Democrat premiers was bound to bring some level of policy whiplash, and in no place would this be seen as clearly as with corporate taxes. Won't someone think of the downtown Calgary accountants and their poor necks?

A brief timeline of Alberta's corporate tax rates:

In 2014, under the old Progressive Conservatives: 10 per cent.

NDP 2015: 11

NDP 2016: 12

UCP 2019: 11

UCP 2020: 8

NDP 2023?: 11 

It would remain lower than any other province in Canada, the party reasoned Tuesday. (Fact check: yes, but only a half-point below Ontario and single percentage point lower than Alberta's neighbours.)

This plan by the New Democrats would offset $3.2 billion in expenses and tax credits— atop what Danielle Smith's UCP government had budgeted — with a forecast $1.6 billion in new revenue this year. That would produce a $1.2-billion surplus, roughly half what the United Conservatives had forecast, and slightly smaller ones the next two years.

It's a plan thick with risks layered atop of the political one Notley is taking. (Although in 2015, PC rival Jim Prentice had campaigned on plans to hike only personal taxes, and Notley promised to bump high earners' rates even higher, in addition to raising corporate tax, and she still became premier.)

Speaking of figures that go up and down, planning for a slimmer surplus means greatly boosting the chances of deficit, given how reliant Alberta's budget is on oil prices. As it is already, a UCP budget based on $79 US per barrel seems at great danger of tipping into red-ink territory, given that oil sits currently at $71 US. (Team Notley relies on the price in Smith's budget.)

The other potential peril is another assumption — about how much revenue a corporate tax hike can bring in.

The NDP platform writers simply use the calculator's multiplication button to expect every cent of Alberta corporate profit that would be taxed at eight per cent would also get taxed at 11.

It's a flawed expectation, according to University of Calgary economist Trevor Tombe. Many experts argue corporate tax hikes backfire, at least to some extent, as companies choose to evade higher rates by moving elsewhere.

Tombe estimates that Alberta would only reap half the extra tax revenue the NDP expects, and that means goodbye, surpluses.

The NDP argue that their various investment tax credits targeted to various businesses would help broaden the tax base. And the UCP pledges of a major bounty from Kenney's corporate tax cut never materialized, New Democrat veteran Shannon Phillips said.

"They promised it would fill the office towers here in downtown Calgary," said the party's finance critic. "They said companies would be 'irresponsible' for not relocating here."

Thanks in part to the post-COVID recovery and steadier oil prices, the UCP can simply point to the budget to insist the tax cut helped. Alberta's corporate tax proceeds are forecast at $5.9 billion this fiscal year, above where things were before the rate drop, or in the recessionary years the NDP government oversaw.

Again, broader economic yoyo-ing factors in. But reputations will also factor in, notably the NDP's rap as being the shabbier economic or fiscal stewards. UCP have already been playing up the contrast between themselves as tax-cutters and the NDP as hikers, and now they don't only have to base that on the increases Notley imposed in the past. 

"The NDP has a track record of driving away business, killing jobs, and turning small businesses into no businesses," the UCP's Brian Jean said in response to the corporate hike plan.

Phillips had former ATB chief economist Todd Hirsch on hand at the costing announcement to back up the NDP's argument that ultra-low corporate taxes aren't worth it — but the things that more revenue can pay for will have dividends for the public.

$10 child care next year

In addition to the party's previous promises on school, infrastructure and health-care spending, the NDP tucked into Tuesday's omnibus announcement a significant new pledge for parents of young children.

If elected, Notley would one-up the federal plan to bring child-care costs to $10 per day by 2025, and accomplish that deep discount by next year. The NDP would also extend that lower fee to before- and after-school care for older children, which as any parent would tell you costs more than $10 per day now.

Doing all that and creating additional child-care spaces would cost $1 billion over three years, the NDP estimated.

Will it have the revenue to pay for it all? Fiscal and economic projections have never been seen as the Alberta NDP's strong suit — but then again, this is a province in which no party can make a budget promise in May that isn't blown to smithereens by the economic realities in October or November.