Alberta does not have a provincial sales tax because Albertans do not want one. They tried it 86 years ago. It was not successful. Robert Ascah, former director of the University of Alberta’s Institute for Public Economics, recounts the little-known experiment. “An unpopular and misunderstood tax is something to avoid if you are gunning for re-election,” Ascah wryly observes.
In the teeth of the Dust Bowl and facing insolvency, the Social Credit cabinet introduced a two percent sales tax on May 1, 1936. Ascah recounts the dreadful circumstances. Four hundred school districts were in default, wheat was down to 32 cents a bushel – a price not seen since the Middle Ages – and ratepayers were reduced to eating rodents.
A 1933 Alberta Taxation Inquiry Board endorsed a sales tax in bloodless terms strikingly similar to those used by advocates today. It was “simple,” “easily understood,” “flexible,” “easily modified.” The legislature repealed the tax a year later on September 1, 1937 and never mentioned it again.
“Backing down from this tax appears to have been, in hindsight, an astute move for Alberta’s young government,” writes Ascah. Social Creditors remained in office another 34 years and the sales tax remained Black Death.
When Brian Mulroney introduced the GST in 1991 Albertans challenged it in court and defeated every single GST supporter at the polls. Conservative MP Murray Dorin (Edmonton West), then-chair of the Commons finance committee, was such an enthusiastic support of the GST he wanted it levied on rents.
I lived in Dorin’s riding at the time. The MP had so many fists waved in his face Dorin suspended his 1993 campaign weeks before balloting day. “Nervous exhaustion,” they said.
Against this colourful history Editor Ascah and contributors have produced A Sales Tax For Alberta: Why And How. “The biggest obstacle to actually implementing such a tax is Alberta’s political culture which is widely considered to be hostile to taxes,” authors note. “Politicians fear electoral defeat should they ever advocate for the tax or even consider the idea in public.”
A Sales Tax For Alberta is lively and a good argument starter. Authors concede no sales tax is possible without popular support.
“A sales tax could help fund crucial public programs such as education and health care,” write Ascah. “A sales tax makes good sense both economically and fiscally,” writes Graham Thomson, longtime Edmonton Journal columnist. A sales tax would have reduced past deficits, explains Melville McMillan, professor emeritus of the University of Alberta’s Department of Economics.
So the Taxation Inquiry Board said in 1933. Advocates today have the advantage of 86 years’ worth of data to contrast and compare in proving their assertion Alberta is worse off for its lack of a sales tax. Here A Sales Tax For Alberta falls short.
Does oil-producing Alberta with no provincial sales tax have worse health and education outcomes than oil-producing Newfoundland and Labrador that charges 15 percent? We don’t know.
Are residents of oil-producing Alaska made more miserable by the fact they not only don’t pay a sales tax but last year each received a US$1,114 oil dividend cheque? Readers are left to wonder.
Is the poorest ratepayer next door in British Columbia materially better off for paying seven percent plus GST? A Sales Tax For Alberta does not say.
Alberta taxpayers would answer no, no and no. Advocates accept they must first convince voters before any tax could be imposed. Here at least they are ahead of Murray Dorin.
By Tom Korski
A Sales Tax for Alberta: Why and How, edited by Robert L. Ascah; Athabasca University Press; 160 pages; ISBN 9781-7719-92978; $27.99