Alberta is getting a fair deal
Does Jason Kenney have a point? Is the federal tax system treating Alberta unfairly?
Here is a chart of all federal revenues collected from the provinces and federal expenditures to the provinces, on a per-capita basis.
Federal Revenues and Expenditures by Province, 2018 ($ per capita)
This is a perfectly normal transfer distribution that would be unremarkable if not for the influence Alberta wields. The fact that Albertans pay into the federal tax system on net indicates their relative prosperity, not any kind of anti-Alberta tax scheme.
Because workers, nonworkers, and the sick are unevenly distributed around the country, federal taxes and transfers are non-uniform in their distribution. Provinces with older and poorer populations, like the Atlantic provinces and Manitoba, net out of the tax system. Provinces with younger and richer populations, like Alberta, British Columbia, and Ontario, net into the tax system.
Alberta has a particularly sharp spread because of the migration of young workers into the province and because of the high incomes of workers in resource extraction. As a result, Alberta has the highest per capita GDP of any province as well as a generally low unemployment rate.
Alberta’s recent economic issues seem mostly related to fluctuations in the oil industry. Oil prices cratered from 2014-17 and from early 2020 to the present. The oil and gas industry represents about a quarter of Alberta’s GDP in any given year, and declines in oil prices lead to mass layoffs. This has nothing to do with equalization payments or Canada’s tax policy more generally.
The oil price fluctuations have upside as well as downside however, and Alberta’s oil industry is generally very profitable. However, the province has higher-than-usual fluctuations in GDP and employment rate as a result of its large oil and gas sector.
One method of dealing with these fluctuations is through changes to EI. In Alberta, oil workers are laid off in a manner that is hard to predict, and because EI benefit duration is shortened during periods of high regional employment workers often receive short-lived benefits. During downturns in the oil industry, layoffs can last for years, and finding well-compensated work in other sectors can be difficult for such workers.
Increasing benefit amount and duration would help, as well as establishing a minimum unlimited benefit to assist the long-term unemployed. I propose changes to EI in this piece that would be helpful in addressing Alberta’s issues.
As long as the oil and gas sector is a significant portion of Alberta’s economy, Alberta will have large and impactful swings in economic output from year to year, with some years showing large decreases in output. One way to shield against this would be to use taxes to create a capital fund, similar to the Alaska Permanent Fund.
The fund could operate as a dividend-paying fund that gives a payment to every Albertan per year, or it could operate as a stimulus fund, building up during normal years and being partially sold off during years of oil industry downturn to fund stimulus programs or welfare programs. Either model would help to harness Alberta’s general prosperity while shielding Alberta from the downward price swings inherent to commodity markets.