Alberta Seeks Tax Hike

June 25, 2015

Last week, legislation was proposed in the Canadian province of Alberta that could soon change its corporate income tax rate and personal income tax starting on July 1 and October 1, respectively. Joe Ceci, the Minister of Finance, introduced the Act to Restore Fairness to Public Revenue in an effort to implement a progressive tax structure. The revenue generated by the tax would be used to invest in quality services and infrastructure.

The corporate tax rate would rise 2 percent, from 10 percent to 12 percent, while small business tax rates would remain stable at 3 percent. Additionally, the 10 percent flat income tax would be replaced by a graduated tax structure with five different brackets:

Income

Personal Income Tax Rate

Up to $125,000

10%

$125,000-$150,000

12%

$150,000-$200,000

13%

$200,000-$300,000

14%

$300,000 and higher

15%

Source: Alberta Ministry of Finance

During a press conference, Ceci explained that 7% of the Alberta province is directly impacted by this progressivity.

Ceci estimates the personal income tax alone would raise an additional $800 million to $1 billion in FY 2016-2017. The corporate tax rate would also generate $350 million to $550 million more. Health care, education, and social services are expected to see further support with additional revenue being channeled into each fund. $500 million would strictly funnel into health care, $40 million to post-secondary schools, $45 million to schools with new students in the fall, and $39 million for programs regarding human services.

Canada is well known for its low corporate taxes. Just last year, our experts commended Canada’s decrease in corporate tax rates in 2000. For many years, their corporate tax revenue, as a share of GDP, has surpassed that of the U.S. because businesses are more comfortable incorporating under Canada’s tax code.

The Act to Restore Fairness to Public Revenue will raise revenue, but not without substantial costs to competitiveness and growth.

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