Hot Potato & Humpty Dumpty

A Romp through the Finance Minister's Mandate Letter

My plan was to keep the substack quiet this summer, but the Alberta mandate letters just keep coming. Today’s was the Finance Minister’s and the contents are important.

Hot Potato

Front and center, Minister Horner is being directed to fulfil some campaign promises, including extending the ‘fuel tax pause’ until the end of the year and creating a new tax bracket for incomes below $60K. And moving ahead with the Keep Alberta Dependent on Resource Revenues Act. Oops! I meant “amending the Alberta Taxpayer Protection Act to ensure no future government can increase personal or business income tax rates without approval from Albertans in a referendum.”

This legislation cannot truly tie the hands of future governments, as they can simply repeal the legislation or pass a tax increase “notwithstanding” the legislation. But it does add an extra political penalty that some hapless future finance minister will have to pay when taxes need to go up.

Think of it this way: even without this legislation, we know that at some point in the future, an unfortunate Alberta government is going to face the inevitable moment when the resource revenues decline significantly and taxes have to be levied to pay for services. Remember playing “hot potato”? It’s like that - whoever is in government when the resource royalties dry up is left holding the hot potato. Making them repeal this legislation and impose tax increases is just super-heating the potato.

In the meantime, making it more politically costly to impose a tax increase ensures that the province will remain reliant on natural resource revenues. Making it politically impossible to raise taxes lends credibility to the claim that it’s not feasible to talk about reducing GHG emissions, in a sense. If we can’t pay for health care, education and social programs from increased taxes, we must have resource revenues — never mind that the trap is entirely of our own making.

Humpty Dumpty sat on a firewall

And then there’s the Canada Pension Plan and a provincial revenue agency, two of the three big-ticket items called for in the Firewall Letter, way back in 2001.

The mandate letter directs the Minister to release the Alberta Pension Plan report and consult with Albertans on its findings “to determine whether a referendum should be held to establish an Alberta Pension Plan that will increase pension benefits for seniors, reduce premiums for workers and protect the pension interests and benefits of all Albertans.” Kinda sounds like that decision has been made…

Related, the letter goes on to tell the Minister to explore the “feasibility and advantages of establishing an Alberta Revenue Agency to collect all provincial tax revenues, and developing a detailed strategy for its implementation should our government choose to pursue it.” Interesting that there’s no directive to explore the disadvantages, like cost, or increasing paperwork and red tape for Alberta residents.

Much as the wording of the letter suggests a desire to go ahead with these proposals, the Premier has given herself considerable room to maneuver. Public opinion on abandoning the CPP is not favorable, and it would be a peculiar strategic choice for a government to hold a referendum it knew it was doomed to lose. (Humpty Dumpty had a great fall…)

My best guess is that the Alberta Pension Plan is being kept in reserve as a weapon to wield in the standoff with the federal government over the emissions cap. You can read the mandate letter perhaps more as a message to the Feds: “Nice pension plan you’ve got there; it’d be a shame if someone destabilized it.”

Much as the idea has relatively little public support, if it were weaponized as a response to ‘federal overreach’ into the province’s management of natural resources, public support might grow.

Interesting times.