Alberta’s personal income tax rates are uncompetitive compared to energy-producing U.S. states, says a report released Thursday by the Fraser Institute a public policy think tank.

The report said Alberta’s top combined personal income tax rate (federal plus provincial) is now more than 10 percentage points higher than the top rate in several other energy-producing jurisdictions, making the province less competitive. 

“One of the cornerstones of the former Alberta Advantage was competitive personal income tax rates and the province’s rates are now among the highest in North America,” said Ben Eisen, Fraser Institute senior fellow and co-author of Alberta’s Lost Advantage on Personal Income Tax Rates, in a news release.

The report said that over the past five years, Alberta’s top combined (federal/provincial) personal income tax rate increased by nine percentage points— from 39 per cent to 48 per cent—from 2014 to 2019 as a result of tax hikes by the provincial and Canadian federal government in 2015 and 2016 respectively. 

“Whereas in 2014, Alberta’s top PIT rate was the lowest in North America, now it is the 10th highest. What’s more, in 2018, the U.S. Congress and Trump administration cut the top federal U.S. personal income tax rate by 2.6 percentage points—from 39.6 per cent to 37 per cent. In fact, Texas, Alaska and Wyoming—three energy-producing states that don’t have any state income tax—have the lowest PIT rates in North America while Alberta now has one of the highest,” said the Fraser Institute, adding that Albertans face a substantially higher marginal PIT rate than in energy intensive American jurisdictions at all income levels ranging from $50,000 to $300,000. 

“Alberta can no longer claim a clear advantage when it comes to personal income tax rates, and uncompetitive taxes have negative effects throughout the economy,” said Tegan Hill, Fraser Institute economist and study co-author.

Although the government has announced a plan to restore corporate income tax competitiveness lost in recent years, no similar plan has been announced with respect to the PIT, said the Fraser Institute.

“In fact, to the contrary, the new government has introduced PIT increases by implementing a pause in indexing, thus lowering the real income threshold at which individuals become eligible for higher marginal rates over time. Unless policy changes are announced, Alberta will continue to maintain one of the highest combined PIT rates in Canada or the United States, a remarkable shift from the situation just five years ago.”

Mario Toneguzzi is a business reporter in Calgary.

© Calgary’s Business


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