The Rise of Western Canada: Focus Alberta

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Beatrice West
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1 The Rise of Western Canada: Focus Alberta 1 Calgary Real Estate Forum Oct 24th, 2007 Presented By: Jason Clemens Resident Scholar in Fiscal Studies

2 Rise of Western Canada: Focus Alberta 2 Narrow or broad-based based economic prosperity? Just about commodities? Institutions and policy matter. What lies ahead? Risks and Opportunities.

3 Economic Prosperity Takes Hold in Western Canada 3

4 Economic Prosperity Shifts West: Economic Growth (2006) 4 Real GDP growth (%) CDN Average AB BC MB NL NB PEI ON QC NS SK Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

5 Economic Prosperity Shifts West: Economic Growth (2007) 5 5 Real GDP growth (%) CDN Average 0 NL AB SK BC MB NB NS QC PEI ON Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

6 Economic Prosperity Shifts West: Economic Growth (2008) 6 4 Real GDP growth (%) CDN Average 0 AB BC SK MB NB NS QC ON PEI NL Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

7 Economic Prosperity Shifts West: Employment Growth (2007) Percent 3 2 CDN Average 1 0 AB BC SK QC PEI NS MB NL NB ON Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

8 Economic Prosperity Shifts West: Employment Growth (2008) Percent CDN Average AB BC SK MB NB QC NL ON NS PEI Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

9 Economic Prosperity Shifts West: Unemployment Rates (2007) 9 Percent CDN Average AB SK BC MB ON QC NB NS PEI NL Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

10 Economic Prosperity Shifts West: Unemployment Rates (2008) 10 Percent CDN Average AB SK BC MB ON QC NS NB PE NL Source: Scotia Economics (2007), Provincial Forecast Update, September 2007.

11 Accumulated Net Business Investment Per Worker ( ) 11 30,000 25,000 Per Worker 20,000 15,000 10,000 CDN Average 5,000 0 AB MB NL ON PEI NS QC BC SK NB Sources: Statistics Canada, Investment Flows and Capital Stock Division; D calculations by the authors.

12 Net Business Investment Per Worker (2005) 5, ,000 Dollars 3,000 2,000 1,000 CDN Average 0-1,000 AB SK BC NB PEI QC NS ON MB NL Sources: Statistics Canada, Investment Flows and Capital Stock Division; D calculations by the authors.

13 Average Net Interprovincial Migration (2002/ /07) 2006/07) 13 In Thousands AB BC PEI NB NS NL SK MB QC ON Source: Statistics Canada (2007), Annual Demographic Estimates: Canada, Provinces and Territories.

14 Net Interprovincial Migration (2006/07) 14 In Thousands AB BC SK PEI NB NS NL MB QC ON Source: Statistics Canada (2007), Annual Demographic Estimates: Canada, Provinces and Territories.

15 Prosperity in Western Canada 15 strong GDP growth increasing per capita incomes strong employment growth (job creation) low unemployment attracting investment & people

Provincial Investment Climate Report Based on 6 years of survey data (1998-2004) of money managers 16 Includes 7 sections: Corporate

16 Provincial Investment Climate Report Based on 6 years of survey data ( ) of money managers 16 Includes 7 sections: Corporate income taxes; Fiscal prudence; Personal income taxes; Infrastructure; Corporate capital taxes; Labour regulation; and Regulatory burden

17 Provincial Investment Climate Index: 2007 Results 17 Index Score (0-10) AB BC SK ON NL MB NB NS QC PEI CIT Fiscal PIT Infrastructure CCT Labour Regulations Source: The Fraser Institute (2007), Provincial Investment Climate Report.

18 Investment & Economic Development: Secret of Success of the West 18

19 Two Approaches to Economic Development Create the Right Environment Active Participation 19 competitive tax rates incentive-based tax structure cost-effective regulations adequate infrastructure broad-based based free trade optimal government preferential tax rates subsidies & other support asymmetric regulations targeted free trade expanded role for government

20 Size of Government: Pillar 1 20 Size of government compared to the economy matters. Western provinces have succeeded in reducing the size of government.

21 Total Government Spending as a Share of the Economy (2006/07) 21 Percent of GDP AB ON BC NL SK MB QC NB NS PEI Sources: Statistics Canada (2007), Financial Management System. Includes Federal, Provincial and Local government spending.

22 Taxation: Pillar #2 22 The amount we collect (burden) matters. The manner in which we collect it (mix of taxes) also matters. Consensus in the West for lower and better taxes.

23 Western Canada: Reduce and Reform Personal Income Taxes 23 BC (2001): 25% across-the the-board reduction additional 10% PIT reduction AB (2000): Canada s s only single rate tax (10%) SK (2001): reduced rates and increased the thresholds at which they apply

24 Western Canada: Where We Stand 24 25% Federal 20% 15% SK BC 10% AB 5% $30,000 $60,000 $100,000

25 Western Canada: Reduce and Reform Business Taxes 25 BC (2001): CIT reduced from 16.5% to 12.0% Eliminated general CCT AB (1999): CIT reduced from 15.5% to 10.0% CCT completely eliminated SK (2006): CIT reduced from 17.0% to 12.0% Eliminating CCT for most firms

26 Free Trade: Pillar #3 26 April 28 th, 2006 TILMA Free trade agreement between AB and BC covering products, services, investment, and labour Fundamental improvement on previous agreement (AIT)

27 Alberta: Losing Focus and Advantage 27

28 35,000 30,000 25,000 Increasing Program Spending 1994/ /07 Actual Program Spending 28 Millions 20,000 15,000 10,000 5,000 $47.1 Billion Constant Per Person Program Spending / / / / / / /07 Sources: Stat Can, 2007; Government of Alberta, PA 1995 to 2007; calculations by the authors.

29 Per Capita Program Spending (2006/07) 29 12,000 10,000 CDN Average 8,000 Dollars 6,000 4,000 2,000 0 AB SK NL QC MB BC ON NS PEI NB Sources: Statistics Canada, Public Institutions Division, Financial Management System, 2007; Statistics Canada, Provincial Economic Accounts, 2007; calculations by the authors.

30 General Corporate Income Tax Rates ( ) 2008) 30 Percent SK BC AB Sources: Provincial Budgets ( ).

31 Top Marginal Provincial Personal Income Tax Rates Percent BC SK AB Sources: Provincial Budgets ( ).

32 Changes in the Oil Sands: Killing the Golden Goose? 32 Federal and provincial environmental regulations Federal change in taxation for income trusts Our Fair Share Report = increase royalties Federal change in depreciation

33 Rise of the West: Not Just Commodities Smart Policies 33 Smaller, focused government Incentive-based tax relief (personal and business) Regulatory streamlining Freer trade But risks exist

Comparing Ontario s Fiscal Position with Other Provinces

Comparing Ontario s Fiscal Position with Other Provinces Key Points In 2017, the Ontario provincial government received $10,415 in total revenue per person 1, the lowest in the country. Despite the lowest