Alberta budget: not a stellar vintage

We have a sign above the door to our kitchen. A gift from friends, it reads: “Life is too short to drink bad wine.”

I take it to be metaphorical, but my wife is more literalistic, and she will no longer drink the swizzle that comes from my wine lab downstairs.

That edge of particularity now costs us a bit more, due to the 16-cent-per-bottle hike in provincial wine taxes in last week's budget. Is there anyone out there willing to bet that this increase will morph closer to $1.60 by the time the price stickers are applied to the bottles?

Gasoline, wine and beer — the fluids on which much of Alberta runs — have become more dear since the price of that other vital fluid — oil — has collapsed. But life is too short to get bitter over that.

Rather, we should sample a bit more widely from the budget before we pass judgement on it. But judgement is needed, considering we can expect a snap election to be called any day now, as a sort of public ratification for it.

So what has really changed since premier Jim Prentice gave the province a long, hard look in the mirror? For most of us, not a whole lot — at least not immediately.

Alberta's flat income tax has become slightly inclined. The first $100,000 of taxable income remains taxed at 10 per cent. That about covers the 90 per cent of us.

But any portion of a taxable income over $100,000 to $250,000 will ratchet up to 11.5 per cent by 2018. Taxable incomes of $250,000 and up will hit 11.5 per cent in 2017, and take a one-year bump in 2018 to 12 per cent, before going back down to 11.5 per cent in 2019 — just in time for the next election scheduled by law to follow the snap election we'll have this year.

If you can believe it, there are critics bemoaning this heartless tax grab. But once Alberta's super-rich compares the top income tax rates of the other provinces, I doubt we'll see an exodus of wealth any time soon.

The new health levy is getting the most ink in discussion of the budget. While catching up on the news Monday night, I was called to participate in a phone-in “town hall” meeting with the health minister, most likely to discuss the health levy.

I had volunteer commitments right then, so I had to hang up.

But we 90-per-centers won't be suffering much from that new tax levy. After all your deductions, if your taxable income is under $50,000, you won't pay any health care levy at all.

Anything over that, up to $70,000 (remember: taxable, not gross income) gets hit with a five-per-cent surcharge — the maximum you'll pay is $200.

The sliding scale slides up — for a person who has $130,000-plus annual income — with the maximum annual charge of $1,000. Some people pay more than that for a night out to watch one hockey game.

The only improvement I currently see in this health levy over the last one, is that it's tied to the tax system. Our previous “health care premium” was a separate bill the government spent fruitless millions trying to collect from people who just refused to pay it.

What bothers me more is a change that has slid under the radar so far. Alberta till now had the most generous tax rebate for charitable donations (between the federal and provincial governments, we used to get back half of what we gave to charities, over $200, at tax time). After 2016, the provincial portion drops from 21 per cent, to 12.75 — the rate it was in 2007, when it was last raised.

As a volunteer fundraiser for charities, I used to pitch for donations by telling people that they'd get half their donations back (at least the portion over $200 a year).

In the larger picture don't know how well that worked — the provincial government reports having serious doubts raising the deduction helped raise charitable giving.

But it does tell me something about human behaviour, and the effectiveness of tax incentives in general. Albertans do give the highest median charitable donations in the country, about $420 a year. But because we have so many millionaires among us, Alberta ranks second last in donations as a portion of median income.

So, I say the biggest lesson here is that people will give what people will give, and tax incentives don't influence personal generosity all that much.

That argument cuts in several directions. It could also mean that, for instance, businesses decide to invest and work in Alberta regardless of whether the business tax is the 10 per cent or, say, 12 per cent.

A 100-per-cent income tax write-off for RSP investments has not created a nation of savers, has it?

A 50 per total tax rebate for charitable donations did not make Alberta charities here so well funded they can patch up the shortfalls of the publicly-funded social safety net.

So what makes the government think a two-per-cent corporate tax hike would totally flatten this province?

But where we live, saying things like that sounds like bad whining. And life's too short for that.

Follow greg Neiman's blog at Readersadvocate.blogspot.ca