On March 26th, the much anticipated 2015 budget was rolled out to Albertan’s. Following a pre-budget televised speech by Premiere Jim Prentice two days prior to the release of the budget, Albertan’s have had mixed emotions about the details. Some felt it was way over board, others feel that it wasn’t as bad as they thought it was going to be. In an effort to break it all down, here are the majority of the key points and details that Albertans should know.
Family Tax Credits
This new budget does seem to show some relief for low income families. With a new refundable tax credit for working families and an increase to the AFECT (Alberta Family Employment Tax Credit) which will come into effect July 1, 2016.
The Alberta Working Family Supplement (AWFS) is a new credit that applies to families earning $2760 – $41,220. One child earns you up to $1100 per year, plus as much as $550 more for additional children to a maximum of $2750 per year. This new credit will provide an additional $85 million per year to 75,000 working families in our province.
Families that are currently eligible for AFECT will automatically be enrolled in the new AWFS. It has not yet been released as to when these payments will be made.
Health Care
The new Health Care Levy will be introduced July 1, 2015 and will be included on personal income tax primarily through payroll deductions. Previous health care premiums were done away with seven years ago by Premiere Stelmach. These new health care levy is structured so that those that make more, pay more. It is expected that the implementation of a health care levy will generate $396 million in the 2015-2016 budget. The breakdown of what Albertans will be expected to pay looks something like this:
Taxable Income
Health Care Contribution Levy Payable Yearly
$0 – $50,000
No levy will be paid
$50,000 – $70,000
(taxable income $50K) x 5% to max of $200
$70,000 – $90,000
(taxable income $70K) x 5% to max of $400
$90,000 – $110,000
(taxable income $90K) x 15% to max of $600
$110,000 – $130,000
(taxable income $110K) x 20% to max of $800
$130,000 – up
(taxable income $130K) x 25% to max $1000
Friday March 27, 2015, Albertan’s would have noticed an increase in taxes on gasoline and diesel by four cents to $0.13 per litre. Also, an immediate 10% liquor and tobacco tax hike also occurred.
The tax rate for insurance premiums is increasing by one percentage point in April 2016. Going up to three per cent for life, accident and sickness insurance, and four per cent for any other insurance contract.
On average, 35% increase on traffic offenses and many other user fees such as provincial campgrounds, the cost of obtaining a marriage license, birth certificate and death certificates will also be going up.
One bit of good news is that the Premiere kept his word when it came to Provincial sales tax as Alberta will not be getting one. Corporate tax and oil royalties will remain the same. There will be changes to Alberta’s 10% flat tax, but not for anyone making less than $100k. Those with a taxable income of $100,000 – $250,000 will have increasing tax rates for the next three years. Tax change expected to bring in $330 million in 2016-2017, which will increase to $730 million in 2018 – 2019.
Charitable Donations Tax Credit – for amounts of more than $200, these rates will go down to 12.75% in 2016 from the 21% they have been. This will save the province $90 million per year.
Public Sector Wages
In the Premieres pre-budget broadcast, he claimed that wage increases from negotiated contracts will cost Alberta tax payers $2.6 billion over three years.
Last year, the province spent $22.5 billion (1/2 of the entire budget) on public sector compensation, including teachers, nurses and physicians.
Roughly 1700 jobs will be eliminated at Alberta Health Services, but no front line jobs will be cut and no vacant positions will be filled. There will also be a freeze put on all management salaries at Alberta Health Services.
Infrastructure Funding
For the most part, the government plans on cutting spending but will be borrowing money to complete capital projects. Hospital funding over five years will add up to $3.4 billion, with $926 million of that being spent in Calgary and Edmonton.
New schools will continue to be built and giving makeovers to existing schools. These projects will cost approximately $3.9 billion over the next five years. Phase 2 of this huge provincial wide school build project will see 107 new builds in 2016, 10 in 2017 and 2 in 2018. Phase 3 will have 12 builds in 2016, 66 in 2017 and 5 in 2018.
$80 million is being reserved for 160 modular classrooms, which as we know just in Chestermere are in very high demand. However, there are no additional monies being allotted for teacher wages.
Ring Road funding is now going to be stretched over more years than was originally accounted for. The completion of the west portion of the south west ring road was originally scheduled for 2017 but is now being bumped to 2020-2021.
The Heritage Trust fund has been a sensitive subject for a lot of Albertans. In 2019-2020 and for the five years to follow, the government plans on only using 50% of oil revenues for budgeting purposes. The other 50% they are committing to a ‘contingency account’ that will be used for repaying debts and the Alberta Heritage Trust Fund.
In Finance Minister Robin Campbell’s budget speech, he said, “At today’s oil prices, if government took no action, we would burn through our savings from the contingency fund in the first year, and then blow through the Heritage Fund over the next two years”.
PC MLA for Chestermere Rocky View, Bruce McAllister, had this to say regarding the budget,” I think no matter what we did, people on one end of the spectrum will say that we’ve done too much and people on the other end of the spectrum will say we haven’t done enough. The reality is you need a balanced, measured approach when you’re considering the economy in this province. $50 oil is a game changer. $7 billion is gone from the Alberta economy and from the Alberta budget. So, how do you go forward with a plan that you don’t cut all the programs and services and lay off hundreds and thousands of teachers and nurses and doctors and at the same time, make this province financially sustainable and balance our services. It’s a three pronged approach. It’s reducing wasteful and unnecessary spending. It’s increasing our revenue and it’s also using your savings account. It’s not unlike really what we do in our own homes or in our own businesses. The approach is more balanced more than I think people expected in that in a few years we’re going to look back and say ‘wow, we’re so glad we did it that way’. I firmly believe that”.
McAllister went on to say that Alberta continues to have the best tax rates in Canada and that although Albertans are now paying a little bit more for some services, but we still have the lowest tax rate in the country. He also stated that Alberta has not raised gas taxes at the pump in twenty five years.
“We need to build schools. We need to build schools and roads and this is a calculated approach to maintain core government services, to rein in spending where we can and get us off the roller coaster ride of oil revenue. That is the key. We can either focus on who broke it or we can focus on how we fix it. We got rid of the worst administration Alberta had ever seen. Now we have, in my view, a thoughtful, cerebral approach to getting Alberta back to where we use to be. Worrying about how we fix it is more important to me than anything. I’m not a fan of increased fees any more than anyone else, but you still win the lottery when you live in Alberta as I feel it is the best province in the country”.
