Governments that are rich in oil are in panic mode right now. With the price of oil per barrel hitting around the $40 mark, government officials are conjuring up new policies to continue the charade of big government. Instead of cutting spending and reducing the size of government, oil-rich countries and states are simply considering new taxes to raise the lost revenues.
Case in point is the province of Alberta, the economic engine of Canada, where it has its oilsands development that has produced great wealth for both the province and the rest of the country. Unlike Ontario, a province that has been engulfed with unemployment, corruption and debt for the past several years.
Alberta has gleefully boasted that it is the only province in the country to not have a sales tax. Well, that may be history as Premier Jim Prentice noted that a provincial sales tax may be introduced to help generate revenues and fill government coffers. This comes as the premier dismissed any suggestion earlier this month.
“I don’t think Albertans generally advocate a sales tax, but I’m prepared to be educated and to hear from people. I’m not embracing a sales tax. Let’s be clear,” Prentice told a lunchtime business audience Tuesday. “I’ve simply said I want to hear what Albertans think about cost containment, about deficits and about revenue increments to the government. Certainly there are people who have views about a sales tax, and I welcome their opinions.”
Falling oil prices have essentially bled billions of dollars from the provincial Treasury.
The province will also examine adjustments to its tax system, including its 10 percent flat tax, which critics say hurts the middle class while benefiting the rich. Prentice added that he wants the public sector workers, who are paid the highest in the country, to step up and sacrifice for the better of the province.
Economists have mixed feelings about such a sales tax. Although it may be a good idea at first, it may deter consumers from spending, especially at a time when the economy has slowed down.
“I know a sales tax isn’t going to be on the table for anybody, but maybe the introduction of a B.C.-style gasoline tax. With gas prices in Edmonton at 72 cents and 79 cents, now is the time to do this, ” Todd Hirsch, chief economist with ATB Financial, told the Globe and Mail. “What they might want to do is say ‘when the economy picks back up and we’re growing at four per cent, then we’ll introduce a sales tax and then maybe some other stable source of revenue.'”
Wildrose Party critic Shayne Saskiw averred that the proposal to introduce or raise taxes is unnecessary because the $40 billion budget already contains enough excess and waste – Alberta’s projected budget surplus this year has quickly transformed into a $500 million deficit. Saskiw further added that he wouldn’t mind going to the polls to talk about introducing taxes with voters.
The Wildrose Party has been decimated in the past few months as nine Members of the Legislative Assembly (MLA), including its then-leader Danielle Smith, defected to the Conservatives.
Let the collapses of national and state/provincial economies begin, at least for the short-term.
This is what happens when governments think they can pay for their vast social programs when they have an abundance of resources. When crises like today happen then the governments quickly look for new taxes to maintain the status quo or the ones who have personally benefited from welfare for years are left in the cold. Russia and Venezuela are learning first-hand about the dangers of spending beyond your means becuase you have some oil.
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