Go ahead Jim Prentice: raise taxes in Alberta and see if by 2025 the province isn’t an economic shithole like Quebec and Ontario.

With oil prices below $50 per barrel WCS,i however momentarily, Alberta Premier Jim Prenticeii is already bringing up the prospect of increasing taxes to make up for the $7 bn lossiii his government is expecting in 2015.iv The local papers report that he’s “willing to talk about new taxes,” as if that required the heroism of Hercules. Sure. Why not.

But the fact of the matter is that, yes, in Alberta, of all places, the head of state is talking about higher taxes – in the one province that has enjoyed more prosperity than any other Canadian province in the last 20 years – in the same province where country music, hockey, Ford F-150s and yes, low taxes, course through the blue collar veins of every man, woman, and child – it’s happening.

I bet you never thought you’d see the day when the mighty Progressive Conservativev Party, the de facto and in esse ruling party in Alberta for over three decades, would be advocating for such things. I mean, isn’t squeezing every last penny out of the productive classvi what those good-for-nothing socialist provinces like Quebec do? Yes, Billy, it is. But now that the price of oil is down, we all need to tighten our belts so that the state can extract more of our money without us making a peep we can all do our part for the glory of this beautiful and prosperous land of ours.

Somehow, someway, as if we lived in Backwardsland and now Febturday was the new Sabbath, Premier Prentice is seriously proposing that Alberta unwind the single biggest economic advantage it’s had for the past 20 years: low taxes.

Students of both history and economics will note that it’s on the back of Ralph Klein’s flat income tax, not to mention a few other pretty smart things,vii that Alberta’s enjoyed such unbridled and nationally unparallelled prosperity since the mid-1990’s. While other provinces creaked and groaned under the weight of high taxes and even more draconian regulatory environments, Alberta flourished like no other, improving its status from a “have-not” province to a “have” province and reversing the flow of federal transfer payments in the process.viii They were really, really good times.

And now, all too quickly, and as “no one could’ve predicted,” this single-resource economy is between a rock and hard place. Even though consumers are saving money at the gas pump (which would be a good thing), the psychological trauma inflicted upon Albertans is profound, not to mention the yet-to-be-felt effects of the withering gravy train that flowed south from Fort McMurray to Edmonton, Red Deer, and Calgary like oily manna from heaven.

Soon enough, the reports will trickle in that consumer spending has taken a severe beating, shops and restaurants will close their doors, construction projects will be put on indefinite hold, new truck sales will dive, home sales idem, and every Albertan will turn their eyes to the government to “do something, anything!” as if the province had a magic wand that distributed magic money if only people needed it badly enough. At a time when Canadian banks are quietly raising their interest rates on mortgages and lines of credit, the squeeze will leave few unscathed.ix

So what better time for Prentice to rob any productive capacity left in the province of its will to live, right? That’s just what you do when you finally face the stark reality that your health care, pension, and welfare obligations are going to bankrupt you, isn’t it? Gotta keep the dream alive, eh?

Alternatively, and I’m just throwing this out there, Alberta could take a stab at relevance in the 21st century.

One way to do this would be to reduce taxes, reduce the minimum wage, and reduce government involvement in more industries, such as non-emergency health care and post-secondary education,x allowing businesses and the labour force to lean out and become more competitive. More competition will ultimately yield more profitable and robust businesses as well as reducing unemployment, all of which will ultimately help the provincial government’s tax base.xi

Another way forward, one that will be even more outrageous to the average MLA but I’d be remiss if I didn’t at least mention it: Bitcoin mining. As I previously explored in What happens when all the fish are gone?

So what a to-do to die today, at a minute or two to two?

A humble proposal might be made: Bitcoin mining. Alberta has the coal reserves, the sunshine, the cold climate, the physical space, and the remote geography to make this a reality.xii There’s no reason Oilberta couldn’t be Coinberta. The second best time to plant the tree is now.

Indeed, a thing distinctly hard to say, but harder still to do.

Bitcoin frankly isn’t plussed one way or the other, but Alberta’s window of opportunity is closing. Really and truly. This chance won’t be there 10 years from now. The Internet, in case you hadn’t heard, has made economics a global game and if Alberta doesn’t want to end up like North Korea, much less Quebec or Ontario, the time to act is. right. now.

So whatever you do, Cher Monsieur Prentice, whichever direction you choose, be that to raise taxes or decrease government expenditures or set a brave new course for our province, whatever you do…

Don’t end up like Gavin.

___ ___ ___

  1. WCS=Western Canadian Select, the heavy blend of crude oil derived from Alberta’s bituminous northern sands. It’s a heavier grade than either WTI or Brent and sells for 15-20% less money on the open market.

    With the recent decline of the CAD/USD pairing, WCS is presently selling for US$35.10 compared to ~US$48.00 for WTI/Brent. Undercutting the competition is a good thing, selling something for less than it costs to produce isn’t quite so beneficial. No wonder oil goliath Schlumberger, who has a large presence in Alberta, is preparing to make 9,000 Canadian workers redundant. A shrewd business like Schlumberger is never one to waste a good crisis. If there’s an opportunity to trim some fat, they’ll take it in a heartbeat.

    Still, much of Alberta’s fortunes have been and continue to be predicated on oil thirsty Americans and that nation’s attempts to reindustrialise, as Mircea explores:

    The dim, anemic but also only attempt by the US to reindustrialise is centered among the “alternative energy” flag, which is entirely predicated on oil being scarce and thus expensive. Things like Obama’s signature “we’ll take oil, make fertilizer, pay Monsanto, ferment the corn, make ethanol, change all the engines to less efficient types, because this indirect path creates more jobs than simply distilling the oil” entirely relies on oil not ever going under 100 a barrel, and that in inflation adjusted dollars, so it’d be about 140 by now. The scheme barely works even then, but it’s beyond ridicule with a barrel under 50 2015 dollars. About 15 cents in 1973 dollars.

    Untethered from that pesky metal, US Dollars aren’t worth the paper they’re printed on. So ya, 15 cents is about right. Seeing as how it’s pretty hard to separate oil from sand for anywhere near that, the “Alberta Advantage” was quite dependent on cheap injections of USD to artificially inflate the whole economy. The US was basically propping up Alberta just until North Dakota came online – and nary a moment more. But what do you expect when you choose dishonest handlers?

    So forget Keystone XL. Alberta’s economy, to the extent that it will continue to be a single-industry operation, desperately needs the proposed pipelines to China. []

  2. Not that it particularly matters who the specfic Premier proposing this is, they’re just the fall guy. []
  3. What the fuck is a “budget shortfall?” If you lost money, you lost money. Call it what it is. You can’t really dress up in your mother’s high-heels and cocktail dress and call yourself “King of The Britains” and expect no one to bat an eyelash. []
  4. When I say that the Alberta government is “expecting” such and such in the future, it’s because they’ve made projections* based on the wise words of their ever-so-brilliant team of unbelievably well educated economists. Y’know, just like the Soviets.

    *Lest we forget: “This concentration of “decision-making” certainly isn’t an overnight process, but top-down socialist democracies inevitably reach a form of unparalleled fragility, dependent as they are on the shamans of economic prognostication. So no matter how much stability and peace they promise, they will break and they will break catastrophically, despite and entirely because they only ever had “the best of intentions.” “

    eg. Alberta budget projections 2014You’re fully entitled to find this as laughable as I do! []

  5. How’s that for a contradiction in terms? More free health care! Less taxes! I swear, you can only get away with this shit when you have oil money plugging the swiss cheese holes in your head.

    Really though, I don’t have to swear. This self-contradictory emperor is naked now and low oil prices took our jobs! Because mismanaging the books for the last 5-7 years had nothing to do with it. []

  6. Yes, it’s a class, and yes, that means that there are different classes in society. Just like grade 2 is not grade 6, the heavy-duty mechanic is not the PhD in economics. And no, I would never imply that PhDs in economics are part of anything other than the magpie/cockroach/mollusc class. []
  7. The “few other pretty smart things” included privatising government liquor stores and vehicle registries, greatly reducing the number and size of loan guarantees issued to corporations, and generally letting businesses take care of matters of business. Not bad for a high-school drop-out and a drunk, eh? He actually understood how the world works!

    Alberta would do well to recall Ralph Klein’s lessons, namely, that government has no place in the economy. []

  8. Don’t even get me started about the inaneness of “transfer payments.” I mean sure, why not tax people in one area, send their money 3,000 km away, let it catch a few fingers on the way there, and then send whatever is left back from whence it came, letting it stick to a few more fingers on the way back. Because there’s nothing more efficient than central planning! Derp. []
  9. The “few unscathed” will be those of us who are only nominally exposed to the Five Eyes banking system, and, via Bitcoin, independently wealthy. No, I don’t just mean independent from mom and dad, though that’s nice too, but rather structurally immune to coercive taxation. That’s right, Bitcoin is a swiss bank account in the clouds. Figure it out.

    Even though the inverse-iatrogranic effects of capitalism have been repressed for over a century, you can’t keep a good thing down forever. The splendiferous decency that lays ahead of humanity is already starting to burst through the dark skies.

    And it’s all because of Bitcoin: the most powerful underpinning for an economy yet devised by nature. Nothing else is so immune to intervention, nothing else so neatly cleaves the state from any meaningful participation in the economy. No state can print more of it to buoy failing firms, no state can coercively tax its citizens to balance its own books, and everyone in the world can transparently see what new capital is entering the market. It’s right there in the math – frozen as if in an entablature.

    So go ahead, Prentice, raise taxes as high as you want! Jack them up to 95% of income for all it matters. All you’ll do is drive anyone with two brain cells and a spare nickel straight towards our little cryptographic safe haven in the sky. Now how’s that for driving adoption? []

  10. At this point in Canada’s history, post-secondary undergraduate education is largely, though not entirely but by and large, an extension of high-school; that is, an exercise in neoteny. Depending on the specific program, it can be four years of drinking and socialising, four years of cramming for lab exams, four years away from home, and/or four years towards a practicable skill. It really quite depends, but socialising the costs of such an experience make it almost impossible for the middle-class high-school graduate to turn it down, distorting a more accurate cost-benefit analysis. []
  11. I know I know, this humble proposal is “crazy” and “never going to happen” because lowering the minimum wage and decreasing taxes “doesn’t fit the theory” or some such nonsense. Yet somehow, everyone from high-school drop-outs like Ralph Klein to the Prime Minister of Singapore have well demonstrated that it’s all about what works in practise! And what works in practise is lower taxes and less government involvement in matters of import such as the economy. []
  12. From the same article:

    Alberta’s coal reserves are currently estimated at 33 bn tons, representing 70% of Canada’s known reserves and 1000x the province’s current annual output. This annual output of 25-30 mn tons is currently used to meet 43% of the province’s electricity needs with plenty left over to export to Asia.

    As to sunshine, 320-330 days per year isn’t unusual, making the province’s wide-open plains an ideal location for PV panels.

    As to temperature, Central and Northern Alberta are really quite cool. In this part of the world, the July mean temperature ranges from 12C to 15C and January mean temperature ranges from -14C to -24C, though there are probably 5 days per year over 30C and another 5 days per year below -40C. Nothing modern PV can’t handle. In fact, they quite like the colder clime. Around here, it’s not unheard of for wintertime efficiency of PV panels to exceed their rated specification. Plus, you’ll certainly spend far less cooling your facility in Central Alberta than you would in Central China.

    At 661,848 km2, Alberta is about the size of Texas, but with only ~3 mn residents, its population is 1/9th that of the continent’s other major oil state. There’s no shortage of space, allowing your Bitcoin mine to be more geographically isolated and thereby slightly reducing, if far from eliminating the risk of, the probability of physical attacks.

    []

16 thoughts on “Go ahead Jim Prentice: raise taxes in Alberta and see if by 2025 the province isn’t an economic shithole like Quebec and Ontario.

  1. Jautenim says:

    Heh, that’s gotta be something. In the PIGS country where I’m from we’ve never known anything other than socialist parties. The whole lot of them. And so it goes. At least now I can vote by stashing some wealth in a friggin’ Swiss bank account in the clouds.

    Nice post, I enjoyed reading it.

    • In the PIGS country where I’m from we’ve never known anything other than socialist parties.

      You’re not going back far enough to say “never” ;) I’m not an expert on the Spanish monarchy but the original La Serenissima was in the “PIGS” neck of the woods and it was a hell of a far cry from a socialist shithole!

      At least now I can vote by stashing some wealth in a friggin’ Swiss bank account in the clouds.

      A vote with your wallet is a powerful vote indeed.

  2. […] it trickles down at all, will matter in the slightest at a time when oil pricesii are tanking and higher taxes seem to be right around the […]

  3. […] and contrast with Go ahead Jim Prentice: raise taxes in Alberta and see if by 2025 the province isn’t an economic sh… […]

  4. […] of a state’s budget just for health care ? No wonder Alberta wants to raise taxes, free and practically unlimited non-emergency health service is the least tenable idea in the […]

  5. […] states who seem to have nothing better to do with their citizens’ tax dollars than derp about the best strategies for managing the economy. The similarities are clear: neither pretender has ever closed the deal but they still have plenty […]

  6. Matthew East says:

    The argument that less taxes makes a stronger economy has been debunked over the last several decades, Except for the odd outlier the vast majority of nations, states, territories etc from around the world have statistically had more and faster economic growth with higher taxes then with lower taxes.

    Having a sook over possible higher taxes in the lowest tax region of Canada does not speak highly of you, When the finances get into a hard time people need to adapt, Those that cant adapt tend to wither and fade away (ie: America)

    • The argument that less taxes makes a stronger economy has been debunked over the last several decades,

      Debunked ?? As in, it’s been proven that lower taxes hurt an economy ?? This is just so much braindamage. You seem to be wandering through the empty city streets thinking that economics is a science capable of proving anything at all, rather than the art that it is, and even that actual sciences can do more than disprove theories, as per Popper.

      Except for the odd outlier the vast majority of nations, states, territories etc from around the world have statistically had more and faster economic growth with higher taxes then with lower taxes.

      Not only do these outliers debunk your naive scheme – because that’s how real science works, by disproving garbage – but you’re really going to need to come up with some examples to fortify your quivering claims. For my side, Alberta has grossly outperformed Quebec over the last 25 years.

      Having a sook over possible higher taxes in the lowest tax region of Canada does not speak highly of you, When the finances get into a hard time people need to adapt, Those that cant adapt tend to wither and fade away (ie: America)

      The lowest tax region in Canada still has taxes in excess of 10% of profit, just for being part of this great socialist ‘experiment,‘ therefore still making it part of a command economy, the exact type of economy that is unable to adapt to rapidly changing circumstances. For my part, adapting to “hard times” doesn’t mean giving away more money to fuckers who are going to turn around and piss it away, it means Bitcoin. Full stop.

      For your part, Matthew, regurgitating this type of baseless, misspelled, statist retardation speaks woefully for any and all positions you may choose to associate with. Get your little head out of the box, my man.

  7. […] is a neat little trick that Alberta hasn’t quite figured out. The province has prosperity, even if oil prices are in a temporary […]

  8. […] 20%, the 787 is unique not only for its “environmental conscientiousness,” as if oil prices were high !, but also because an exceptionally large percentage of the plane’s component manufacturing […]

  9. […] Therefore the weak must do their damnedest to constrain the strong through physical means, redistributing that which they did not earn under the veil of high-minded “morality” to go alongside with the narrative construction of the noblese oblige somehow, someway magickally extending to handouts, lest their despicable and broad daylight thefts be called, well, “theft.” […]

  10. […] also on track for the same ‘dignified’ minimum wage. As if the slumping oil prices and pending tax increases weren’t enough of an economic thwap to the head of productivity. […]

  11. […] I’ve reviewed some plays and discussed some local politics, but I think you’ll agree that the perspective garnered from a single shopping experience is […]

  12. […] that doesn’t mean that Alberta isn’t still the best place to make it big, as long as there are fish around. […]

  13. […] transfer payments,” ie theft from the industrious to the needy, but that topic’s been touched upon elsewhere. […]

  14. […] Alberta isn’t as good as it should be five years after the last oil price crash (because reading Contravex is hard mkay), but with CAD/USD at only $0.73, we’re still somewhat protected from the full […]

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