Alberta budget delivers tax increases for 1st time in years

Smokers, drinkers, speeders and high-income earners will pay more thanks to new measures introduced today by the Alberta government to deal with lower revenues brought by the plunge in oil prices.

For the first time in years, Albertais introducing new taxes and will use that money to keep building infrastructure for the growing province.

• 5 things you need to know about the Alberta budget

That construction comes at a price though. About 2,000 full-time positions will be cut, with Alberta Health Services being hit the hardest.

The governing Progressive Conservatives are abandoning the 10 per cent flat tax in favour of a more progressive tax regime and bringing back health premiums or a levy, although the latter will only apply to people who make more than $50,000 a year.

There will be no increases to corporate taxes, even though 70 per cent ofAlbertanswho filled out a government survey said they favoured that option. Alberta will remain the only province without a sales tax.

The government is also increasing user fees for example, traffic fines will increase an average of 35 per cent as well as introducing new ones, particularly on documents filed in the court system.

Despite these measures, the government is still forecasting a $5-billion deficit based on consolidated numbers, the largest amount in modern Alberta history.

The government is spending $48.4 billion in the upcoming year, $2 billion less than planned.

"I guess we had two choices," Finance Minister Robin Campbell said during a news conference that preceded his budget speech.

"One choice is we cut services and we lay people off, and I didn't think that was a very good choice.

"I think when you look at some of the increases coming forward some of them havent been touched in decades."

The province will use $4 billion of the $6.5 billion contingency fund, a savings fund for "rainy days, such as today," to cover the budget shortfall, Campbell said.

Calling it the hardest budget in many years, Campbell said the government has taken a "thoughtful and balanced approach."

WildroseLeader Heather Forsythsuggested Campbell has nothing to be proud of. She said the budget has the largest tax increase and largest deficit in the history of Alberta.

Quite frankly, Ive been in this legislature 22 years and this is a liberal budget passed by a conservative government," she said.

"And I think Albertans are going to be quite aghast by what they see.

NDPLeader Rachel Notley said the budget puts the burden on middle income people. Sheslammed Premier Jim Prentice, a former bank executive, for favouring the corporate sector.

All of this so he can let his corporate friends and insiders off the hook without having any responsibility for fiscal challenges we face right now," she said.

Bye-bye flat tax

One of those new measures is the fuel tax, which hasnt been increased since 1991.

That changes at 12:01 a.m. Friday when the tax will increase by four cents, to 13 cents a litre.

Markups on liquor will increase, adding about 16 cents to a bottle of wine and an additional 90 cents on a case of 12 beer. Those changes will happen by the timeAlbertanswake up tomorrow.

Liberal Leader David Swann, a medical doctor, said raising taxes on cigarettes and liquor is a good thing.

"I dont think anybody objects to seeing more disincentive for addiction, so its good to see that were sending the right message on those important health risks," he said.

The most radical change for a government that prides itself on having the lowest taxes in Canada is the move to a progressive tax rates.

For years, Alberta levied a flat 10 per cent tax, meaning an oilsands executive and a fast food worker paid the same rate.

Starting Jan. 1, 2016, people who earn more than $250,000 a year will be taxed at 11 per cent. For the next two years, that rate will jump half a percentage point each year, so that by 2018, high income earners will be paying 12 percent. In 2019, the rate will shift directions, falling back to 11.5 per cent.

Similarly, taxes will go up by 0.5 per cent a year for earners in the $100,000 to $250,000 tax bracket,10.5 per cent in 2016, 11 per cent in 2017 and 11.5 per cent in 2018.

People making under $100,000 will still pay a 10 per cent tax.

The progressive tax is expected to generate about $730 million a year by the time the rates are fully implemented in 2018-19.

"We are asking those who can afford it, to pay a little bit more," Campbell said.

Lower incomes exempt from health-care levy

However, the government is taking measures to reduce the effectson lower income earners. Unlike the old health premiums that were killed in 2008, the new health-care contribution levy will be assessedaccording to income.

People who make under $50,000 a year in taxable income will be exempt.

For example, someone earning between $50,000 to $70,000 will pay a maximum of $200 a year. The amount will be capped at $1,000 a year for those earning over $130,000 a year. The payments will be deducted from peoples paycheques and will not be paid by employers.

By 2016-17, the first year the levy will be in place for the entire year, government will take in $530 million.

The government is also introducing the new Alberta working family supplement, which will assist families that earn between $2,760 and $41,220 a year. A working family with one child will be eligible for a maximum credit of $1,100. The supplement will be paid in addition to the Alberta family employment tax credit, which has increased.

Job cuts in health, education

The public sector will feel the ramifications of this budget.

Alberta Health Services faces a cut of 1,695 full-time equivalent positions, but the government is not expecting layoffs, as the provincial health authority will stop filling a "significant" number of vacancies.

The health service also plans to review how it operates to try to find ways to cut spending.

Campbell said front-line health-care service will not be affected by the job losses, but he could not guarantee that front-line staff would not be affected.

If theyre part-time they get fewer hours than theyre getting now but theyre not gonna lose their jobs," she said. "We will be maintaining front line service.

The Education Department will lose 244 jobs even though 12,000 more students are expected to enrol in Alberta schools in the next year. The department expects all of the affected jobs to be non-teaching positions, including classroom aides, bus drivers and school maintenance staff.

Campbell said all teaching positions would be maintained.

A total of 370 people are expected to be laid off, with a total cost savings of about $200 million.

As for wage increases, the $2.6 billion in salary increases over three years touted by Premier Jim Prentice prior to Thursdays budget is nowhere to be seen. Because of staff reductions, the actual cost of salary increases isforecastto be half of that, at $1.2 billion.

No new hospitals for Edmonton or Calgary

Albertas health budget is $18 billion, $160 million less thanforecastin 2014. The province wants to lower how much it spends on health, and bring the amount closer to the Canadian average. This is the first time in two decades that the province has reduced its overall health spending.

"We spend 43 per cent of our budget on health care and people arent happy about that," said Campbell.

The budget allocates $926 million for renovations of hospitals in urban centres including the Misericordia and Royal Alexandra hospitals in Edmonton and the cancer centre in Calgary.

However, no money has been set aside to build to build new hospitals.

Only one of nine previously announced new family care clinics will now open, the one in Peace River.

More kids in the classroom

The Alberta government plans to stick to its school construction plan, spending $5 billion over five years to build and modernize schools across the province.

The money is part of a five-year capital plan that will have expenditures of $29.5 billion. The measure reinforces a key message in the budget: Alberta is continuing to spend during tough economic times.

Teachers will receive a bump in pay, as promised in their collective agreement.

The government anticipates that class sizes will increase as a result of these cuts.

"The transition will not be easy, but it will be necessary to ensure a quality education system is affordable to taxpayers now and in the future, no matter the price of oil," said Campbell.

Post-secondary institutions

The budget sets aside $5.8 billion for post-secondary institutions but cautions that the province wants with universities and colleges to reduce their reliance on government funding.

• NorQuest College in Edmonton will receive $120 million for its downtown campus development.
• NAIT will receive $124 million for its applied technology program

In his budget speech, Campbell alludes to future discussions about a review of tuition fees and "the need to identify and shed low-value programs that do not represent good return on investment."

Economic indicators

Looming large over the entire budget is the economy and the roller-coaster of oil prices.

Resource revenue is expected to be $5.9 billion less than 2014-15, the lowest since 1998-99

This is expected to be a weak year for the Alberta economy, with a growth of just 0.4 per cent in 2015, followed by 1.7 per cent growth in 2016.

The slow growth can be attributed directly to oil prices and a 50 per cent reduction in corporate profits and what corporations pay in taxes this year.

Campbell was blunt about what he thinks is the key message of the government: "Were going to get off oil," he said.

"And were doing that so when times are good we can put more money into savings and build more infrastructure, and when times are bad we arent going to have to have a discussion if we have to cut services," he said.

The government forecasts that oil prices will bounce back starting in the second half of 2015, with the government estimating West Texas Intermediateoil at $62 a barrel in 2016 and reaching $83 a barrel by 2019.

This budget is widely expected to be a forerunner to a provincial election and will become a centrepiece of the Tory partys campaign.

"I have no issue going to my riding and selling this," said Campbell.