Fraser Institute: Families Could Save $1,500 by Reducing Alberta’s Tax Rate to 8 Percent
A report from the Fraser Institute suggests that implementing a flat 8 percent income tax rate in Alberta would enhance competitiveness and result in savings of over $1,500 annually for residents. This reduction in tax rates was a promise made by Premier Danielle Smith during the 2023 election.
However, the residents were informed in the 2024 budget that they would have to wait until 2026 to witness a new income tax bracket for individuals earning up to $60,000, with a rate of 9 percent. Subsequently, in 2027, this rate will decrease to 8 percent as per a government webpage.
According to the Fraser Institute report, ten years ago, the province had a flat 10 percent income tax rate for both businesses and individuals.
The authors of the report, Tegan Hill and Nathaniel Li, highlighted the advantageous position Alberta held as an attractive location for starting businesses, working, and investing due to the previous tax rate. They noted that the measures introduced by the NDP in 2015 complicated the tax system, leading to a five-bracket system and an increase in the corporate and personal income tax rate to 12 percent.
Alberta now ranks as the 10th North America region with the highest personal income tax rate, according to Ms. Hill and Mr. Li.
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The authors emphasized that if the personal income tax rate in Alberta was reduced to 8.00 percent, it would be one of the lowest in Canada and among the 15 lowest top combined PIT rates in North America at 41.00 percent.
They stressed that the high tax rate hampers productivity in the province as skilled workers are less incentivized to work in Alberta due to the current tax system. The report suggests that reverting to a single rate system at 8.00 percent could diminish this disincentive across the income distribution.
“Undoing the personal income tax hikes of 2015 and introducing an eight percent flat personal income tax rate would help restore Alberta’s tax competitiveness and retain more money in the pockets of Albertans,” mentioned Ms. Hill in a statement.
During the 2023 campaign, Ms. Smith pledged that if her government was re-elected, the tax rate for individuals earning $60,000 or less would be reduced to 8 percent.
“This change would result in savings of $760 for every Albertan earning $60,000 or more – equivalent to over $1,500 per family,” as per a news release on May 1, 2023 announced. “Those earning less than $60,000 will witness a 20% reduction in their provincial tax bill with this tax cut.”
