An Albertan adds up the numbers

[overthere]

It was harder than expected...and shockingly not found in the Toronto Star, Globe and Mail, or Le Devoir.

If you’re still wondering why oil-rich Alberta doesn’t have a massive sovereign wealth fund like Norway, consider this.

Alberta is a province, not a country. Ergo, we don’t get to keep all the wealth we generate in this province. Not even close.

I realize this runs counter to the preferred narrative in Canada, where politicians and media types insist Alberta either “put all its eggs in one basket” by failing to diversify its economy (hello Christy Clark), or that Albertans “spent like drunken sailors” during boom times.

Sure, there’s some truth to those arguments. But the far bigger reason why Alberta isn’t rolling in filthy lucre is that we are part of a federation called Canada.

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Ergo, most of our tax revenues go to Ottawa, and are then redistributed to fund a vast array of social, health and educational programs in Quebec, the Maritimes and the rest of Canada. The federal equalization program alone, under which Quebec receives nearly $10 billion a year, is just part of that wealth transfer.

When economists say Alberta has been Canada’s key engine of growth in recent decades, that’s really what they mean. Without Alberta’s energy wealth, this country would have been a fiscal basket case long ago. Now that Alberta’s oil-fired economy is also struggling, Canada is heading for the fiscal swamp.

So just how much money has flowed out of Alberta to Ottawa? A lot. Between 2000 and 2014, on a net basis, Alberta’s individual and corporate taxpayers shipped an estimated $200 billion-plus to the federal government. That’s what left the province, less what the feds reinvested here.

To put that lofty figure in perspective, it’s nearly 12 times the value of the $17.4 billion Alberta Heritage Savings Trust Fund. No other province — including Ontario, with three times Alberta’s population — even comes close to matching this province’s contribution to the federation.

During Alberta’s boom years, back in 2007 and 2008, the province’s taxpayers shipped more than $20 billion annually, on a net basis, to Ottawa. And when oil prices returned to triple-digit levels after the 2008-2009 recession, the cash gusher from this province returned. In 2011, for instance, it reached nearly $19 billion.

Even more remarkable, few Canadians seem to be aware of this, except in the vaguest sense. Conspicuously, I’ve never seen these numbers reported in the national media or disclosed by federal and provincial politicians.

And after calling not one but four leading public policy think tanks, I couldn’t find a single expert who has researched this data, or who was willing to discuss it at any length. Some seemed downright defensive about it, as if it was “un-Canadian” to explicitly acknowledge one province’s outsized contribution to the federation.

http://edmontonjournal.com/opinion/columnists/gary-lamphier-how-much-money-has-flowed-out-of-alberta-to-ottawa-a-lot

Edited February 20, 2016 by overthere

[Smallc]

All that because of winning the geographic lottery. How brave of you.

[Smallc]

I mean, lets just ignore the fact that Alberta was a creation of the Canadian federation, and not a member that joined it.

[The_Squid]

Alberta is a province, not a country. Ergo, we don’t get to keep all the wealth we generate in this province.

Could Alberta have had royalties on oil to raise money for the Province, or not?

The answer, of course, is yes it could have and chose not to.

The fact that it's a province, that it pays into equalization and that people in the province pay federal income tax is irrelevant to whether or not the province could have generated revenues from the tar sands when it was booming and profits were massive.

[Smallc]

No no, this is everyone else's fault.

[overthere]

Could Alberta have had royalties on oil to raise money for the Province, or not?

The answer, of course, is yes it could have and chose not to.

The fact that it's a province, that it pays into equalization and that people in the province pay federal income tax is irrelevant to whether or not the province could have generated revenues from the tar sands when it was booming and profits were massive.

Are you being intentionally funny?

Of course Alberta collects royalties? How do you think they built all those roads, schools and hospitals to accommodate the hundreds of thousands of Canadian economic refugees that have left the unemployment of the ROC to try and earn a living? The NDP just completed a thorough royalty review and confirmed that the existing royalty regime is on par with that of other countries, including Norway.

But they do not have any choice or control on what happens to taxes, including direct federal royalties and taxes on resources and resource companies.

All that because of winning the geographic lottery. How brave of you.

I once hoped you could do better than that, but not any more.

How about: and you lost the lottery. But wait, no you didn't after all!

[Smallc]

I once hoped you could do better than that, but not any more.

How about: and you lost the lottery. But wait, no you didn't after all!

I was born in the planet's best country. I definitely won the geographic lottery.

Alberta is still the richest jurisdiction in the country, with a per capital GDP more than 50% higher than the average (whereas my own province has a per capita GDP just below the average - about 95% of it). If you're looking for sympathy, you won't find it here.

Edited February 20, 2016 by Smallc

[Argus]

It was harder than expected...and shockingly not found in the Toronto Star, Globe and Mail, or Le Devoir.

http://edmontonjournal.com/opinion/columnists/gary-lamphier-how-much-money-has-flowed-out-of-alberta-to-ottawa-a-lot

It's also not true. Alberta doesn't have a sovereign wealth fund because its lazy, short sighted politicians, and lazy, short-sighted electorate preferred to have very low taxes while having some of, if not the best government social services in Canada. Alberta started a sovereign wealth fund, but then the politicians who got elected afterward preferred to raid it rather than raise taxes as they added more and more services and gave their public services big fat raises to keep them happy and quiet. How much money could Alberta have put into a wealth fund if it had been collected 8% sales taxes like Ontario the last twenty years and depositing them in the bank? The Alberta PCs, like their federal counterpart, have been conservative in name only since Lougheed stepped down.

[Argus]

I was born in the planet's best country. I definitely won the geographic lottery.

How is Canada better than Australia or New Zealand?

[Smallc]

How is Canada better than Australia or New Zealand?

Canada is significantly wealthier than New Zealand. Australia is slightly more wealthy but has a few drawbacks. I'd probably consider it and a couple of other countries to be Canada's peers.

[Argus]

Canada is significantly wealthier than New Zealand. Australia is slightly more wealthy but has a few drawbacks. I'd probably consider it and a couple of other countries to be Canada's peers.

Wealth is not a complete measure, inho. Lifestyle is more important. That includes government services, of course, and how hard it is to find jobs that will support yourself in a relatively comfortable lifestyle.

[Smallc]

If we're going to be New Zealand, taxes are going to have to go up a bit. New Zealand taxes their economy at a rate 2.3% higher than Canada. That helps with services.

Australia on the other hand, has significantly lower taxes (almost 7% of the economy less) but is closer to the United States in its conservative attitudes.

Edited February 20, 2016 by Smallc

[ReeferMadness]

Of course Alberta collects royalties? How do you think they built all those roads, schools and hospitals to accommodate the hundreds of thousands of Canadian economic refugees that have left the unemployment of the ROC to try and earn a living?

I wondered how long it would be until someone trotted out this type of self-serving whining.

Assuming the numbers are accurate, they are highly misleading. Take a look at a map of Canada. Notice all that blue stuff around beyond Canada's borders? That's called ocean and the costs of defending it and controlling it are high. Alberta doesn't have a navy base - can you guess why? The numbers don't account for how the rest of Canada has subsidized Alberta. For example, when someone grows up in Nova Scotia and moves to Alberta to help mine sludge, the childhood costs of birthing, educating and caring for the child go to Nova Scotia but the economic benefit of the worker goes to Alberta. Similarly, when an Albertan couple sell their farm and move to BC to retire, BC absorbs the cost of caring for them during the part of their lives when they cost the government most.

These numbers have also failed to account for the damage to Canada's other industries resulting from an artificially high dollar.

The NDP just completed a thorough royalty review and confirmed that the existing royalty regime is on par with that of other countries, including Norway.

But they do not have any choice or control on what happens to taxes, including direct federal royalties and taxes on resources and resource companies.

This is complete patent nonsense.

Jim Roy, a royalty expert who advised Alberta during the oil price downturn in the 90s, wrote this analysis (appropriately titled "Billions Foregone") on Alberta royalties. Here are a few quotes:

Alberta has a low royalty rate compared to rates in countries that have similar quality of resource. Alberta takes from 25% to 40% of profit, equivalent to 10% of gross revenue. Venezuela, which has the most comparable resource, takes 40% of gross revenue – four times as much as Alberta. Saudi Arabia takes 85% of profit and Norway takes 80% of profit – both three times as much as Alberta. Newfoundland/Hibernia takes 30% to 50% of profit plus 7.5% of gross revenue – twice as much as Alberta.

A more serious problem is that Alberta’s failure to manage the pace of oil sands development has not only hurt the Alberta treasury, it has cost Alberta producers. As illustrated in Figure 4, Alberta pushed the Canadian price $25 per barrel below the European price (Brent) or $12 per barrel below the US price (WTI).

There you have it. The gold rush mentality in Alberta's tar sands hurt Canada, hurt Alberta and even hurt the energy companies. If Albertans want to look at who is responsible for their current economic pain, I would suggest a mirror.

[Argus]

If we're going to be New Zealand, taxes are going to have to go up a bit. New Zealand taxes their economy at a rate 2.3% higher than Canada. That helps with services.

Australia on the other hand, has significantly lower taxes (almost 7% of the economy less) but is closer to the United States in its conservative attitudes.

New Zealand seems like a pretty good place with a comparable standard of living and way better weather.

https://www.newzealandnow.govt.nz/living-in-nz/money-tax/comparable-living-costs

[ReeferMadness]

Canada is significantly wealthier than New Zealand. Australia is slightly more wealthy but has a few drawbacks. I'd probably consider it and a couple of other countries to be Canada's peers.

Australia is already hit hard by climate change and the pain will only increase. Heat waves, massive bush fires and water shortages are its rewards for contributing to a carbon economy.

[The_Squid]

Are you being intentionally funny?

Of course Alberta collects royalties? How do you think they built all those roads, schools and hospitals to accommodate the hundreds of thousands of Canadian economic refugees that have left the unemployment of the ROC to try and earn a living? The NDP just completed a thorough royalty review and confirmed that the existing royalty regime is on par with that of other countries, including Norway.

But they do not have any choice or control on what happens to taxes, including direct federal royalties and taxes on resources and resource companies.

It's all about priorities... a 2% sales tax 20 years ago that was saved for the low points in the resource sector would have been just as good. It probably would have put a "rainy day fund" in the 10's of billions...

The whining "hard done by Alberta" nonsense is just silly.

[cybercoma]

If we're going to be New Zealand, taxes are going to have to go up a bit. New Zealand taxes their economy at a rate 2.3% higher than Canada. That helps with services.Australia on the other hand, has significantly lower taxes (almost 7% of the economy less) but is closer to the United States in its conservative attitudes.

Yet there's a livable minimum wage in Australia and they're wealthier with lower taxes.....funny that, but I digress.

[Smallc]

Yet there's a livable minimum wage in Australia and they're wealthier with lower taxes.....funny that, but I digress.

Strange world.

[Accountability Now]

No no, this is everyone else's fault.

You're missing the point:

​McDougall was also motivated by the fact that other provinces, which have benefited immensely from Alberta’s energy wealth, are now explicitly or implicitly opposing new oil export pipelines, thus jeopardizing Canada’s economic future.

Certainly Alberta benefits from this oil but so does the ROC. However most don't acknowledge this fact.

[Smallc]

Certainly Alberta benefits from this oil but so does the ROC. However most don't acknowledge this fact.

And if Alberta's per capita GDP advantage fades, so will equalization.

Not everything is about money to everyone.

[Accountability Now]

Assuming the numbers are accurate, they are highly misleading. Take a look at a map of Canada. Notice all that blue stuff around beyond Canada's borders? That's called ocean and the costs of defending it and controlling it are high.

What's your point here? Costs for defence is a federal cost an not borne by those who actually border the water. In fact, the money spent on such navy bases helps bring in local revenue that otherwise wouldn't be there.

The numbers don't account for how the rest of Canada has subsidized Alberta. For example, when someone grows up in Nova Scotia and moves to Alberta to help mine sludge, the childhood costs of birthing, educating and caring for the child go to Nova Scotia but the economic benefit of the worker goes to Alberta.

How much is offset by the fact that that person is no longer competing for employment in Nova Scotia? Or the fact that the larger than average salaries these people make are usually sent back to Nova Scotia for family or retirement?

Similarly, when an Albertan couple sell their farm and move to BC to retire, BC absorbs the cost of caring for them during the part of their lives when they cost the government most.

WHAAAAAT? You literally JUST told me in the Western Alienation Thread that having retirees come to BC is importing money. Remember?

BC has a diverse economy. And in addition to exporting stuff, it imports money. In the form of retirees, immigrants, the film industry, tourism.

So which is it? Are these retirees a blessing or a curse. Or its it whatever meme suits your bashing du jour?

These numbers have also failed to account for the damage to Canada's other industries resulting from an artificially high dollar.

Nah....if you want some numbers to look at, I suggest you view the amount of federal revenue raised within Alberta compared to that spent in Alberta.

http://www.mapleleafweb.com/forums/topic/25504-energy-east-causing-uproar/page-15#entry1136860

Alberta contributes nearly as much on the NET level to federal money as Ontario does even though we are a third of the population. Is that because Albertans are something special and work three times harder.....NO. Its because a lot of money from oil is hitting the federal coffers...a lot of money that is used for all other provinces.

Jim Roy, a royalty expert who advised Alberta during the oil price downturn in the 90s, wrote this analysis (appropriately titled "Billions Foregone") on Alberta royalties. Here are a few quotes:

Jim Roy was fired by the provincial government under Ralph Klein and has has a chip on his shoulder ever since. His name comes up every election as this so called expert even though he was fired. Forgive me if I don't take him seriously.

Edited February 21, 2016 by Accountability Now

[Accountability Now]

And if Alberta's per capita GDP advantage fades, so will equalization.

Not everything is about money to everyone.

I'm not even talking about equalization. Alberta's contribution to equalization is actually minimal as every province contributes to it.

Look at Figure 11 in the paper linked here: https://business.ualberta.ca/Centres/~/media/business/Centres/WCER/Documents/Publications/155ElectronicApril2final.pdf

The portion of provincial level expenditures that might be attributed to federal funds raised from Alberta to finance Equalization is small – ranging from 1.1 percent in Quebec to 2.9 percent in Prince Edward Island.

In total Alberta contributes about 15-20 billion in net revenue to the federal government AND equalization is about 15B in total these numbers are coincidental.

[Smallc]

In total Alberta contributes about 15-20 billion in net revenue to the federal government AND equalization is about 15B in total these numbers are coincidental.

So everyone should just do what they want?

[Accountability Now]

So everyone should just do what they want?

What? Are you actually thinking of what you are asking or do you just feel the need to respond quickly?

Again...the point is that Alberta contributes a large portion of money for ALL of Canada. Therefore pipelines and other oil ventures shouldn't be seen just as an ALBERTA project.

[Smallc]

Again...the point is that Alberta contributes a large portion of money for ALL of Canada. Therefore pipelines and other oil ventures shouldn't be seen just as an ALBERTA project.

So then shouldn't Canadians in different parts of Canada be able to decide the projects on their merits, and to reject them outright if they please?

I don't really see the point in any of this.

Edited February 21, 2016 by Smallc