Alicia Planincic: Is the Alberta advantage making a comeback?

Tariffs and uncertainty are top of mind as we enter provincial budget season, but in Alberta, something else caught peoples’ attention: a tax cut.

In the latest Alberta Budget, the government announced that it was lowering the personal income tax rate from 10 percent to 8 percent on the first $60,000 of income earned, saving individuals up to $750.

But didn’t the province already have a tax advantage? The province has long promoted the Alberta Advantage and its lower taxes as a key economic edge. The budget itself states “Albertans and Alberta businesses generally pay lower overall taxes than taxpayers in other provinces.”

For most people this was true, but not for everyone. The lowest and highest earners have always fared well but those in the middle faced a relatively high tax burden in Alberta. Someone earning $55,000, for instance, would pay 6.0 percent of their salary in provincial income taxes if they lived in Alberta but only around 4.0 percent if they lived in Ontario or British Columbia. Under Alberta’s new bracket, that person will pay 4.8 percent.

That’s not to say Alberta’s middle-income tax burden was ever excessively high. Someone earning the same amount in Nova Scotia or Prince Edward Island would pay around 9 percent of their income in taxes. Even Saskatchewan (6.9 percent) and Manitoba (7.9 percent) have a much higher tax burden. Now those differences with Alberta will be even more pronounced.

To put it into perspective, for that $55,000 wage earner, the gap between the least income tax-friendly provinces in the Maritimes and the most tax-friendly provinces of B.C., Ontario, and Alberta amount to a tax savings of nearly $2,700 every year.

Additionally, because this new tax bracket affects all Albertans earning above the basic amount, it reduces the tax burden on higher earners, too. Alberta was already tax competitive here but now will have a clearer edge.

Someone earning $150,000 will pay around 8 percent of their income in provincial income taxes—on par with the lowest-tax provinces, B.C. and Ontario. However, their overall tax burden is almost certainly lower, as both B.C. and Ontario impose additional major taxes—most notably, a provincial sales tax.

Of course, low taxes are just one factor influencing a province’s competitiveness and potential relocation decisions. Housing costs, job opportunities, a sense of community, and countless other considerations will always play a role. Nonetheless, Alberta’s recent move doubles down on its tax advantage—ensuring that anyone who lives and works in the province will see that benefit.

A version of this post was originally published by the Business Council of Alberta at businesscouncilab.com.