My Speeches

Motion 501: Personal Income Tax

Posted on Oct 11, 2008

Personal Income Tax (April 21, 2008)

501. Mr. Griffiths moved:
Be it resolved that the Legislative Assembly urge the govern-ment to study the feasibility of eliminating personal income
tax in the province and replacing it with a consumption tax. Mr. Griffiths: Thank you, Mr. Speaker. It’s a pleasure to rise today for the debate on the first motion to be introduced in this the 27th Session of the Legislative Assembly. Motion 501, eliminating personal income tax, is an idea that’s been brewing in my mind for many years. I want to assure the public, any public that is listening today, reading this tomorrow, that this is not strictly about eliminat-ing income tax. I also want to assure all members of the public, and most importantly a member from across the way who put out a press release that had inaccurate information, that I am not strictly proposing a sales tax. In fact, the exact motion reads, Mr. Speaker: “ Be it resolved that the Legislative Assembly urge the government to study the feasibility of eliminating personal income tax in the province and replacing it with a consumption tax.”
Now, I truly hope that members, before they express themselves aptly with boos and whines and voices of opposition, listen closely to the rationale for such a study, that they consider all of the implications that are raised, and that they give this concept a full and fair hearing. I hope that others such as the member across the way debate the motion I presented rather than raising straw dogs that can be burned down easily.
Now, Mr. Speaker, when it comes to tax policy, there are four widely accepted objectives that any tax policy should have. The first is simplicity. You see, the more complex a system is, the more likely the system is to be manipulated by those who want to pay fewer taxes and the harder it is for the average taxpayer to manage the system appropriately to ensure that he or she is only paying the tax that he or she is supposed to pay. That is the essential reason for moving to a 10 per cent flat tax in this province and having our tax forms as one page on the federal tax form: simplicity. But what could be more simple than no form at all? What could be simpler for taxpayers to understand than that when they buy a good, they will pay a tax on that good? No forms, no accountants – provincial forms anyway. Just a simple rule that if you’re going to consume, you’re going to pay a tax, and a fixed tax at that.
The second objective, Mr. Speaker, of a tax policy is fairness. This is a very complex issue for all governments, and many different governments and public servants disagree remarkably on exactly what this concept means when translated into real-
world policy.

Would fair mean that everyone should pay the same amount, like getting a bill for $ 2,000 from the government every year, regardless of income or ability to pay, so that all have equal responsibility to contributing to the government? Or does it mean that all should pay the same percentage of income, that the comparative contributions are equal, much like we have now, where every taxpayer pays 10 per cent of what they earn? Or does fair mean that those who can afford to pay more should pay more and more and more of their income the more income they earn? Well, I believe that nothing would be fairer to taxpayers than to allow them to decide how much tax they pay when they decide how much stuff they’re going to consume.
Mr. Speaker, the third principle of a sound tax policy is revenue sufficiency. I really do love this policy and this principle of tax policy. It sounds so straightforward, yet almost every government in the nation except for ours is taxing in a way that is not sufficient to meet the expenses it incurs from the programs it provides. So they run deficits, which lead to debts, which is still a tax; it’s just a tax on the next generation. Governments have to provide fewer programs or tax more, and the public has got to realize they can’t demand both more programs and less taxes.
I’m glad to say that a shift from personal income tax to consump-tion tax appears, from the studies I’ve done, to be virtually revenue neutral. There would be no shortfall of revenue to the province to provide this program. If there is, it would be more than offset by the extra revenue the government seems to collect year over year that produces our constant surpluses, specifically the revenue from Alberta ’s personal income tax. A flat tax rate of 10 per cent for the budget year ending March 31, 2008, is projected to be just over $ 7 billion. A provincial sales tax of 10 per cent for the fiscal year ending 2008 based on the projected retail spending in Alberta would bring us to within 5 per cent of that $ 7 billion mark.
Now, Mr. Speaker, the fourth principle of a sound tax policy is efficiency. This principle means that tax policy should interfere as little as possible with individuals’ choices within the private marketplace. It means, however, that tax policy should encourage people to earn money and to invest rather than take leisure or consume goods. Income tax, where money is taken off people’s cheques before they even get the cheques, discourages them from wanting to work more and invest more and actually encourages them to work less and take more leisure time and consume more goods. In fact, I find it quite absurd on occasion that some economists continue to talk about how consumer consumption is a positive sign in an economy without considering some complementary measure of the income and savings growth for consumers. Without a growth in income and savings a rise in consumption is a temporary boost to the economy that will eventually disappear and cause a contraction in spending as credit purchases must be paid off.
Mr. Speaker, the tax that reflects all four principles of good taxation – efficiency, fairness, simplicity, and revenue sufficiency – is a consumption tax, but those reasons are not the only reasons for encouraging the government to explore the feasibility, which is what this motion presents, of eliminating personal income tax and replacing it with a consumption tax. There are many others.
Moving from a consumption tax would have the potential of
eliminating all of the income tax bureaucrats that have to process income tax forms, chase down audits, and hunt down cheaters. In fact, this type of tax would eliminate all cheaters and tax evaders because there’s no way around a simple pay-
at-
the-
till tax. It would
eliminate all the games that can be played, which often give an advantage to the wealthy, who can afford to hire expensive tax accountants and lawyers, by eliminating all of the tax loopholes and writeoffs that so many average taxpayers are not aware of, not privy

Alberta Hansard April 21, 2008 110

to, and which are incredibly unfair. For those reasons, a consump-tion tax is widely acclaimed as the most open and transparent form of taxation.
Now, imagine just for a moment, Mr. Speaker, how this motion suggests a study of replacing income tax with a consumption tax. If that were to come true, no more provincial income tax. Workers would be allowed to keep all of their entire paycheque. Working students would be able to keep all of their entire paycheque. Seniors would be able to keep their entire pensions to help themselves for retirement. Prosperity would grow.
Now, I know that members across the way will suggest that all of that difference will be made up when poor and middle-
income pay
taxes on basic essential goods. Mr. Speaker, I would suggest, as would most others, that items such as food, school supplies, clothes, and books and items such as used cars and even used houses could be exempt from the consumption tax so that all of the basic items of life would not have a tax and not needlessly burden those on lower incomes and make them pay higher proportional taxes.
Mr. Speaker, such a change is also an environmentally friendly one. North Americans, including Canadians, are far and away the highest consuming people on the planet. We consume stuff, and we consume more and more stuff all the time. As I mentioned previ-ously, income tax is naturally an incentive to earn, invest, and
produce less and consume more. A consumption tax would have the exact opposite effect, encouraging people to save, encouraging people to invest, pay down debts, and to consume less stuff. A consumption tax, not only a fair, transparent, and open system, is also a green tax that may help lower our consumption rates and strengthen our environmental awareness. As governments spend more and more available resources on cleaning up consumption, it seems only right that the tax dollars used to clean up that consump-tion discourage it in the same breath.
Finally, Mr. Speaker, moving to a consumption tax would help generate new funds and new money into this province as tourists that come into this province would help contribute to the tax burden across this province rather than just those that work here and earn an income.
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To me the most exciting added bonus of moving to a consumption tax and eliminating income tax, Mr. Speaker, is that it would attract more businesses, more employees, and more professionals like doctors and nurses and dentists that we need so badly in this province, who would see no income tax as such a huge boon to their businesses, to the opportunities availed to them. I know some members will suggest that with a consumption tax they may come here and work and earn a living, but they’ll move off or buy their product somewhere else, but every other jurisdiction in this country has a consumption tax, so there would be no competitive advantage to that. We would have people coming in and spending their money here. I think it would be fantastic to explore this, consider the options.
I look forward to the debate. Thank you, Mr. Speaker.

Mr. Griffiths: Thank you, Mr. Speaker. There were some great comments made this evening. I have to confess that private mem-bers’ motions have always been what I’ve found to be some of the
most exciting times in the Legislature because things aren’t as prepared or as scripted. You get a real open debate as long as you have a challenging question that really brings out people’s personal views.
On that note, I really appreciate the full debate and all members’ comments, and I would like to start by just addressing a few of those by the hon. chair of Treasury Board. He mentioned that taxing goods leads to a black market. Though I understand that concept, if I were to use the same logic as the Member for Edmonton-
Highlands-
Norwood, I would assume that those comments mean that
the government is now going to eliminate all the taxes on cigarettes and alcohol because he made some comment about it in the House. I’m sure he’s not, but I do appreciate and support the notion that – he suggested that no tax system is perfect and recognized that the

one that Alberta has might be the best in North America . But it’s still not perfect, and it never will be. It’s always our job and it should always be our diligence to review what we’re doing to make sure that we can’t necessarily do it better, that we’re doing the best we possibly can.
Now, most of the other comments and questions that were around are things that, Mr. Speaker, can’t be addressed in a private mem-ber’s motion. I can’t address whether or not we’re going to pay
more taxes because of the exemptions. I can’t go through the time to address whether or not first mortgages will be free and exempt from the tax. I can’t address whether or not we’re going to have to have a higher rate because of the exemptions or whether or not we have to have more bureaucracy. The entire purpose of some of these questions is for the study to go and answer them, to come up with some solutions, to gather more information so that we can debate this even further when the report comes out. That’s all I was looking for. I think the questions were great.
This motion does not propose that we eliminate income tax and move to a consumption tax. It proposes that we explore the
possibilities that are around moving from an income tax to a consumption tax. That’s all I’ve suggested.
Mr. Speaker, Albertans are bold. We do bold things. We have
always done bold things. That’s what we pride ourselves on in and North America . We always have to be asking ourselves: what’s the next bold move that we’re going to do? What’s the next thing that we will lead North America and maybe the world on, where they’re going to say: “ Holy smokes. Look at what Alberta is doing now. Let’s watch this model and example”? That’s what
Albertans do.
I know that a few members said that they didn’t want to support this because all their questions weren’t answered, even though it’s just asking for a study to answer those questions. I would hate to think that if we’re afraid to explore new ideas, if we’re afraid to endorse just investigating something, if we’re afraid to explore any new option, then we’ll be standing still, and we won’t ever think of a new idea, Mr. Speaker. We will go nowhere, round and round doing the same thing, tweaking the same things we’ve always done, and we won’t have major, massive improvement. We won’t be the North American and the global leader that we pride ourselves on being. We will in fact become the epitome of Einstein’s definition of insanity: doing the same thing over and over and expecting different results every time.
All this asks for is a study. I ask all of my colleagues, I ask every member of the House just to give it a chance and consider support-ing it just to see what kind of possibilities are out there.
Thank you.