Tag: Provincial Governments

Recently, the Trudeau government announced it would increase the federal backstop carbon levy to $170 per tonne between now and 2030. This backgrounder considers options for fiscal policy reform in Alberta that would be made possible by the provincial government repatriating the full amount of the carbon levy (most of which is now collected by Ottawa and distributed to Albertans in lump sum transfers) while also instituting a harmonized sales tax. These options include almost entirely closing the province’s “fiscal gap” and thus essentially solving its current fiscal problems or eliminating both personal and corporate income taxes, thus creating a more economically efficient and easily understood “tax advantage” than Alberta has ever enjoyed in the past.

Provincial governments across Canada face a conflict of interest surrounding the policy treatment of alcohol, tobacco and gambling. On the one hand, all provinces derive substantial revenues from “sin taxes” or from providing these goods and services through government monopolies. These revenues flow into consolidated revenue funds for the year they are collected and so governments are reliant on them to fund current programs. On the other hand, governments have a mandate to promote public health, all of which are negatively affected by alcohol, tobacco and gambling addictions. This commentary explores the conflict of interest surrounding sin taxes. It also considers policy proposals for setting aside a non-trivial share of all sin tax revenue in a special fund designed to generate a lasting stream of revenue that can be used to finance social support projects an initiatives.