EDMONTON - Premier Ed Stelmach used an Internet video Wednesday to defend Alberta's flat-tax system at the same time as a study was released claiming flat taxes are costing the province $5 billion a year in potential revenue.
"The flat income tax is fair to all," said Stelmach. "It frees up a lot more money to be re-invested in the economy."
A study by Alberta's Parkland Institute concludes that the flat-tax system - in which all taxpayers, rich and poor, are charged the same rate - should be cast aside in favour of the progressive or multi-rate tax structure used by most other provinces.
The study concludes that returning to the progressive tax structure that existed in 1999 would be more than enough to eliminate Alberta's projected budget deficit of $4.3 billion this year.
In his latest "Ask Premier Ed" video posted on YouTube, Stelmach strongly defends the flat tax.
"We will continue with the flat income tax," he said. "It has attracted a lot of younger people to this province.
"This is still the province where people see hope they can get a job, raise a family and retire here in the future."
The premier also says it would be very poor planning to make changes during a recession that would increase taxes for some Albertans.
But the Parkland study says tax breaks for the rich have been shown not to generate economic activity, while a boost in tax revenue would allow for increased public spending, creating jobs.
"The government's refusal to consider reforming our tax system to make it more just, equitable and sustainable is just aggravating the negative effects of this downturn," says Diana Gibson, research director for the Parkland Institute.
"Albertans tend to be reluctant to discuss tax reform because they have bought into the myth that we pay the lowest taxes in the country."
As an example, it says an Alberta family earning $75,000 per year pays more tax than the same family in British Columbia, Saskatchewan, Ontario, Quebec and all three northern territories.
Alberta's single income tax rate of 10 per cent is a concept put forward by Stockwell Day nearly a decade ago when he was Alberta's treasurer. It mainly benefits those with higher incomes.
Day later switched to federal politics and is now Canada's International Trade minister.