The Priorities of Privatization
Albertans will see a nice rebate on their gas bills over the next month or so as the provincial government’s rebate program (http://www.gov.ab.ca/home/Index.cfm?Page=559) has kicked into gear. What this means is that the price of gas rose to over $5.50/GJ. In fact, it soared to over $7.50/GJ, and so rebates of $2.50/GJ kicked in, lowering the price for Alberta consumers.
Except the price really hasn’t gone down for Alberta consumers at all. Instead, it’s just coming out of government funds, which means it’s coming out of money that otherwise would have been used for other things, such as paying off the debt, better education, health, or social services, or even filling up the government’s sustainability fund (which otherwise will have to be filled up from those other areas I mentioned). So in the short term, while it makes everybody’s winter gas bills a little less hairy, in the long term all it does is benefit the people who run the gas companies and the government that de-regulated them so that prices could climb as high as they have. The rest of us are still paying for it, except now we pay for it at tax time.
A more honest way to go about this would be to either let the people suffer with high-cost gas and take the inevitable public back-lash that would come from doing that, or admit that the government made a mistake when it decided to privatize a required service without a proper plan for sponsoring competition, and re-regulate. The method they’re going about now is simply dishonest. The government is refusing to admit it made a mistake in privatizing the gas industry, but does not want Alberta citizens to be able to see how bad the mistake is – so they try to hide it with a rebate program to cushion the blow.
So just how bad a mistake is it? When you consider that the government estimates the rebate program will cost $50 million each and every month it’s in effect – and that’s at the lowest level – it seems to be a fairly costly one. That $50 million a month figure is at the $1.50 rebate rate, however. Because of what the gas price is sitting at now, the rebate is $2.50/month. Some quick math shows us that we could be looking at a cost of around $83 million per month. That means that every month, more than the entire budget of AU, including their current government contribution and tuition combined, will be given to the gas companies to pay for the provincial government’s privatization mistake.
So which do you think this government has a priority on? Education? Or covering its butt?
‘Tis the Taxing Time of Year
No less than three provinces have recently announced changes to their taxation: Alberta (http://www.gov.ab.ca/home/index.cfm?Page=678), Manitoba (http://www.gov.mb.ca/chc/press/top/2003/12/2003-12-30-02.html), and Nova Scotia (http://www.gov.ns.ca/news/details.asp?id=20031230003). What’s interesting about this is the variety of ways in which the taxes are being adjusted. In Alberta, for instance, the adjustment is a bit of legislation that makes the basic personal exemption amount climb by an amount equivalent to inflation since its last adjustment. For an Albertan, this means that the first $14,337 they earn is non-taxable.
Of course, what this also means is that Albertans have had no real tax reduction, even though the government likes to announce it as such. Instead, we’re just keeping up with inflation. Still, when you compare this to how it was before, it seems a much better system. Notable about this system is that it actually benefits everybody equally, and if you think about the nature of inflation and income disparity, may even work to benefit people with lower incomes more than it does those with higher incomes, as the higher incomes have been rising faster than inflation, while the lower incomes have been rising at a slower pace.
In Nova Scotia, they’re taking a more traditional tack of lowering the general tax rate by 10%. This seems like a fair solution at first, but when you remember that the taxation system is progressive, what this means is that higher incomes actually see a much higher reduction in the amount they have to pay. For example, the average family of four with a single wage earner making $40,000 in Nova Scotia will save $276 on their taxes. If that same person was instead making $60,000, an increase of 50%, he would save $550 on his taxes – almost doubling the savings.
Manitoba, on the other hand, is just reducing the middle tax bracket by 0.9% and instead applying most of their tax cuts on the corporate side of things. Interestingly though, they are also taking steps to get that money back through the justice system, with the fines for many offences sky-rocketing. Passing a stopped school bus, for example, will jump from a fine of $180 to a fine of $530, while fines for speeding have doubled. In a way it stands to reason – if you break the law, you’re directly causing an unwanted expense to society, so should expect to have to shoulder more than the average load of the tax burden.
Ideally, we’d look at a combination of the best of all of these systems. Perhaps indexing tax exemptions to inflation and moving the costs of undesired behaviours on to the people doing them. Of course, making smokers pay for their own cancer treatments probably wouldn’t fly.