Alberta has hit the sweet point in the Laffer curve. The Laffer Curve?When I first moved to Alberta a long time ago, I met several people who had what I thought was a great business idea. I asked each why they did not monetize their idea creating a business. The answer was the same in each case. The taxes are so high in Canada that it was not worth it to them to deal with all the trouble getting their idea to market.The highly credentialed Art Laffer, once a professor at the vaunted University of Chicago and other prestigious institutions... also the chief Economist to the office of Management and Budget (USA) and a consultant to the US Secretary of the Treasury, Secretary of Defense and Secretary of the Treasury... additionally a member of President Reagan’s Economic Policy Advisory Board and the Reagan/Bush Finance Committee amongst other laudable positions, is credited with bringing to the attention of government this economic principle: Work has to be worth the effort.The Laffer curve is an economic theory when charted shows the increase in governmental tax from a 0 rate to 100. His argument is that there is a point on this curve where government tax revenue regardless of increases in the rate will generate lessening returns. If a government increased the tax rate to 100%, revenues would bottom out. This is because as the rate passes a certain point, less people/corporations are active or even close. Then less dollars flow into the government coffers. A smart government will look for that sweet spot where taxes are low enough to encourage economic expansion and thus increase dollars coming into the treasury.In the USA, the conservatives have promoted this idea and President Trump’s economic expansion is a product of the Laffer idea. The expanding economy brought increased prosperity to all but most importantly those at the lower level of the economic scale saw the greater percentage of increases. States such as Florida, Texas, and others are presently benefiting from a lower tax regime and people from higher taxed states such as New York, California and Illinois are losing business and people by the thousands.When the socialist NDP under Rachel Notley formed government (2015-2019,) they raised taxes on corporations and hard-working individuals as well as mandating a higher minimum wage in a recession, carbon pricing and other ideas that increased the cost of doing business. Her government also damaged the excellent Alberta credit rating by overspending the province into debt without benefiting sectors that could theoretically increase future revenues. Businesses closed and people fled to other jurisdictions en masse proving Laffer the idea that government revenue will decrease after a certain point in the tax rate.It appears now however, that the Alberta government has found that sweet spot where government coffers are filling because lower taxes are encouraging more new businesses to open. People from across Canada and from around the world are moving in droves to Alberta. The challenge for the UCP will be managing this growth without killing the golden goose.Dr. A.W. Barber is the former Director of Asian Studies at the University of Calgary. For several years, he lived and travelled in Asian countries, including Hong Kong, Taiwan and the People's Republic of China and India
Alberta has hit the sweet point in the Laffer curve. The Laffer Curve?When I first moved to Alberta a long time ago, I met several people who had what I thought was a great business idea. I asked each why they did not monetize their idea creating a business. The answer was the same in each case. The taxes are so high in Canada that it was not worth it to them to deal with all the trouble getting their idea to market.The highly credentialed Art Laffer, once a professor at the vaunted University of Chicago and other prestigious institutions... also the chief Economist to the office of Management and Budget (USA) and a consultant to the US Secretary of the Treasury, Secretary of Defense and Secretary of the Treasury... additionally a member of President Reagan’s Economic Policy Advisory Board and the Reagan/Bush Finance Committee amongst other laudable positions, is credited with bringing to the attention of government this economic principle: Work has to be worth the effort.The Laffer curve is an economic theory when charted shows the increase in governmental tax from a 0 rate to 100. His argument is that there is a point on this curve where government tax revenue regardless of increases in the rate will generate lessening returns. If a government increased the tax rate to 100%, revenues would bottom out. This is because as the rate passes a certain point, less people/corporations are active or even close. Then less dollars flow into the government coffers. A smart government will look for that sweet spot where taxes are low enough to encourage economic expansion and thus increase dollars coming into the treasury.In the USA, the conservatives have promoted this idea and President Trump’s economic expansion is a product of the Laffer idea. The expanding economy brought increased prosperity to all but most importantly those at the lower level of the economic scale saw the greater percentage of increases. States such as Florida, Texas, and others are presently benefiting from a lower tax regime and people from higher taxed states such as New York, California and Illinois are losing business and people by the thousands.When the socialist NDP under Rachel Notley formed government (2015-2019,) they raised taxes on corporations and hard-working individuals as well as mandating a higher minimum wage in a recession, carbon pricing and other ideas that increased the cost of doing business. Her government also damaged the excellent Alberta credit rating by overspending the province into debt without benefiting sectors that could theoretically increase future revenues. Businesses closed and people fled to other jurisdictions en masse proving Laffer the idea that government revenue will decrease after a certain point in the tax rate.It appears now however, that the Alberta government has found that sweet spot where government coffers are filling because lower taxes are encouraging more new businesses to open. People from across Canada and from around the world are moving in droves to Alberta. The challenge for the UCP will be managing this growth without killing the golden goose.Dr. A.W. Barber is the former Director of Asian Studies at the University of Calgary. For several years, he lived and travelled in Asian countries, including Hong Kong, Taiwan and the People's Republic of China and India
