A recent tax cut for the rich managed to achieve international notoriety. Former British Prime Minster Liz Truss, a neo-liberal zealot à la her idol Margaret Thatcher, ushered in her term with a generous tax cut for Britain’s high income earners. It got quite the response: the exchange rate of the pound plunged, interest rates on long-term government debt rose sharply, and the Bank of England was forced to reverse planned interest rate hikes to avoid a collapse of much of the UK pension system. The move shook up the markets and was condemned even by the International Monetary Fund. Liz Truss is now history.

A generous tax cut by the Alberta government, similarly inspired, has also proven to be a failure and its architect has also been dumped by his party although not for that reason.

One of the first acts of the UCP when elected in 2019 was to cut the corporate tax rate from 12 percent to 8 percent. The cut was advertised as a “job creation plan.”

Well, jobs were not created. In fact, according to a report by the Parkland Institute, from June 2019, the month before the cuts began, to the end of 2021, oil and gas employment in Alberta dropped by over 3,000 workers. The drop was the result of continuing trends of decreasing capital spending, industry consolidation and increasing automation. None of these can be reversed by tax cuts. Ironically, by providing more funds for automation, the tax cut may have actually contributed to the job loss.

And it may have contributed to job loss in other ways. Money is flooding out of the province and out of the country and jobs go with it.

About three-quarters of Alberta’s oil producing companies or shareholders of those companies are foreigners, so the great part of the profits leaves the country. Much less is being reinvested in the industry: about 25 per cent in 2014, about seven percent today.

This should be no surprise. New tar sands mines cost billions and why would companies commit to those kind of expenditures when demand is going to decline. Indeed, some shareholders may in effect be bailing out—using the windfall to pay down debt, buy back shares and pay dividends. Imperial Oil, for example, plans on spending $1.5-billion in share buybacks, and increased its quarterly dividend by 30 per cent.

The money certainly isn’t going to fight climate change. Indeed, in spite of profits of $22-billion in the first half of 2022, compared to $6-billion in the first six months of 2021, four leading tar sands companies are looking for more financial help from Ottawa before revving up their climate promises.

Experts from Alberta Treasury Board warned the UCP before they implemented the tax cut that the plan would not work as the party’s election platform claimed. They ignored the advice.

The Parkland report also offers them advice: “The negative trends of accelerating automation and job cuts mean the Alberta government should reverse its corporate tax giveaway and instead use public funds to support workers and communities traditionally reliant on the oil sands for employment and investment. There is an immediate need for Alberta and Canada to develop and implement long-term sustainable economy programs for workers and communities to secure future prosperity.”

Good advice indeed. This time they should listen.

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