Investment executive’s readership needs no reminder of the recent demands that Alberta turn over its oil-fuelled wealth to the rest of Canada. Debate within Alberta centres on whether to stash the growing budgetary surplus, accelerate the gusher of public spending, mail out a “prosperity bonus” to Albertans as promised by Premier Ralph Klein or reduce taxation.

Many ostensible conservatives — not just the usual politicians, academics and numerous sub-species of leftists — oppose tax cuts. Only a few are making the case for allowing Albertans to keep a little more of what’s produced through personal initiative, risk-taking, inventiveness and hard work.

Allan Warrack, a university administrator who, as he never tires of reminding journalists, was an architect of the Alberta Heritage Savings Trust Fund in the mid-1970s, is typical of the pro-tax crowd. This former Conservative cabinet member is urging the government not to cut taxes, nor to emulate Alaska and dividend Alberta’s oil royalties to taxpayers, but to resume building up the now-$12 billion trust fund, aiming for perhaps $60 billion.
Alberta must hoard its oil wealth, all these people argue, to “leave something for future generations.”

That little phrase, ceaselessly repeated like a mantra, contains so much that is wrong. It is based on a false dichotomy: it isn’t either cut taxes or leave something for the future.
Further, the claim that entrusting our wealth to bureaucrats guarantees that money for our great-grandchildren is, in the context of Canada’s endless list of government screw-ups, a multibillion-dollar non-sequitur. Finally, the “future generations” pose is based on a fundamentally nasty premise: that leaving money in the hands of those who produce the wealth is akin to wasting our natural resources. That is a fallacy flowing from an underlying contempt of ordinary people.

Basically, the Warracks of the world assume that each and every Albertan will take their tax cut, fly to Vegas and spend every last dime on cocaine and wild times. You know what they say: what happens in Vegas stays in Vegas — including the economic benefits of all that spending. But that’s rubbish. Imagine the real effects of a substantial tax cut.
There’s extra money in everyone’s pocket. Some is spent immediately. The influx boosts profits. Retained earnings are reinvested or used to pay down debts, strengthening the business — for the future. Meanwhile, new people are hired — new jobs for the future.

Higher wages let workers live better and stash money into RRSPs, meaning security for the future. Those already well off can invest in securities and in vacation properties, creating assets for the future. Accumulated wealth can be willed to children and grandchildren or to charities and foundations, benefiting future generations.

The economic activity triggered by lower taxes not only spurs current growth, but it also creates a cycle of increased income and greater wealth. And it generates greater tax revenue, some of which the government could set aside for those “future generations.”

The favoured plan of Alberta’s big thinkers — having the government hoard our wealth — would be more than economically inefficient; it would be self-defeating. A small but crucial fact is that today’s demands from Ontario, Quebec and Atlantic Canada that Alberta “share” focus almost entirely on our budgetary surplus (guesstimated at $8 billion this year). More abstract concepts, such as per capita income growth or general economic output, gain no similar traction. It isn’t the bi-weekly paycheque of the average Albertan that provokes those driven by envy but, rather, the existence of a measurable stock of wealth.

The Heritage Fund at $6 billion in 1980 helped provoke the National Energy Program. Hoarding $60 billion would be akin to painting a giant target reading “Loot me now!”
Albertans — current and future — might never enjoy their constitutionally entitled resource endowment.

The probable beneficiaries of Alberta “saving for the future” would be future generations of Maritimers and Quebeckers. So don’t create the target to begin with — cut taxes, and do so radically. IE