Rating agency says Alberta tax increases give more leeway to other provinces

WINNIPEG -- A bond-rating agency says recent tax increases in Alberta give more leeway to other western provinces to raise their own levies.

Standard and Poor's recently confirmed its AA rating for the Manitoba government. It noted that one of several factors in the decision was the Alberta government's recent tax changes, including a new surtax on higher personal incomes.

"With Alberta changing its corporate and personal income taxation, we believe that tax competition between Alberta and other Canadian provinces, especially those in Western Canada, will decrease, as will constraints on the ability to raise revenues," the agency wrote in a report.

Manitoba's NDP government has already faced public anger over tax hikes, most notably a 2013 decision to raise the provincial sales tax to eight per cent from seven.

Alberta has no provincial sales tax, but the NDP government has revamped its formerly flat 10 per cent income tax rate. It has introduced new surtaxes for high-income earners, starting at $150,000.

Manitoba is musing about new income surtaxes as well, although its existing rates are already above 10 per cent.

Fletcher Baragar, an associate professor of economics at the University of Manitoba, said small differences in corporate or income taxes usually don't mean much in terms of where people choose to live or set up businesses.

But there can be a big public backlash for politicians who raise taxes, he warned.

"I think the constraint has really been a political one -- the perception of that. Part of that perception is heightened by the concern that if the tax rate gets too far out of the park, you're going to lose people, you're going to lose business."

With Alberta raising taxes, Baragar said bond rating agencies feel other provinces will have an easier time, politically, raising their own taxes if need be to meet budget targets.

Manitoba Premier Greg Selinger said while his government has raised some taxes, it has lowered others, such as the education property tax for seniors and the small-business income tax rate.

"We're always looking at ways to make sure Manitobans can have an affordable cost of living and that we can grow job opportunities in the province," the premier said in a year-end interview.