COVID-19 blunts alberta challenge to federal-provincial income tax

Abstract

Stephen Harper proposed an Alberta personal income tax (PIT) modelled on Quebec's separate PIT in 2001. The Alberta government rejected this proposal because of cost concerns. In 2019, Premier Kenney twinned the Alberta PIT plan with Quebec's request for provinces to collect federal PIT and asked an expert panel for a report. In June 2020, Alberta accepted the Fair Deal Panel's recommendation to support Quebec while admitting that a separate Alberta PIT requires signifi cant further analysis. The fi scal impact of the corona- virus disease 2019 crisis may explain Alberta's relatively cautious approach. An Alberta PIT may now be affordable only if the federal government covers provincial administration costs. The crisis also highlights the value of a cash fl ow advantage for provinces from federal PIT collection, thereby further reducing the appeal of an Alberta PIT.