Alberta government’s large budgetary surplus creates an opportunity for tax reduction for small businesses

New research examines province’s capacity for tax reduction amid affordability crisis.

Calgary, – The Alberta government can reduce tax rates for small businesses and individuals while maintaining a large surplus over the next several fiscal years, according to a new analysis from the Canadian Federation of Independent Business (CFIB). It is estimated that reducing the 2% small business tax rate and 4% insurance premium tax rate by half would still leave the government with estimated surpluses of over $600 million for the next several fiscal years.

“Like individuals, Alberta’s small businesses are also struggling with affordability,” said Bradlee Whidden, Western policy analyst. “High interest rates, inflation and low consumer demand are all making it difficult for businesses to pay their bills, staff and keep the lights on with taxes exacerbating an already challenging situation.”

Two in five Alberta small businesses report weak or critical financial health, compared to just 26% reporting strong financial health. These businesses cite taxes and regulatory costs as the top cost constraints for their business, the highest since before the pandemic, making tax reduction imperative.

CFIB recommends the Alberta government follow through on their commitment to reduce personal income taxes for individuals. Additionally, affordability for small businesses should be addressed by reducing or eliminating the small business tax rate while insurance costs for all Albertans can be lowered by reducing or eliminating the insurance premium tax.

Key findings from the snapshot include:

• Small business preferences for the government’s use of surplus funds are to reduce public debt (65%) and reduce taxes (60%). Nearly two thirds (65%) of small businesses prefer the government use its surplus funds to reduce public debt while 60% say it should be used to reduce taxes.
• Even after the reduction in revenues from the government’s plan to reduce personal income taxes, the government will have estimated budget surpluses of over $1 billion for the next several fiscal years.
• Small businesses owners would use cost savings to increase employee compensation (60%), expand their business (43%) and lower or maintain prices (28%).

“Billion-dollar surpluses, while a sign of good fiscal management, present an opportunity to address cost burdens for small businesses with our recommendations costing less than half the price tag of the government’s plan to reduce personal income taxes” concluded Whidden. “The Alberta government is in an advantageous position to boost the province’s economy through tax cuts while maintaining a large surplus to pay down debt simultaneously.”