In October, Albertans will vote in a referendum covering various policy issues. Recently, Premier Danielle Smith said that if Albertans collect enough signatures, a question about a potential provincial sales tax (PST) could be added to the ballot. But Albertans should be cautious about supporting tax hikes. After all, the Alberta government has a spending problem, not a revenue problem, and higher taxes will only leave less money in their pockets.

Discussions about Alberta’s finances often revolve around resource revenue (e.g. oil and gas royalties). While this volatile revenue source does impact the budget, it isn’t in and of itself the problem. The problem is Alberta governments tend to increase spending during periods of relatively high resource revenue, but do not commensurately reduce spending when resource revenue declines, which inevitably leads to deficits.

HILL: Sales tax wouldn’t magically balance the budget, but it will leave less money in Albertan pockets Back to video

Consider the resource revenue boom in the early 2000s. The Alberta government increased program spending from $10,382 per person in 1999-00 to $15,772 in 2008-09 — a jump of more than 50% (after adjusting for inflation). Despite resource revenue plummeting in 2009-10 — and remaining relatively low in historic terms up until the windfall from 2021-22 to 2023-24 — projected program spending remains historically high ($15,504 per person) in 2026-27 (again, inflation-adjusted).

Put simply, despite some restraint from Premier Smith during the last windfall, Alberta’s spending levels are still far too high. As a result, now that oil prices have declined, the Alberta government projects a $9.4-billion deficit for 2026-27 with more deficits over the following two years, and provincial debt set to reach $137.5 billion by 2028-29.

Despite Alberta’s spending problem, economists often suggest raising more revenue, typically through a PST, is the solution to deficits. Yet all other nine provinces and the federal government have a sales tax and it hasn’t prevented them from running deficits. In reality, if Albertans are willing to accept the current level of government borrowing then it will continue, regardless of whether the government creates a sales tax. The only difference will be bigger government and less money in the pockets of Albertans.

The Alberta government doesn’t have a revenue problem — it has a spending problem.

And deficits will continue with or without a sales tax so long residents accept them. So the real question for Albertans is — do you want more or less government?

Tegan Hill is director of Alberta policy at the Fraser Institute.

© Edmonton Sun