At issue

Something sounds familiar. As the Alberta government gets set to table its budget today, there’s a hint of things past. If you’ve been watching, Premier Jim Prentice has done a lot to set the stage for this budget, including his televised address on March 24, in which he alluded to the return of provincial health-care premiums by stating, “We will be asking Albertans to begin to contribute directly to the costs of the health system.” Alberta has one of highest health expenditures per capita in the country, with a budget of $18.3 billion in 2014/15, and accounting for 45 per cent of the overall budget. And while “Alberta Looks Ahead”—the 10-year Tory plan to balance the budget by 2017, with an aggressive savings plan to follow—does not include a provincial sales tax, the health-care premium is a smart, and somewhat palatable approach to fill the revenue gap.

The backstory

Introduced in 1969, health-care premiums were eliminated in Alberta on January 1, 2009 by then-premier Ed Stelmach who had promised to remove premiums on the 2008 campaign trail. Past health-care premiums were flat-rate—direct levies on families ($1,056 per year) or individuals ($528 per year). Many Albertans had their premiums covered by employers. Low-income residents had special consideration, and those 65 or older were exempt (a change made in 2004). At the time, eliminating health-care premiums reduced provincial revenue by approximately $1 billion annually.

What does this mean?

In February 2015, Prentice and Finance Minister Robin Campbell tested the water by floating a trial balloon to reintroduce health-care premiums, suggesting fees could be added directly to income tax bills and be made income-contingent to protect vulnerable Albertans. Initial reaction to the new approach to health-care premiums was mute, essentially providing a green light to move the idea forward.

More recently, respondents to a government survey were evenly split on three options for how to address revenue: reducing expenditures, raising taxes and user fees, or running a deficit.  Of those who opted for raising taxes, 27 per cent favoured the return of health-care premiums.  Hardly a majority, but the relative calm around this approach suggests the Tories may be on to something that will most certainly not be the lightning rod for criticism the way a provincial sales tax would be.

Introducing a health-care levy will surely have an impact on all Albertans; however, it will be less onerous and more palatable than higher corporate taxes or a provincial sales tax.

As Alberta moves away from budgeting based on energy revenue, the government has weighed the public’s opinion on new taxes. By not raising corporate taxes, introducing a provincial sales tax or raising income tax, Prentice is ensuring that Alberta remains as the most-competitive tax regime in the country. Constituents’ familiarity with a health-care premium is an easy card for the government to play, and quite frankly a great source of revenue given that the province has had incredible population growth since Stelmach eliminated premiums in 2009. And while the reintroduction of the health-care premium is an echo of sorts, it’s no doubt designed to generate positive reverberations at the ballot box during the expected spring election.