Alberta Budget: Tax relief is the right approach amidst economic uncertainty, MEI says

• Even without this tax cut, Alberta would have run a significant deficit this year.

Edmonton, February 27, 2025 – The government of Alberta is making the right call by lowering taxes and leaving more money in Albertans’ pockets amidst U.S. tariff threats, according to an MEI researcher reacting to today’s budget.

“The current trade uncertainties between Canada and the United States are not a government sector crisis, but a private sector crisis, and the Smith government rightly recognizes that,” says Krystle Wittevrongel, director of research at the MEI. “By lowering Albertan’s tax bills, it is providing much needed relief for consumers and workers who risk bearing the brunt of both countries’ tariff hikes.”

Finance Minister Nate Horner announced the government would create a new eight per cent bracket for incomes up to $60,000. This represents a two per cent drop from the current 10 per cent bracket in effect for incomes up to $151,234.

For an Albertan earning $60,000, this represents roughly $750 in tax savings, amounting to roughly 20 per cent of their income tax bill.

This move is expected to leave an extra $1.2 billion in Albertans’ pocket in the coming year.

The researcher warns that, even without this tax cut, Alberta’s government would be running a multi-billion-dollar deficit this year.

“The government rightly recognizes that Albertans need relief, but now it needs to do the hard work of right-sizing its expenditures,” said Wittevrongel. “With a number of collective bargaining agreements up for renewal, it will have to hold the line on massive new spending or risk seeing these deficits become chronic.”

For 2025-2026, the government of Alberta expects to spend $5.2 billion more than the revenues it will bring in.

The province has doubled its contingency fund from $2 billion to $4 billion to address the impact of potential U.S. tariffs as well as pay hikes that might stem from collective bargaining agreements up for renewal.

A number of agreements are up for renewal this year, including in the health and education sectors.

Program spending is up $660 million this year, to $72.8 billion. This amounts to $14,525 per Albertan.

Interest payments on the province’s debt, meanwhile, are down to $3.0 billion this year from $3.2 billion last year.

The province’s debt is expected to reach $82.8 billion at the end of this year, representing a $2.7 billion drop in the coming year. The government expects it will grow back to $98.4 billion by March 2028.

“While a one-time drop in government debt is a good thing, taxpayers shouldn’t be lured into a false sense of security by it,” added Wittevrongel. “The government’s push for capital and infrastructure spending will fill up the province’s credit card much faster than what Albertans are accustomed to in the coming years.”

Capital spending is expected to amount to $8.7 billion this year.

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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