When I published my news story on corporate income tax earlier this week, I received some pushback from a handful of people saying that the article was being disingenuous because I was leaving out revenue from oil and gas royalties, which they claimed are kind of a corporate tax.
So, here I am, writing an article on royalty revenue and the context of how it fits in with Alberta’s revenue in general.
To start, here’s a table of all revenue sources for last year (which was as of August’s first quarter fiscal update):
|Personal income tax||$11.244|
|Other tax revenue||$5.747|
|Corporate income tax||$4.107|
|Premiums, fees and licences||$3.929|
We see that resource revenue came in at just barely under $6 billion last year, roughly 13% of total government revenue. It was the third highest single source of revenue—coming behind personal income tax ($11.2 billion) and federal transfers ($9.072 billion) and just barely ahead of “other” tax income ($5.747).
The vast majority of that $5.937 billion was royalty revenue, with only $120 million of it coming from bonus and sales of Crown leases. But that’s only 2% of resource revenue: 98% of it is royalty revenue (although, technically rentals and fees are lumped in with coal royalties, but even then, that’s still under $200 million).
Now, here’s what revenue looks like for the current fiscal year, according to the fiscal update released last month:
|Personal income tax||$10.712|
|Other tax revenue||$5.242|
|Premiums, fees and licences||$3.869|
|Corporate income tax||$2.146|
This year, resource revenue will be the smallest contributor of provincial revenue, at only $1.224 billion, about 2.6% of total revenue.
But we’re in the middle of a pandemic and are slowly coming out of a record-low oil price slump, so it makes sense the revenue based on oil would be affected by oil prices.
So, let’s see what revenue looked like over time. I was able to find revenue data going back to 2008.
Hmmm. That’s kinda busy. What about this one?
This one looks better.
Still kind of busy. What about if we just look at the 4 largest contributors?
Ah. That’s better. Now we can actually tell what’s been going on over the last 12 years.
Of the 4 largest sources of government revenue last year—personal income tax, other tax revenue, royalties, and federal transfers—3 of them have been trending up. Royalties are the only one that appears to be trending down. To be fair, it did seem to have been trying to make a comeback over the last 4 years, but a lot of those gains will be lost this year with the pandemic and record-low oil prices.
Here’s another graph, this time showing the percentage of total revenue that each of last year’s 4 largest revenue sources.
This graph pretty much shows the same thing as the previous graph: resource revenue is trending down and the others are trending up. Although “other tax” has increased overall by just marginal amounts.
Something this one shows that the previous one didn’t is that during the last 13 years, royalties have never been been more than 1/3 of provincial revenue, and only 2 years saw it over 1/5 of government revenues.
I also find it interesting that despite all the posturing of the UCP government that Ottawa doesn’t do enough for the province, federal transfer payments are the fastest growing revenue stream for Alberta. If these rates continue, federal funding could become the biggest source of revenue for Alberta by the end of the UCP government’s first term.
With those who complained about my omission of the royalties from the story on corporate income taxes, their most common argument is that if you add up all corporate income tax revenue and royalty revenue, it would make up more than half of all government revenue.
I mean, you can’t really add the two and say that it’s representative of how much oil and gas generate in government revenue: it’s not just oil and gas companies paying all that corporate income tax.
But let’s humour them. Let’s assume every dollar paid in corporate income tax comes from oil and gas companies. (It doesn’t, but we’re humouring these critics.)
Here are two more graphs. I promise these are the last ones.
This compares the combined total of corporate income tax and royalties with personal income tax (the largest source of revenue for the province).
This one shows the percentage of total revenue that personal income tax and the combined total of corporate income tax and resource revenue.
Both of these charts show us that—even when combined—corporate income tax and resource revenue have never made up the majority of provincial revenue over the last 13 years. As well, for half of this time, personal income tax has been generating a larger portion of revenue for the Alberta government than even corporate income tax and resource revenue combined.
The entire NDP term relied heavily on personal income tax to make up the shortfall in corporate income tax and resource revenue, and that reliance is continuing into the UCP’s term.
I thought I’d finish with a table showing the totals that each revenue source has contributed over the last 13 years.
|Personal income tax||$130.704||22.97%|
|Other tax revenue||$64.090||11.26%|
|Corporate income tax||$54.594||9.59%|
|Premiums, fees and licences||$44.175||7.76%|
Over the last 13 years, the Alberta government under the PCs, NDP, and UCP has generated over half a trillion dollars in revenue. Roughly 23% of it came from personal income tax. It was the only revenue source to crack $100 billion. No other revenue source came even close.
We’ve received roughly the same amount in federal transfer payments over the last 13 years as we have royalties, with each of them bringing in a little over 15.5% of the total revenue.
Even if we ignore all the low royalty revenue since the 2015 recession, royalties still brought in only 21.5% of total revenue between 2008 and 2015. Personal income tax during that same period brought in 21.1%.
If you combine corporate income tax and royalties, you barely get 25%, so nowhere even close to the “more than half” that people were claiming to me earlier this week.
And again, that’s if you combine resource revenue with all corporate income tax, regardless of which companies actually paid the tax.