The layered costs of government policies by CalgaryChamber

The layered costs of government policies

Why did we complete a “layered cost assessment”? Small and medium-sized businesses are the backbone of Canadian communities. They are our neighbours, innovators, service providers, and job creators. They account for over 95% of businesses in Canada, and employ nearly 70% of our workforce. After consulting with small and medium-sized businesses in Calgary, one thing has become all too clear – government policies are making it harder for them to succeed. Governments are layering on costs, making it increasingly difficult to run a healthy business. Minimum wage increases, rising municipal property taxes, and Alberta’s carbon levy have all been put in place at a time where unemployment remains high, and consumer spending low. Each individual policy may not cause a healthy business to close its doors. Layered on together however, these policies are causing harm. They are resulting in fewer job opportunities, higher prices, and are discouraging investment. They are reducing the ability of current businesses to expand and new businesses to start-up. And by making it harder to run a business during an economic downturn, they have contributed to the permanent closing of Calgary businesses. We call this the layered cost impact. For some time now, we have been calling on policymakers to stop layering costs on to businesses. We decided it was time to calculate how recent policies have impacted Calgary businesses’ bottom lines, impacted their employees, and the broader Calgary community. We gathered data from 26 businesses through online surveys, and follow-up consultations to assess the costs that minimum wage increases, rising municipal non-residential property taxes, and Alberta’s carbon levy will place on Calgary businesses, and the broader community in 2017 and 2018. This assessment also reports survey results from the Chamber’s Spring 2017 Calgary Business Leader Market Perceptions research. The full methodology and sources can be found here. We hope the findings in this assessment will encourage all levels of government to: 1. Stop layering costs on to business; 2. Consult businesses when implementing policies that directly impact their operations; and 3. Encourage all levels of government, and other organizations to conduct layered cost assessments. The following Chamber assessment illustrates how the policies examined have impacted the businesses surveyed, and how they could impact a typical Calgary business within each industry. To our knowledge, there has been no layered cost assessment completed by any level of government in Canada in recent years. We hope these findings encourage all levels of government, and other organizations to conduct their own layered cost assessments.

Summary of recommendations The layered cost impact The Chamber recommends all levels of government fully consult businesses on policy changes, and undertake a “layered cost assessment” as part of the policy development process to mitigate current and future unintended consequences.

Alberta’s minimum wage increases The Chamber recommends the Alberta Government stop the minimum wage increases at $13.60/hour until an in-depth analysis can be completed on its impact on provincial economic activity and employment. The Alberta Government should consider targeted approaches to poverty alleviation including an expansion of the Alberta Family Employment Tax Credit to cover the full demographic of low-income working Albertans.

Calgary’s non-residential property tax bill The Chamber recommends the City extend the non-residential property tax relief through 2018, while working to find a long term solution to mitigate large swings in property assessments. The City can do their part to ensure future property taxes do not significantly rise by containing annual spending increases within a “Smart Spending Bandwidth” – the combined rates of consumer inflation plus population growth.

The cost of Canada’s and Alberta’s climate leadership The Chamber recommends the Alberta Government take a more balanced approach to the Climate Leadership Plan by recycling a greater portion of the carbon levy’s revenue through a reduction in corporate and personal income taxes.

The layered cost impact What is the issue? It’s becoming harder to run a successful business in Calgary. It’s becoming harder for entrepreneurs to follow their passion, to solve problems, to create new and innovative products, to reinvest in their businesses and communities, and to create jobs. Government policies have become a large reason why many entrepreneurs and business owners are having a more difficult time succeeding. Through the Chamber’s 2017 Spring Business Leader Market Perceptions survey, 19% of businesses surveyed identified government and government regulations as a challenge their organization faces when trying to grow a successful business. But, it isn’t just one specific policy, from one specific level of government that is making it harder to run a business. Rather, a myriad of policies, from all three levels of government, are layering costs on to the business community. Minimum wage increases, rising municipal property taxes, carbon taxes, new labour code reforms, increasing personal and corporate income taxes, greater future Canadian Pension Plan contributions, and the recently proposed federal tax changes illustrate the many recent policy changes that are making it harder for businesses to be successful. These policies not only impact business owners and budding entrepreneurs, they are having a serious impact on all of society – because when businesses see an increase in costs, it can mean higher prices for Calgary’s households, fewer funds for Calgary’s businesses to reinvest, and less job opportunities for Calgary’s workers.

What is the impact? As shown in the figures below, the minimum wage increases, rising municipal property taxes, and Alberta’s carbon levy are increasing costs for Calgary businesses across multiple industries. Layered cost increase for a typical Calgary business – all three costs combined Transport & Delivery business

1,000,000

$856,727

Restaurant & Hospitality business

80,000

Retail business 10,000

10,000

Service Providing business

70,000

$60,710

800,000

$7,643

8,000

60,000

600,000

$570,785

50,000

6,000

40,000 400,000

4,000

30,000 20,000

4,000

$2,904

$2,680

$17,641

200,000

2,000

2017 0

2018

10,000

2017

2,000

2017

2018 0

2018

$1,682

2017 2017

2018 2018

The cost calculations illustrate the median cost increase (over-and-above costs in 2016) that a typical business in each industry could pay in 2017 and 2018 due to minimum wage hikes, municipal non-residential property tax increases, and Alberta’s carbon levy. All cost calculations within this assessment represent the median in each industry, based on the data we received from the businesses surveyed.

Along with the thousands of dollars in additional costs paid by small and medium-sized businesses, these policies are resulting in many unintended consequences for Calgary’s broader community, including: • Layoffs and fewer future job opportunities • Higher prices • Fewer services offered to customers • Fewer funds available for business owners to reinvest and scale up their business 31% of Calgary businesses surveyed in the 2017 Spring Business Leaders Market Perceptions survey indicated they will likely reduce future spending in either capital investments, labour, or operations. • Potential investments flowing to other jurisdictions According to the Fraser Institute’s 2017 Global Petroleum Survey, Alberta has fallen from the 14th most attractive jurisdiction to upstream petroleum industry executives in 2014, to 33rd in 2017. Much of the change in Alberta’s score has been driven by perceptions of regulation and taxation policies. • Business closures In 2016, Calgary saw a record number of businesses, 7,126, close their doors. Many cited the increase in costs, that were layered on during an economic downturn, as a key reason why they closed their doors. 5% of Calgary businesses surveyed in the 2017 Spring Business Leaders Market Perceptions indicated that failing is a real risk in the next year. New and smaller companies tend to be the most at risk. • Double impact to low-income earners Fewer job opportunities, along with higher prices

How can we work to solve the problem? The Chamber recommends all levels of government fully consult businesses on policy changes, and undertake a “layered cost assessment” as part of the policy development process to mitigate current and future unintended consequences. The business community understands the need to work together to solve difficult and complex social problems such as alleviating poverty, or preserving our environment and natural resources. In fact, many entrepreneurs go into business to solve these very issues. In recent times, however, a broader distrust of business-centred solutions has developed. Instead of encouraging businesses to help tackle society’s biggest issues, businesses have been targeted as the source of these problems. This approach will only exacerbate the current issues that society is trying to address. It’s important to acknowledge that business plays a significant role in helping people rise out of poverty by creating jobs and providing income, business contributes more than their fair share for municipal services, and it’s our business community that is a world leader in sustainable energy development and production. Moving forward, we urge Canadian policymakers to look for business-centred solutions, and at the very least, to fully consult the business community when implementing policies that directly impact their operations. All levels of government should conduct layered cost assessments to determine the costs that are being layered on to the business, and broader community. Along with consultations, there are other ways that all levels of government can relieve the burdens placed on the business community. The Chamber’s 2017 Spring Business Leaders Market Perceptions survey indicated ways where Calgary business owners believe governments could best support their organizations, including: • Reducing corporate income taxes and fees (41% of businesses surveyed) • Adopting a more business friendly tone and attitude (33% of businesses surveyed) • Removing regulatory barriers (26% of businesses surveyed) • Reducing property taxes (23% of businesses surveyed).

Alberta’s minimum wage increases What is the issue? Prior to October 1, 2015, Alberta’s minimum wage was $10.20/hour. On October 1, 2018, the minimum wage is set to reach $15/hour. This represents a 47% increase in 3 years. While effective at increasing business costs, minimum wage increases have not proven effective at alleviating poverty. The ineffectiveness of the minimum wage stems from two key issues: 1. The minimum wage largely fails to target the very people the policy is intended to benefit. 2. By placing thousands of dollars of additional costs on small and medium-sized businesses, minimum wage increases result in negative unintended consequences for the broader community, specifically less job opportunities for lower skilled workers, and higher prices for Albertans.

What is the impact? Blanket minimum wage increases tend to be ineffective because they fail to target many of the working Albertans that are most in need of support. This becomes clear when we look at who earns the minimum wage in Alberta, and Canada. According to Statistics Canada, only a small number of Albertans earn the minimum wage. And those that do earn the minimum tend to be young, and living with their parents and other family members. • • •

2% of working Albertans earn the minimum wage (2017) 61% of minimum wage workers in Alberta are under 25, 70% are under 30 (2017) 50% of minimum wage workers in Alberta identify as a son or a daughter living with a parent (2016)

Those who are most in need of support – individuals from low-income households, single parents with children – are not effectively targeted by the minimum wage (data available is for across Canada and was retrieved by the Fraser Institute from Statistics Canada. See their report, “Raising the Minimum Wage: Misguided Policy, Unintended Consequences”).

13%

of Canadian minimum wage workers live in low-income households, as measured by the low • income cut-off (2012)

• of Canadian workers that are single heads of households with minor children earn the minimum wage (2014) While ineffectively targeting those most in need, the minimum wage is impacting small and medium-sized businesses in Calgary.

â&#x20AC;&#x153; The minimum wage increase is causing the greatest strain and is forcing us to restructure our business. The majority of our workers are just entering the workforce, and have little or no experience. Paying out a minimum wage of $15 is not possible and would force us to move away from the standards that the business is built on. We have a solution, but it will result in us minimizing team, and no longer hiring from that demographic [lower skilled employees].â&#x20AC;? - Calgary business

As illustrated in the figures below, the sharp increase in Albertaâ&#x20AC;&#x2122;s minimum wage has resulted in thousands of dollars in additional costs for Calgary businesses, and is especially impacting restaurants, hotels, and smaller retailers. Cost increase for a typical Calgary business with minimum wage staff

Restaurant & Hospitality business

60,000

Retail business 10,000

$51,720 50,000

8,000

$6,255

40,000 6,000 30,000

$22,757

4,000

$2,752

20,000 2,000

10,000

2017 0

2017

2018 0

2018

44% of businesses surveyed said they employed minimum wage workers. Compared to 2016, minimum wage hikes will cost impacted businesses 22% more in 2018.

52% of businesses surveyed said they also increase wages to higher paid staff due to the minimum wage increases.

The cost calculations demonstrate the increase cost to pay minimum wage staff. What we have heard is that the minimum wage also puts increased cost on businesses that pay wages above the minimum. When the minimum wage increases, employees that are higher-up the pay scale also look for a raise, including some managers that are not the intended target of the policy. This has impacted the business owners that take pride in paying their employees above the minimum. Many businesses can’t pass the costs on to their customers through higher prices, especially during tough economic times. Thus, greater labour costs mean these businesses now have less funds available to reinvest in future business and job expansion.

55%

of businesses surveyed with minimum wage staff reported layoffs due to the minimum wage increases.

36% of businesses surveyed said that they would likely need to layoff staff when a $15 minimum wage kicks in next fall.

While higher wages benefit the workers that receive a raise, the increase in labour costs results in negative unintended consequences, especially for lower income Albertans. Most notably, as the minimum wage increases, job opportunities for lower skilled workers tend to decrease. Calgary businesses owners have reported reducing staff in order to offset rising labour costs. By only examining layoffs, the impact of Alberta’s minimum wage increase on employment is not fully captured. In addition to reducing the number of staff working, businesses have reported other measures of staff cutbacks, including: • R educing work hours – Instead of laying-off workers, many businesses choose to offset the increased costs by reducing the hours their staff work. • Hiring freezes – Businesses that would have previously hired lower skilled, or less experienced employees are less likely to do so as the minimum wage increases. As the majority of minimum wage workers in Alberta are young (61% under 25, and 70% under 30), the minimum wage increases are making it harder for students, youth, or recent graduates to gain those crucial first few years of on-thejob, resume-building experience. • Choosing to hire more experienced workers – Businesses that would have previously hired lower skilled, or less experienced workers now look for more experienced staff to offset rising labour costs. While the total number of jobs may not be reduced, Albertans with less experience have a harder time finding jobs. While attempting to retain as many staff as possible, some businesses have mitigated higher costs by increasing their prices. This can result in a higher cost of living within the province, which disproportionately impacts lower income Albertans. Thus, minimum wage increases have had a “double impact” on Albertans with lower income or less experience – less job opportunities, and higher prices for some goods and services.

How can we work to solve the problem? The Chamber recommends the Alberta Government stop the minimum wage increases at $13.60/hour until an in-depth analysis can be completed on its impact on provincial economic activity and employment. The Alberta Government should consider targeted approaches to poverty alleviation including an expansion of the Alberta Family Employment Tax Credit to cover the full demographic of low-income working Albertans. Alleviating poverty and ensuring all Albertans are paid a fair wage for a day’s work are important public policy concerns. However, while costing Alberta’s small and medium-sized businesses thousands of dollars, arbitrary minimum wage increases tend to be ineffective at targeting those most in need of support. To mitigate against any further job losses – 36% of businesses surveyed will likely need to layoff workers if the minimum wage increases to $15 – the Alberta Government should freeze the minimum wage until an indepth analysis can determine its impact on economic activity and employment. The analysis should also weigh the benefits and costs of other poverty reduction strategies. If further wage increases are mandated, they should not be arbitrary, but tied to economic indicators such as inflation. Instead of minimum wage increases, the Alberta Government should consider more targeted policy approaches. One such measure could be the expansion of the Alberta Family Employment Tax Credit (AFETC) to assist the full demographic of low-income working Albertans, including individuals and households without children. In this regard, the expanded tax credit could closely resemble, or supplement Canada’s Working Income Tax Benefit (WITB). Measures like an expanded AFETC would be much more effective at directly targeting the working Albertans in need of support. The tax credit can be aligned to meet the needs of specific demographics, and ensure those living in low-income households receive the benefits. The tax credit would also reduce the risk of unemployment, as there is no additional cost to businesses. The tax credit can actually encourage greater employment by minimizing the disincentives that can occur when government assistance is removed at higher income levels, and by encouraging Albertans to join the workforce by raising the reward for working. The Chamber fully supports the Alberta Government’s objective of alleviating poverty. However, minimum wage increases ineffectively target those most in need, while impacting small and medium-sized businesses. The increase in labour costs is resulting in negative unintended consequences, such as reduced hours, and a reluctance to hire low-skilled or less experienced workers at the higher salary range. More impactful policy alternatives that directly target those in need of support and do not reduce job opportunities – such as an expansion of the AFETC – should be explored before further increases in the minimum wage take place.

“ We will most definitely be more selective in our employee hiring…With the minimum wage increase, we will be looking for more consistent and qualified staff that will be able to handle multiple tasks, and we will not be hiring as many part time students.” -Absolute Sports Academy

Calgary’s non-residential property tax bill What is the issue? A property tax model that allows for large swings in property assessments, along with City spending increases, has resulted in larger property tax bills for many businesses. This has been especially impactful for small and medium-sized businesses outside of the downtown core. The increase in property taxes paid by many Calgary businesses has made the economic downturn more difficult. Businesses such as Abruzzo Ristorante, Escoba, and Studio Revolution have reported that greater costs during tough economic times contributed to the decision to close their doors. This has also resulted in Calgary workers being let go, and our city becoming a harder sell to potential businesses and talent.

What is the impact? At nearly 30%, Calgary has the highest downtown office vacancy rate of any major global city. The large increase in office vacancy – due to the economic downturn – translated into to a $4 billion drop in property values of office buildings in Calgary’s downtown core. Because the City has the same operating budget regardless of changes in property value, the budget shortfall had to be made up somewhere. This resulted in the redistribution of taxes in 2017 from downtown, to our surrounding business communities such as the Beltline, and more suburban business and industrial locations. Approximately 6,000 businesses outside the downtown core saw their taxes increase significantly, some as much as 200%. Fortunately, the City decided to access Calgary’s reserve fund to cap all business property tax increases at 5%. We applaud the City’s decision to support Calgary businesses during challenging times. Had the City not provided tax relief, more Calgary businesses would have been at risk of closing their doors, with more potential jobs being lost. As displayed in the figure below, businesses could have faced a much larger property tax bill had the City not provided tax relief. Cost increase for a typical retail business in Calgary – municipal property taxes

Retail business 3,000

$2,776

2,500

2017* illustrates the non-residential property tax increase that a business would have paid in 2017 without the City’s intervention. While these increases may not seem onerous, the figure only shows the yearly increase in a typical retail business’ property taxes, not the total tax bill.

2,000

1,500

1,000

500

$304

2017

2017* 10

Greater City spending also puts upward pressure on property taxes. When spending is not constrained, if processes are inefficient, and if policies or programs are unproductive, then costs increase. And when costs go up, more revenue is needed to cover those costs. Using data from the Municipal Benchmarking Network Canada’s 2015 Performance Measurement Report, the Chamber has identified areas where City programs have not been delivered as efficiently as other jurisdictions, and the costs that are associated with this overspending: • Fleet vehicles – Calgary owned and operated 67% more fleet vehicles per capita than Toronto, and 32% more than Ottawa. The City also paid $0.06, and $0.41 more per kilometre more than Toronto and Ottawa respectively. It cost Calgary 6% more for each kilometre driven than Toronto, and 57% more than Ottawa. • O perating costs for governance and corporate management – These costs for the City of Calgary were 5.8% of the operating budget. Toronto and Ottawa paid 2.6% and 2.7%. If Calgary’s governance and corporate management costs as a percentage of the operating budget were the same as Toronto, the City would have saved $118 million. • Total cost for human resource administration – Calgary human resource costs were $1,599 per employee. This was 13% higher than Toronto, and 92% higher than Ottawa. At $1,599 per employee, Calgary’s human resource administration for full time employees cost the City $26.1 million. If Calgary would have brought these costs down to $1,000 per employee, which is still above the median for all cities in the report, the City would have saved $9.8 million. This inefficient program delivery has, in part, fuelled spending growth. Looking at data going back to 2008, which spans multiple terms of City Council, spending has outpaced the popular limit of consumer inflation plus population growth, referred to as the “Smart Spending Bandwidth.” In fact, had City spending increased only to cover consumer inflation and population growth since 2008, the City would have spent $745 million less in 2016. Actual spending vs “smart spending” in Calgary

City Spending ($000)

3,855,105 3,655,105 3,455,105 3,255,105 3,055,105 2,855,105 2,655,105 2,455,105 2,255,105 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total City Spending (Operating) "Smart Spending" (consumer inflation + population growth) Source: Various City of Calgary Annual Reports

If these issues are not addressed, greater property taxes may result in further unintended consequences for the broader community, including: • Reduction in future job, wage, and business growth as business owners have fewer funds available for reinvestment • Higher prices as some businesses can pass on the increasing costs • Calgary becoming less attractive to potential businesses and talent as Calgary’s tax burden increases • Layoffs and fewer future job opportunities • Business closures

How can we work to solve the problem? The Chamber recommends the City extend the non-residential property tax relief through 2018, while working to find a long term solution to mitigate large swings in property assessments. The City can do their part to ensure future property taxes do not significantly rise by containing annual spending increases within a “Smart Spending Bandwidth” – the combined rates of consumer inflation plus population growth. While not a sustainable long term solution, we applaud the City for extending the non-residential property tax relief for another year. In 2018, we recommend the City prioritize the need to address the issues with Calgary’s property tax model to mitigate large swings in property assessments, along with balancing the burden between residential and non-residential property taxpayers. Moving forward, businesses will face the same property tax increases that were mitigated by tax relief in 2017, and may face future increases due to continued vacancy rates in the downtown core, and spending increases. The Chamber has proposed to work with the City on incentive prizes for innovative ideas to solve the long term issue. The City can maintain fiscal discipline by keeping spending increases below the combined rates of consumer inflation plus population growth, known as the “Smart Spending Bandwidth”. We recommend the City base their spending decisions on the increase in the Consumer Price Index, rather than the Municipal Price Index, as this measure illustrates how the cost of living in Calgary increases, the costs facing taxpayers, and is not influenced by City decisions. How might the City address property tax increases and maintain fiscal discipline? While this is for the City to ultimately determine, options that could be considered include: 1. Bringing costs into line with the municipal benchmarks of peer cities and best practices 2. Looking at cutting some non-front line and non-essential service delivery 3. Outsourcing certain City provided functions 4. Decreasing regulation, and ensuring existing regulation is required, useful, mitigates unintended consequences, and is measured on achieving the intended result 5. Implement a Regulatory Impact Assessment process for any new or existing regulations

The cost of Canada’s and Alberta’s climate leadership What is the issue? The federal government has mandated that all provinces create a carbon-pricing scheme (carbon levy, capand-trade) to encourage emissions reductions. Each province must meet the federal government’s baseline price of $10/tonne of CO2, beginning in 2018, and reaching $50/tonne by 2022. Alberta’s Climate Leadership Plan already meets the federal government’s baseline price as Alberta’s carbon levy is currently set at $20/ tonne of CO2, and will increase to $30/tonne on January 1, 2018. While pricing carbon may be the most cost-effective way to reduce emissions, the implementation of Alberta’s carbon levy does not adequately balance the need for environmental stewardship, with the need for business and investment growth. There are three particular issues with Alberta’s Climate Leadership Plan: 1. Only a small percentage of the revenue collected from the carbon levy has been used to offset existing taxes 2. The revenue expenditures are creating further market distortions by subsidizing certain groups and activities 3. Alberta’s carbon pricing has been layered on top of other regulations and market interventions Given the past few years of economic hardships, the three implementation issues outlined above must be addressed to ensure Alberta’s economic recovery can occur as expediently as possible. 14

What is the impact? As illustrated in the figures below, Alberta’s carbon levy is imposing thousands of dollars of costs on Calgary’s small and medium-sized businesses. Cost increase for a typical Calgary business impacted by the carbon levy Transport & Delivery business

1,000,000

$856,750

Restaurant & Hospitality business

40,000

$36,408

10,000

Service Providing business

35,000

800,000

8,000 30,000

600,000

$570,811

25,000

$24,264 6,000

20,000 400,000

4,000

15,000 10,000

200,000

2,000

2017

2018

5,000 0

2017

2018

$1,011

2017

$1,516

2018

73% of businesses surveyed reported that their costs will increase due to the carbon levy. With the recent economic downturn, many small and medium-sized businesses do not believe that their customers can, or are willing to pay higher prices. Therefore, they are reluctant, or unable, to pass the cost increases on to their customers.

21%

of businesses surveyed that have been impacted by the carbon levy plan on passing the carbon Only costs on to their customers. When governments impose greater costs on businesses, many business owners – along with their workers and investors – have no choice but to “eat” a large portion of the costs. In many circumstances, the higher costs paid by the business means there is less available funds to reinvest in wage, job, or business growth. By failing to adequately balance environmental and economic objectives, Alberta’s carbon levy is making it harder for businesses to succeed. And like the other policies examined, the greater costs on business has resulted in unintended consequences for the broader community, including: • Higher prices for Alberta’s households as some businesses pass on a portion of their carbon costs • Reduction in future job, wage, and business growth as business owners have less funds available for reinvestment • Reduction in potential investment staying, or flowing into Alberta as the province’s regulatory and tax burden increases. According to the Fraser Institute’s 2017 Global Petroleum Survey, Alberta has fallen from the 14th most attractive jurisdiction to upstream petroleum industry executives in 2014, to 33rd in 2017. Much of the change in Alberta’s score has been driven by perceptions of regulation and taxation policies. • Potential of “carbon leakage,” which means limited reduction in global emissions because carbonintensive production leaves Alberta and moves to other low-cost jurisdictions

How can we work to solve the problem? The Chamber recommends the Alberta Government take a more balanced approach to the Climate Leadership Plan by recycling a greater portion of the carbon levy’s revenue through a reduction in corporate and personal income taxes. Calgary businesses understand the need for environmental stewardship. In fact, many businesses in Calgary are already world leaders in sustainable energy development, and clean production and technologies. Moving forward, there is no need to sacrifice economic activity for environmental protection. The most efficient way for a government to directly encourage GHG emissions without placing undue burdens on an economy is to implement a carbon levy that approaches revenue neutrality. That is, use the price signal to encourage businesses and households to reduce their emissions and invest in cleaner technologies, while supporting economic growth by reducing other taxes. While we applaud some steps the Alberta Government has taken to mitigate the costs of carbon pricing, such as reducing the small business rate by 1 percentage point, granting output based allocations to trade exposed businesses, and providing rebates for low income households, more steps are needed to support competitiveness. This is especially the case as other international jurisdictions do not have a price on carbon. Lowering the personal income tax would provide incentives for greater work effort and increased savings and investments, all of which improve long-run growth and competitiveness. Similarly, a reduction in corporate taxes can mitigate the losses in investment that, as illustrated above, is a problem that the Alberta Government should be taking seriously. A reduction in the corporate income tax rate would also encourage diversity (a Government of Alberta’s stated objective), as a broad rate reduction would stimulate investment and innovation in multiple sectors, attracting new employers to our province. In the Chamber’s Business Leaders Market Perceptions, more Calgary businesses, 41% of businesses surveyed, indicated that reducing corporate income taxes and fees is a helpful way to support business than any other policy initiative. Recycling a greater proportion of the carbon levy’s revenue will also aid the economy by reducing market distortions created by government spending. The reason economists tend to support a price on carbon is that it is a “market-based policy.” That is, after the price on carbon is set, the market determines winners and losers by rewarding (a) efficient businesses, (b) businesses that provide their customers with high quality goods and services, and (c) businesses that already produce with cleaner methods, or invest in cleaner technologies. Finally, we urge the government to work with the business community, and other levels of government, to ensure climate policies are not resulting in greater regulatory compliance costs for industry. A cost-effective carbon price should increase the cost of consuming carbon-intensive products; it should not increase the cost of complying with regulations.

Calgary Chamber 600, 237 8th Avenue SE Calgary, AB T2G 5C3

T 403 750 0400 Policy@CalgaryChamber.com CalgaryChamber.com @CalgaryChamber