How Alberta stacks up when it comes to helping people cope with inflation

Inflation has hit Albertans hard – using food banks risingSeniors fall more debtand affordable rents are in short supply.

That has spurred the introduction of measures designed to help Albertans cope with high prices – including rebates on electricity and electricity bills and the suspension of provincial fuel tax collection (although this will be partial). reinstated this week).

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Each government has tried to provide assistance, and they have done so in different ways based on their ability to help, said Trevor Tombe, a professor of economics at the University of Calgary.

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“I think the priority was to get support quickly and Alberta did that,” he said.

But Alberta’s programs and others, such as top-ups to Canada’s housing benefit programs or checks for citizens in Saskatchewan and Quebec, have also come under scrutiny. In some cases, there are concerns about how they might make the problem worse.

Trevor Tombe is an economics professor at the University of Calgary. (Colin Hall/CBC)

Moshe Lander, an economics professor at Concordia University in Edmonton, said most aid programs would fuel inflation (and higher prices) in the long run.

However, Lander thinks the Alberta government is among the provinces taking the best approach – there aren’t too many programs in place and some policies are already in place.

In his opinion, less is more when it comes to cooling inflation.

Target high energy prices

Earlier this year, the province announced it would introduce a rebate program aimed at relieving the sting of high energy prices.

Beginning October 1 and through the end of March, any time the monthly natural gas outage rate exceeds $6.50 per gigajoule, a refund will be provided to cover those costs.

However, since the highest standard monthly price for natural gas in October will be $5,632 per gigajoule, the program will not be activated until November.

This is in addition to a six-month $50 per month electricity discount (for a total of $300).

Other provinces have also tried to contain the pain of energy inflation.

For example, this fall the Newfoundland and Labrador government issued a one-off payment to supplement the cost of heating oil, which is used to heat homes.

And in March, Yukon announced a $150 inflation relief rebate to lessen the impact of rising utility bills.

Still, Alberta’s rebate program is “problematic,” Tombe said, because it eliminates important signals that prices are giving to consumers when they’re going up.

“What the government is doing is short-circuiting an important mechanism for a market to allocate natural gas in this case.”

Inflation has just hit its highest level in a generation, driving up the prices of goods and labour. (Shutterstock)

Tombe says that’s one of the reasons he prefers targeted cash transfer programs, adding that it’s less distorting of the market.

“When governments provide income support instead, they allow prices to go up or down depending on market conditions. Consumers will react accordingly,” he said.

Cash transfer programs that provide money directly to eligible groups of people include things like the proposed one-time increase in Canada’s federal housing benefit program, resulting in a $500 payment for low-income renters.

Saskatchewan residents receive a $500 check, called Moe Bucks from a few. Quebec created a one-time living tax credit, also $500.

Economist David Macdonald of the Canadian Center for Policy Alternatives in Ottawa said cash transfer programs that specifically target lower-income households and are not broadly distributed will have a better effect in smoothing out the inflation sting.

“Cash transfers will not change the underlying price increase. You will help offset these price increases. So I think it makes more sense to target these at lower-income households. And they can be very effective at that,” he said.

He said he doesn’t think packages aimed at curbing the impact of inflation will stoke inflation in the long run, as rising inflation is being driven in part by high oil prices.

Lower prices at the pump

Gasoline prices have squeezed consumers for months, with Russia’s invasion of Ukraine in February sending oil markets into turmoil.

Due to skyrocketing gas pump prices, Alberta has temporarily suspended provincial fuel taxes on gasoline and diesel to ease gas station irritation.

From April 1 through September 30, Alberta stopped collecting the provincial fuel tax on gasoline and diesel at the pump. Monthly savings have been estimated to range from $27 for a Toyota Corolla to $74 for a Ford F-150.

However, the country will partially reintroduce the mineral oil tax from October 1st. For the next three months, the state government will impose a tax of 4.5 cents per liter on petrol and diesel.

A home electric meter in Calgary. In Alberta, any time the monthly natural gas outage rate exceeds $6.50 per gigajoule, a refund is given to cover those costs. (Elise Stolte/CBC)

The Ontario government took a similar approach, cutting gasoline taxes by 5.7 cents a liter, as did the Newfoundland and Labrador government – and temporarily reducing the price at the pump by 8.05 cents a liter until January 1, 2023 .

Tombe said these types of tax cuts are relatively easy to implement and could come into effect the next day, while cash transfer programs take time to implement, although he added that he believed the money spent could be used for a targeted program that could be offers little support -income Albertans.

Macdonald said the gas tax cuts would not necessarily be distributed to those who need them most.

“It applies equally to the person who fills the Porsche as it does to the person who fills their 2002 Toyota Corolla,” he said. “That’s not entirely fair.”

But Lander said inflation affects everyone, adding that high-income Canadians are more likely to borrow large sums of money and are therefore more exposed to rising interest rates.

He believes that politicians are trying to compensate for this by suspending the mineral oil tax.

Moshe Lander is an economics professor at Concordia University. (CBC)

No state sales tax

Alberta’s provincial government says low taxes – namely a lack of PST – are helping people save money in the face of inflation.

“Albertans already pay the lowest overall taxes among provinces, with low personal income taxes and no provincial sales tax, payroll tax or health premiums,” Treasury Secretary Jason Nixon said in a statement earlier this summer.

Macdonald says that doesn’t really help people with inflation.

David Macdonald is an economist at the Canadian Center for Policy Alternatives. (www.policyalternatives.ca)

“If you cut the tax in the middle of the period, that would counteract inflation,” he said.

Alberta didn’t have a PST throughout the period that inflation was soaring, so it won’t change the price trajectory, he added.

“The fact that you have it or you don’t have it is neither here nor there when it comes to inflation.”

No quick fix

No government program offers a silver bullet when it comes to inflation.

Political decisions are often a mixture of politics, economics, finance and the needs and expectations of citizens. Needless to say, it is a complex formula.

Ultimately, Tombe said, the effectiveness of inflation support programs should be measured by what they are designed to achieve.

“I would say that we are in a period of very high uncertainty and that means … we should give our governments a little leeway to experiment and try things,” he said.

“Some things will work and some things won’t because it’s a pretty fast-moving situation.”