Alberta could have a wealth fund like Norway’s if Ottawa stopped picking its pockets
Unlike Alberta, Norway is not forced to subsidize lower-productivity European nations
Gerald Butts recently repeated a common but misguided refrain when he posted a photo of the growth in Norway’s pension fund with the comment that, “Every time I’m in Norway I think this could have been Alberta.” Albertans who are used to such outbursts call this “Norwailing.”
You’d think someone who spent so many years as a senior adviser to the prime minister would understand the three large differences between these two oil-rich jurisdictions.
First, Alberta’s lack of pipeline access to tidewater discounts the price our oil, which means less money going to the government compared with other places; second, Alberta has chosen to be a low-tax jurisdiction; and third, Albertans pay the majority of their taxes to Ottawa, where $15-$20 billion is used yearly to subsidize federal spending across Canada.
Norway’s oil is drilled from the sea, so getting global prices is a given. Alberta’s oilsands saw major investments starting roughly 25 years ago, but Canada has been unable to build enough pipeline capacity to the coast (although the long-delayed and overpriced Trans Mountain pipeline expansion is finally close).
All that added production was thus sold at a large discount to American refiners. In a 2018 interview, Frank McKenna, deputy chairman of TD Bank, said that, according to work done by his bank, being captive to U.S. buyers had cost the country $117 billion over the previous seven years.
The second notable difference is that Alberta, unlike Norway, has chosen to use its resource wealth to keep taxes low. Alberta’s budget documents estimate that roughly $20 billion more would be raised annually if its tax rates matched British Columbia and Ontario’s. Alberta also doesn’t have a provincial sales tax, unlike Norway, where value added taxes reach as high as 25 per cent.
With a debt-to-GDP level at the low end of the Canadian provinces, Alberta has obviously been able to afford this choice. The province could have instead chosen to raise taxes to levels that are comparable to other jurisdictions and made sizable deposits to the Alberta Heritage Savings Trust Fund, but losing our tax advantage would have had negative effects on our economy.
The third factor differentiating Alberta from Norway, which a veteran of federal politics like Butts should be well aware of, is that Norway is a sovereign country. Albertans, on the other hand, pay taxes to Ottawa, and a large portion of that money is used to subsidize federal spending in the eastern third of the country.
Based on my calculations, using numbers from a 2020 University of Calgary research paper and supplemented with data from Statistics Canada, since 1996, the first year Norway made a deposit into its fund, Albertans have paid $462 billion more in taxes to Ottawa than was spent in Alberta.
Many wave this away as simply a result of Albertans having higher wages and a younger workforce, but Norway faces no such need to subsidize lower-productivity European nations.
