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New taxes, spending restraint needed to avoid fiscal cliff in Alberta, report warns





Alberta could face a deficit of almost $40 billion in 2040 unless the government restrains spending and tempers oil and gas royalty swings with new taxes, according to a report from the University of Calgary’s School of Public Policy. 

Economist Trevor Tombe, the author of the new report, says finding a solution to the province’s economic woes will require avoiding extremes and doing away with short-term political thinking. 

“A combination of restrained spending growth and modest new revenues — rather than focusing solely on either tax increases or harsh spending cuts — will create a sustainable economic future for Alberta,” he writes. 

Despite the common rhetoric, he says the province has neither a spending problem nor a revenue problem. It has a budget problem. 

“The conclusion here is simple: substantial spending restraint alone is insufficient to close Alberta’s fiscal gap,” writes Tombe. 

“Entertaining new revenue sources or using carbon tax revenue to address long-run debt sustainability are an important part of the policy mix we should consider. Cancelling the carbon tax and forgoing these revenues, without a clear plan to raise other revenues or achieve spending reductions to compensate, is to exacerbate Alberta’s already unsustainable fiscal situation”

Rising debt without changes

His analysis looks at resource royalties, federal transfer payments, investment income, property taxes, tuition revenue, health and education spending and debt service costs to project the $40-billion figure. 

That represents four per cent of Alberta’s economy. 

“A deficit of this magnitude, combined with capital investments that also add to debt, could raise the ratio of net debt to GDP to almost 50 per cent by 2040 — higher than any point in Alberta’s history,” reads the report, called Alberta’s Long-term Fiscal Future.​

Tombe points out that budget deficits haven’t been this high in the province since the 1980s and told reporters that his projection points to Alberta having higher debt to GDP by the 2030s than it did during the Great Depression.

“While these short-term challenges are well known, the longer-term ones are more significant,” he writes. 

“Even if plans to balance early in the next decade succeed — a goal shared by government and opposition parties alike — an aging population, rising debt levels and volatile resource revenues, to name a few factors, will create increasing fiscal pressures.”

As bad as things appear, Alberta still has the lowest net debt to GDP ratio in the county, at 8.7 per cent. (Adrienne Lamb/CBC)

Based on his projections, Tombe says the net debt to GDP ration could grow to nearly 50 per cent by 2040, with interest costs ballooning to more than $22 billion. 

“I estimate increasing revenue or decreasing spending by 2.7 per cent of GDP is required for long-run sustainable finances,” he writes. “This is equivalent to a 10 per cent sales tax or to cutting $1 in every $6 spent by government.”

But his paper suggests the blend of spending restraint and taxes that would eliminate those extremes. 

Premier Rachel Notley said making those kinds of cuts would be impractical. 

“If we were to cut public services by 17 per cent, which is proposed by the U of C public policy group, and, sometimes, depending on the day of the week, by the official opposition, that we would see massive, massive damage to our economy that we would hurt people and hurt communities, and that is not a thing that our government is gonna do.”

Alberta still leads country

As bad as things appear, Alberta still has the lowest net debt to GDP ratio in the county, at 8.7 per cent. The next closest province is Saskatchewan at 15.4 per cent. Newfoundland and Labrador sits at the top of the pile with 47.3 per cent. 

“We should take comfort in the fact that today, Alberta’s government balance sheet is strong, we do have the lowest net debt and it’s projected to remain so for the next few years,” he said to reporters while presenting the paper. “What that means is we need to take drastic, immediate steps today, or face a crisis.”

He points to Newfoundland as an example of a place struggling to fight the drop in oil prices without a lot of room to manoeuvre. 

The one thing that sets Alberta apart and endangers its fiscal future is what Tombe calls an addiction to resource revenues. 

“Resource revenues are also volatile, so relying on them is difficult,” he writes. 

“Since 1980, the variance of Alberta’s resource revenue growth from one year to the next was 15 per cent per year while, for comparison, the variance of personal income tax revenue is less than 2.5 per cent.”

Tombe argues it makes sense to invest royalties into savings like the Heritage Fund rather than relying on them as general revenue and replacing that revenue with taxes. 

He says the challenge of closing Alberta’s fiscal gap is big but not insurmountable so long as meaningful policy choices are made immediately. Delay just makes the gap that much harder to close. 


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Real Estate

7 Tips For First-Time Home Buyers In Calgary





Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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Real Estate

‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market





The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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Real Estate

10 Tips For First-Time Home Buyers





Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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