On a recent visit to central and eastern Canada, I was reminded of how little governments can do for a local economy compared with private-sector investment.
Governments can offer up a business subsidy here or a tax credit there in attempts to revive a local economy. But without significant sustained investment from the private sector, in the billions or tens of billions of dollars overall, local economies languish.
While walking around Montreal, Halifax and Saint John 鈥� beautiful cities with plenty of historic architecture 鈥� two things stood out: first, how these cities once prospered, due to economic drivers such as finance, insurance, forestry, fishing and shipping; and second, how opposition to natural-resource wealth creation (in some quarters) holds those same cities and their provinces back today.
Where anti-resource development efforts are successful, they directly harm the potential for prosperity. That means a combination of less money for social programs or fiscal room for lower personal taxes.
In 2012-13, in New Brunswick, where the recent anti-fracking protests took place, resource royalties amounted to $98 million, or just 2.1 per cent of the $4.8 billion in own-source revenue. Consider another province where opposition to resource development is rife: Quebec鈥檚 most recent public accounts note $360 million in resource revenues, or just 0.6 per cent of provincial revenues.
In contrast, resource revenues in Alberta amounted to $7.6 billion in 2012-13, or more than 20 per cent of the province鈥檚 $37.3 billion in own-source revenues. The same proportion, one-fifth, was found in B.C. In Saskatchewan, resource revenues were $2.5 billion, more than 23 per cent of the $10.9 billion in provincially collected revenues.
Why does this matter? Because provinces that allow their economies to flourish, in any sector, have more choices on spending and tax rates.
To make this point clear, according to the Alberta government, a two-income Alberta family with two children and $100,000 in employment income will pay $5,306 in various provincial taxes this year. In Saskatchewan, that family will pay $7,447. British Columbia鈥檚 provincial tax take is $7,947.
The B.C. provincial tax bill is 50 per cent higher than Alberta, but even then, the ability of resource revenues to moderate personal taxes is evident when B.C. is contrasted with provinces that are overly dependent on that source of cash: A two-income, two-children family with earnings of $100,000 will pay $9,736 in provincial tax in New Brunswick, $11,837 in Nova Scotia and $12,633 in Quebec.
Or consider program spending. In Alberta, the $7.6 billion collected in resource revenue is more than the entire $7.2 billion spent on primary and secondary education. In B.C., the $7-billion resource-revenue haul more than pays for the $4 billion in social-services spending and the $2.4 billion spent on interest on provincial debt.
One grants that not every province will necessarily garner massive resource revenues; it will depend on what is discovered and developed.
But even then, the notion that B.C., Alberta, Saskatchewan and even Newfoundland and Labrador are merely 鈥渓ucky鈥� because they possess resources is a faulty claim. Quebec has oil and gas and is relatively poor. That is because the Quebec government throws up roadblocks to getting oil and gas out of the ground.
The extraction of resources is not the only thing that should matter. All sorts of private-sector investments contribute to dynamic economies.
The point is that where opportunities exist, in any sector, governments ought not to prevent 91原创s from building the economy beyond the imposition of sensible regulations. Such privately driven economic development is one part of an equation for a more prosperous economy. Prosperity helps pay for social programs; it allows for a lighter tax burden on the personal side.
Such facts matter to Canada鈥檚 overall prosperity. They also help explain the divergence in regional prosperity that one observes even while walking through the various cities: governments that allow for wealth creation and those that do not.
Mark Milke is a senior fellow with the Fraser Institute.
