Faced with mixed messages from his own cabinet and rampant speculation about how the government will curb a soaring deficit, he said Tuesday that while he's in charge, any budget shortfall won't come from taxpayers or businesses.

"As long as I'm premier of this province, there will be no tax increases, simple," he said following a cabinet meeting. "You cannot tax your way out of a recession, and we're not going to do that."

That promise applies to both corporate and personal taxes, as well as to the idea of introducing a sales tax in the province. The government is even rescinding a tax on liquor, brought in just a few months ago, that boosted the price of a dozen beers by $1.30 and a bottle of spirits by $2.89.

The rollback will cost $180 million annually but it's the right way to go to prove the point, said Stelmach.

"It was something that I had a hard time agreeing with, it's been bothering me all that time," he said. "When we say no tax increases, it's no tax increases, period."

An increase on cigarettes brought in at the same time as the liquor tax will stand for now because it's tied up in health and gang issues that go beyond a normal tax, he said.

The head of Alberta's largest union said he feared Stelmach's inflexible position could spell massive job cuts across the province.

"We're deeply disappointed by the premier's comments, because they signal a return to the bad old days of (former premier Ralph) Klein cuts, and that's not good for anyone in the province," said Gil McGowan, president of the Alberta Federation of Labour.

Klein cut thousands of jobs to help pull the province out of debt during the 1990s during the last recession, creating a shortage of health-care workers that is still felt in the province today, said McGowan.

"Hearing the premier's comments today frankly has dashed our hopes," he said. "All that's left, if he's going to take that kind of inflexible position, is a return to deep cuts."

While hiking taxes should be a last resort, it should still be an option for a government to consider, said Alberta Liberal finance critic Dave Taylor.
Many people have suggested that a funding shortfall would have to be balanced by both raising taxes and government job cuts. Cutting out taxes doesn't leave many other options, said Taylor.

"Apparently that can only mean spending cuts now. And we know that the last time the Conservatives went on a slash-and-burn spending cut exercise that they did a lot of damage."

Even more confusing is the reversal on the liquor tax, he said.
"Well, sir, you were the premier. It was on your watch that this tax increase happened. If you weren't in favour of it from the get-go, why did it ever happen?"

The day after releasing the April budget, Finance Minister Iris Evans suggested raising taxes hadn't been ruled out to help deal with an anticipated $2 billion shortfall. Other ministers have echoed that suggestion in recent days.

"I've got a list of quotes from various ministers who have been saying since April, since the day after the budget that they're going to be looking at tax increases, they absolutely have to look at increases, we're going to be seeing it coming, it's likely to happen," said Scott Hennig, director of the Canadian Taxpayers Federation.

Hennig added he's thrilled to see the premier make such a blanket statement, but now wants to see the government cut wasteful spending to make up the shortfall.

"This is the most bloated, biggest spending government in Canada - second only on a per-person level to Newfoundland."

The premier acknowledged the province is facing tough economic times amid low commodity prices and a global financial crisis.

The government ran an $852 million deficit last fiscal year, and at least one finance spokesman has conceded there could be up to a $7 billion shortfall this year.

But Stelmach said the way to deal with the recession is to offer incentives to companies, not for the government to collect more money through taxes.

"We have to continue to work to reduce the cost of doing business in the province. That's the way you build Alberta's future and I can tell you Albertans expect confidence and stability in these very, very difficult economic times, and that is my focus."

Stelmach also introduced changes to the provincial Crown bank ATB Financial that will let it expand its lending capacity by up $15 billion, guaranteed by the government.

The premier said he's made his position on taxation clear to his entire cabinet and also wants municipalities to know they shouldn't rely on the government to take in any extra money.

"This will send a message to other levels of government - start tightening up your budgets."

AM1150, Tues July 7 2009
Shannon Montgomery