Alberta Premier Danielle Smith touts budget’s income tax cut despite $5.2B deficit

Alberta Premier Danielle Smith addresses a news conference in Calgary, Alta., Feb. 19, 2025.THE CANADIAN PRESS/Jeff McIntosh

Premier Danielle Smith defended on Friday the massive income-tax break in Alberta’s proposed 2025 budget, as critics accused her of giving with one hand while taking with the other.

“We felt that we needed to make sure that Albertans had more money in their pockets to support their families, even if that meant having a larger deficit,” Smith told reporters the day after the budget was introduced.

The tax cut won’t be a clean break for a large swath of Albertans. Increases to the province’s education property tax mean Calgary homeowners can expect to pay more than $200 a year -- a decision the province says is necessary as it works to accommodate massive population growth.

Calgary Mayor Jyoti Gondek criticized the move, saying homeowners there would be forced to foot a disproportionate amount of the bill.

“It’s disappointing that we are dealing with equalization payments of this nature when our city is driving the economy,” Gondek said. “We deserve to benefit from the dollars that we’re generating for the province.”

Overall, the United Conservative Party government is increasing the education property tax to 31 per cent from 28.5 per cent.

The increase means the median Calgary homeowner would have an extra $239 added to their property taxes, while Edmonton homeowners would see a $92 increase. More than half of Alberta’s population lives in the two cities.

The property tax increase is calculated on households' assessed property value.

Finance Minister Nate Horner has said Calgary homeowners will pay more because of the formula used to calculate the tax.

“It’s simply just the values of the homes on average. No other fancy calculation -- the average in Calgary is much higher,” Horner said Thursday.

Smith said the influx of newcomers to Alberta, with most landing in Calgary and Edmonton, means residents of those cities would benefit most from new schools being built. Last year, the province promised $8.6 billion over three years to build new schools in response to record migration to Alberta.

“We’ve got to build out 100 new schools over the next six or seven years,” Smith said.

“To be able to have a little bit of support from the communities that are going to be the greatest beneficiaries of that new construction is part of what we had in mind.”

Tyler Gandam, head of the umbrella group representing Alberta’s towns and cities, said the education property tax increases took him by surprise and better options were available.

“The increase represents a shift of the provincial tax burden onto the property tax base, when the province has other more transparent and efficient revenue generation options,” said Gandam, president of the Alberta Municipalities organization and the mayor of Wetaskiwin.

The budget, which still has to be approved by legislators, projects a $5.2-billion deficit while offering income tax cuts that would pull more than $1 billion from provincial coffers.

A new eight per cent income tax bracket on the first $60,000 Albertans earn means savings on paycheques starting in July. The tax break could save individuals up to $750 per year.

Hanging over the budget is the prospect of punishing tariffs to be imposed by the United States. U.S. President Donald Trump has said he intends to impose 25 per cent tariffs on Canadian goods beginning Tuesday.

Smith argued the tax cut, first promised in the 2023 election and postponed in last year’s budget, would help consumers manage the potentially turbulent economic waters ahead.

Critics, including the Opposition NDP, say the budget is irresponsible and that spending in key areas like health care and education don’t keep up with population growth and inflation.

-- Matthew Scace

This report by The Canadian Press was first published Feb. 28, 2025