EDMONTON — Alberta is set to introduce its budget Thursday, with rumours swirling that Premier Danielle Smith's government will deliver on her promised personal tax cut amid the looming threat of devastating U.S. tariffs.
Finance Minister Nate Horner told reporters at the legislature Wednesday it's always challenging to build a budget in Alberta, which is dependent on the peaks and valleys of oil and gas prices.
Horner said addressing affordability is a "prime concern" this time around.
"It's going to be more challenging with the threat of tariffs and the uncertainty that we see," he said. He did not confirm reports that the tax cut is expected.
Instead, the minister said the government is planning for a set of scenarios assuming that tariffs in some fashion are coming from U.S. President Donald Trump.
Adding to the challenge is the United Conservative government cannot by legislation run a budget deficit unless revenue drops by $1 billion or more -- something Horner warned could happen in the case of tariffs on Canadian goods to the U.S.
"There's so many things that are out of our control. So, I think it's just showing Albertans that we're going to leave some dry powder, hopefully for government to be flexible and respond and also have a plausible scenario for what may come," he said.
If the personal income tax cut is delivered as promised in the 2023 election campaign, it could cost at least $1 billion. Premier Danielle Smith has yet to follow through on it and has previously said the province may need to phase it in.
Under the tax cut, those earning $60,000 or more will save $760, and Albertans earning less than $60,000 will see a full 20 per cent reduction to their provincial tax bill.
A key part of Alberta's budget is the North American benchmark price of West Texas Intermediate oil.
Last fall, Horner warned the province might slip into a deficit territory, with oil prices at the time falling below the 2024 budget’s original projection of an average US$74 per barrel. Every US$1 drop in that price takes $630 million out of Alberta's coffers.
Charles St-Arnaud, chief economist at Alberta Central, said he expects some positives, including extra revenue because of a narrowing differential over the last six months between the price of West Texas Intermediate and that of Western Canada Select, which is the benchmark price for Western Canadian crude oil blends.
But, he said there is the risk tariffs drag the province's economic growth "very close" to zero per cent in 2025, which would be a big shock to revenues and could lead to between 20,000 and 35,000 job losses.
"The risks to the fiscal outlook are way bigger than they were back in November," St-Arnaud said in an interview.
That means the government will need to be prudent in case it needs to stimulate the economy, he said.
"The amount of uncertainty doesn’t support making big (spending) announcements."
Opposition NDP finance critic Court Ellingson told reporters they want to see measures for affordability, along with efforts to work with other provinces and diversify the economy.
"We need to be thinking about delivering really strong public services and keeping this province stable and resilient in the face of tariffs," he said.
However, he said the NDP is expecting cuts and "restraint" in the budget, adding the promised tax cut won't benefit low-income earners as much as people might think.
This report by The Canadian Press was first published Feb. 26, 2025.
Lisa Johnson, The Canadian Press
