Budget 2025: What It Means for Taxpayers
Alberta Budget 2025 delivers a $750 tax cut via new 8% bracket, runs a $5.2B deficit, and sees debt rising to $98.4B while maintaining no sales tax and low flat tax.
Personal income tax savings
Up to $750
New 8% bracket on first $60,000
Budget deficit (2025-26)
$5.2B
Prior year surplus was $5.8B
Taxpayer-supported debt (by 2027-28)
$98.4B
Up from $82.8B in 2025-26
Heritage Fund balance
$24.4B
The Bottom Line
Budget 2025 puts more money in your pocket through a new 8% personal income tax bracket on your first $60,000 of income, saving you up to $750 per year. But that tax cut comes at a cost. The province swings from a $5.8 billion surplus in 2024-25 to a $5.2 billion deficit, with two more deficit years of $2.4 billion and $2.0 billion following. Taxpayer-supported debt is projected to rise from $82.8 billion to $98.4 billion by 2027-28. Alberta maintains its low-tax advantage with no sales tax and the lowest overall tax burden in Canada, but the fiscal deterioration means you are taking on future obligations to pay for today's spending.
Top Measures That Affect You
1. New 8% Personal Income Tax Bracket
Alberta introduces a new 8% personal income tax bracket on the first $60,000 of taxable income, effective January 1, 2025. This saves individual taxpayers up to $750 per year. Taxpayers earning less than $60,000 see their personal income taxes fall by 20%. The cut was originally scheduled for Budget 2026 but has been accelerated two years ahead of schedule. This will cost the province approximately $1.2 billion annually.
2. No Sales Tax, No New Taxes
Alberta continues with no provincial sales tax. The Fiscal Plan emphasizes that with low personal and corporate income taxes, low fuel tax, and no sales tax, Albertans and Alberta businesses generally pay lower overall taxes than taxpayers in other provinces. No new taxes or tax increases are introduced in Budget 2025, other than the education property tax increase described below.
3. Deficit of $5.2 Billion
The 2025-26 budget projects a deficit of $5.2 billion, the largest in several years. Total revenue is $74.1 billion while total expenditure is $79.3 billion. This is a dramatic reversal from the $5.8 billion surplus forecast in 2024-25. The primary drivers are lower bitumen royalties (down $4 billion), lower investment income (down $2.3 billion), the $1.2 billion annual cost of the tax cut, and the impact of U.S. tariffs on the economy.
4. Three Consecutive Deficit Years
Budget 2025 projects three straight years of deficits: $5.2 billion in 2025-26, $2.4 billion in 2026-27, and $2.0 billion in 2027-28. The fiscal framework allows deficits when revenue drops by more than $1 billion from the prior year, with the requirement to return to balance within three years.
5. Taxpayer-Supported Debt Rising to $98.4 Billion
Taxpayer-supported debt is estimated at $82.8 billion at the end of 2025-26 and is projected to reach $98.4 billion by the end of 2027-28. Debt servicing costs are $2,968 million in 2025-26, rising to $3,629 million by 2027-28. That is money that pays interest on past borrowing instead of funding services or reducing your taxes.
6. Heritage Fund: $24.4 Billion and Growing
The Heritage Savings Trust Fund balance is estimated at $24.4 billion, growing to $27.1 billion by 2027-28. The government has released a roadmap to grow the Heritage Fund to at least $250 billion by 2050. $1 billion of surplus cash from 2024-25 is being allocated to the Heritage Fund and another $1 billion to offset new borrowing. This long-term savings strategy is a positive offset to the near-term debt increase.
7. Operating Expense Growth Under the Ceiling
Total operating expense is $64,311 million in 2025-26, growing 3.6%. The government's legislated fiscal framework limits operating expense growth to population growth plus inflation. Operating expense growth remains under this ceiling, signalling fiscal discipline on the spending side even while running deficits.
Direct Financial Impact
Your tax cut: Up to $750 per year from the new 8% bracket on your first $60,000 of income. If your household has two income earners, that is up to $1,500 in combined savings. Most taxpayers will see the benefit after July 1, 2025, when payroll withholdings are adjusted.
Education property tax: After being frozen in 2024-25, education property tax rates increase in 2025-26 to $2.72 per $1,000 of equalized assessment for residential and farmland, and $4.00 per $1,000 for non-residential. This partially offsets your income tax savings depending on your property value.
Your share of the deficit: The $5.2 billion deficit in 2025-26 works out to approximately $1,040 per Albertan based on a population of about 5 million. This is new debt that future taxpayers will need to service.
Your share of the debt: Taxpayer-supported debt at $82.8 billion equals roughly $16,500 per Albertan. By 2027-28 at $98.4 billion, that rises to approximately $19,400 per person.
Debt servicing costs: At $2,968 million, debt servicing costs equal about $593 per Albertan in 2025-26. By 2027-28, at $3,629 million, that rises to about $715 per person. This is money that cannot fund health care, education, or infrastructure.
Revenue sensitivities: A $1 per barrel drop in oil prices reduces revenue by $750 million. A 1-cent change in the exchange rate impacts revenue by $560 million. These sensitivities show how volatile your fiscal position is.
Service Changes
Total revenue declining: Total revenue is $74.1 billion, down $6.6 billion (8.1%) from the prior year's $80.7 billion. Resource revenue from bitumen drops $4 billion as oil prices soften. Personal income tax revenue drops $610 million largely due to the new 8% bracket. Corporate income tax falls $587 million reflecting tariff impacts.
Total spending rising: Total expenditure is $79.3 billion, up $4.4 billion (5.9%). Health receives $24 billion in total expense. Education gets $10.4 billion. Social services ministries receive $11.6 billion. The $4 billion contingency accounts for a large portion of the spending increase.
Capital Plan: $26.1 billion over three years funds schools, hospitals, roads, municipal infrastructure, and housing. This borrowing-funded investment aims to serve Alberta's growing population.
Contingency doubled: The $4 billion contingency is up from $2 billion and covers collective bargaining costs, disaster assistance, and emerging priorities from tariff uncertainty. How this fund is spent will significantly affect the final fiscal outcome.
What's Missing
No path back to surplus within the budget window: While the fiscal framework requires a return to balance within three years of a deficit, the budget still projects a $2.0 billion deficit in 2027-28. The return to balance falls outside the current forecast period.
No spending reduction plan: Despite declining revenue, total expenditure increases by $4.4 billion. There is no program review or spending reduction strategy announced to accelerate the return to balanced budgets.
No Heritage Fund protection: While $1 billion is being allocated to the Heritage Fund, there is no mechanism to prevent future governments from raiding the fund if fiscal pressures worsen.
No tax reform: Beyond the new bracket, there is no broader tax reform such as simplification, bracket indexing to inflation, or restructuring the tax system.
No independent fiscal oversight: The budget does not create an independent fiscal council or parliamentary budget officer for Alberta to provide third-party assessment of the government's economic and fiscal forecasts.
Key Dates
| Date | Event |
|---|---|
| January 1, 2025 | New 8% personal income tax bracket takes effect |
| February 27, 2025 | Budget 2025 tabled |
| April 1, 2025 | 2025-26 fiscal year begins |
| After July 1, 2025 | Adjusted payroll withholdings reflect tax cut on paycheques |
| 2025-26 | Education property tax rate increases |
| 2025-26 | Deficit of $5.2B projected |
| 2026-27 | Deficit narrows to $2.4B (target) |
| 2027-28 | Deficit narrows to $2.0B; debt reaches $98.4B |
| 2050 | Heritage Fund target of $250B under government roadmap |
Where to Get Help
- Alberta Treasury Board and Finance: For budget details, tax information, and fiscal plan documents. Visit alberta.ca/budget. Call 310-0000 then 780-427-5364.
- Canada Revenue Agency: For federal-provincial income tax filing questions. Visit canada.ca/revenue-agency.
- Alberta Fiscal Plan 2025-28: The complete document is available at open.alberta.ca.
- Your MLA: Contact your local Member of the Legislative Assembly to share your views on fiscal priorities.
- Canadian Taxpayers Federation: For independent commentary on government spending and taxation.