The tax hikes and cuts to the public sector proposed in Saskatchewan's latest budget will hurt middle-income families and would never fly next door, Alberta Premier Rachel Notley says.

Saskatchewan Finance Minister Kevin Doherty tabled a deficit budget Wednesday with a projected $696-million shortfall for the 2017-18 fiscal year, which includes a one percentage point provincial sales tax hike.

"That's not how we believe we should approach things in Alberta," Notley said of the "very significant tax increase."

"We want to have the backs of Albertans. We think that we can work with Albertans to help them through ... collectively bringing our economy out of a recession period."

Saskatchewan Premier Brad Wall said the budget will help get the province out of the red and secure the local economy.

The easy but irresponsible thing to do would be to simply run huge deficits indefinitely and not make the tough decisions, like the Alberta government has done. - Saskatchewan Premier Brad Wall

"Our budget contained some difficult decisions, but it also delivers a plan to reduce Saskatchewan's dependence on resource revenues while returning to balance in three years," Wall said in a statement.

"And, even after the PST increases in this year's budget, every Saskatchewan taxpayer at every level of income will continue to pay considerably less in provincial taxes than they did under the NDP."

Notley criticizes slashed tax exemptions

Notley said the Saskatchewan government is now walking back tax exemptions previously meant to help certain businesses thrive, including in the construction sector.

"In our province we see construction as a handy way to do job creation, as a handy way to build infrastructure, as a handy way to create a strong investment climate," Notley said. "In Saskatchewan, they just raised the cost of that work [from zero] to six per cent."

The Saskatchewan budget also removes a previous tax exemption on the sale of children's clothing items, something that is already drawing the ire of parents.

The Government of Saskatchewan announced in its budget this week that children's clothing would no longer be exempt from the provincial sales tax. (Simon Dawson/Bloomberg)

Notley said that kind of change isn't in line with her government's values.​

"When you pull money out of the economy, you slow economic recovery ... particularly when you pull money away from regular and middle-income families," Notley said. "They're the ones that spend in the local economy, so you don't want to pull money away."

Different approach to labour cuts

The Saskatchewan Party government is also seeking to reduce overall public sector compensation by $250 million.

While the Alberta government has recently embarked on its own path to rein in wages of some taxpayer-funded positions, the main targets have been CEOs of public boards and agencies.

Notley said the key difference is her cuts won't scare investors out of Alberta.

Wall fired back Thursday, accusing Notley and the Alberta NDP of being fiscally irresponsible.

"I'm not sure a premier who has run back to back $10 billion-plus [deficit] budgets should be giving anyone else budgeting advice," Wall said in a statement.

"[The Notley government is] piling billions of dollars of taxes on future generations of Albertans by running massive deficits year after year, with no plan to return to balance, except to hope for oil prices to skyrocket.

"The easy but irresponsible thing to do would be to simply run huge deficits indefinitely and not make the tough decisions, like the Alberta government has done. We have chosen a different direction that will return our budget to balance and keep our economy strong."

The Saskatchewan government says expanding and raising the provincial sales tax, along with a host of other measures, will bring in $900 million more in tax revenue this year.