All Provinces Aren’t Created Equal; Fiscally Speaking
July 24th, 2006 | by MadHacktress |Faint hopes of consensus on equalization at premiers’ meeting in Newfoundland
Equalization payments have always been something that I have found confusing, disappointing and, at times, infuriating. However, in spite of all of that, I can see their necessity.
I don’t claim to understand the calculation of the payments, though I know that the spirit of them is to ensure that, per capita, each province’s “fiscal capacity” is on par with Ontario and Alberta. That is not an unreasonable thought. There should be some responsibility to the citizens of the country - all of the citizens of the country - by each one of us. If that means that some of my tax dollars are spent helping out in Newfoundland then that’s great; it’s part of being Candian… er… I mean Canadian.
I have a bit of a problem with the fact that there is no incentive for the provinces to work themselves free of the transfer payment program. Because the “have-not” provinces lose one dollar in payments for every dollar it makes it doesn’t give them much want to make themselves independent. This I find irksome. I have given thought to this problem but have not yet come up with a good, fair system that would work to fix this problem.
Obviously there are always going to be have-not provinces but, in some cases, those provinces annoy me. Saskatchewan and British Columbia are close to removing themselves from the have-not provinces list. Quebec is the single largest recipient of equalization payments. When B.C. and Saskatchewan are no longer recipients of the payments some 70% of transfer payments made in Canada will end up in Quebec.
Ontario doesn’t receive payments through the equalization program - just like Alberta. But, unlike Alberta, Ontario doesn’t have a balanced budget nor does is it a debt free province. Ontario pays heavily in to equalization but receives nothing for it. Our province continues to go deeper in debt (though hopefully the budget will soon be balanced) and continues to run an annual deficit.
A little help here, folks?
Entry Filed under: General, In The News, Pure Opinion
It’s not like the “have-not” provinces aren’t trying to become “have” provinces. Unfortunately, it’s a little harder attracting the head offices of most national corporations to the maritimes. This region is working hard at becoming an economic powerhouse that won’t need transfer payments (”Atlantica” is a good example of this). Give it time. Also, the maritime provinces can’t benefit from the economies of scale that Ontario can.
Jon,
I’m not an expert in this matter, but here’s what I have observed. Some of the equalization-receiving governments are doing everything they can to remain “have-not” provinces. The governments of Saskatchewan, New Brunswick, British Columbia and Nova Scotia cut taxes in recent budgets, so while their economies are growing, their fiscal capacity remains low enough for them to receive equalization. And who can blame them? In a deal approved by the three national parties in the House of Commons, the government of Canada has committed to increasing the total equalization envelope by 3.5% per year regardless of provinces’ fiscal capacity. Naturally, equalization-receiving governments will do everything they can to stay on that train.
So while Ontarians get a tax hike, Canadians who live in certain equalization-receiving, or “have-not”, provinces get tax cuts paid for by the federal government, which collects 45% of its revenues from Ontarians. At this point, only Manitoba, Quebec and possibly N.L. should be receiving equalization payments. The total envelope should be decreased with the difference redistributed in CHST payments, which are givern on a per-capita basis.