More equal than others
Equalization program spoils have-not provinces
When most Canadians think of so-called have-not provinces, they probably conjure up images of communities with fewer economic opportunities and less generous public services.
The first part may be accurate to some degree, but the Fraser Institute has found in a new report that the least-productive areas of Canada are binging on the equalization payments made possible by the most economically successful regions of our nation.
“Instead of providing ‘reasonably comparable levels of public services at reasonably comparable levels of taxation,’ as the Constitution sets out, equalization results in ‘havenot’ provinces buying more expensive government goodies than the spending-responsible ‘have’ provinces,” says the author of the study, Mark Milke.
“More professors, more doctors, more nurses, lower tuition fees and smaller class sizes can all be enjoyed in the provinces which do not have to pay for these services by themselves,” he says.
Perversely, for instance, a West Coast resident pays substantially more for university tuition than her counterpart in Quebec or Manitoba, and a patient in Nova Scotia has better access to a doctor than an ill Albertan, says Milke.
“Yet in both cases, the tax dollars of the British Columbian and Albertan are used to provide those better services,” he says. “Not only are the services unequal at the provincial level — missing the point of the payments entirely — but individuals in B.C., Alberta, Saskatchewan and Ontario are forced to pay for substantially larger government spending elsewhere,” Milke says.
Federal income taxes are consistent across Canada, but provinces such as Alberta tend to have higher incomes and a greater proportion of its population in the workforce, logging longer hours than in some parts of the country. So when the federal government looks at the so-called fiscal gap between provinces — the fiscal need compared to the ability to finance services — Albertans’ tax dollars are sent to Canadians living elsewhere.
Alberta’s finance department calculated that in 2011, this province’s taxpayers provided $18.9 billion — or $5,012 per Albertan — more in annual revenue to the federal government than we received in services and transfers, Derek Fildebrandt of the Canadian Taxpayers Federation has noted. Alberta’s contribution is more than the entire equalization budget, which has climbed to $16.1 billion in the current fiscal year from $11.1 billion in 2005.
The equalization agreement is supposed to be renegotiated next year, but it’s unlikely the opportunity to refine the arrangements will be seized. The program is intended to ensure that an equal level of services exists across the country, regardless of ability to pay; it is not supposed to enable have-not provinces to bloat their bureaucracies with unnecessary civil workers.
The transfer is not supposed to allow provinces that receive equalization payments to provide cut-rate tuition or levels of services that other provinces would struggle to afford. It’s not aimed at encouraging some provinces to stifle resource development so they can continue to enjoy the largesse of other Canadians, most notably Albertans.
The Fraser Institute report is one more reason why federal and provincial politicians should ensure equalization provides the means for havenot provinces to improve their lot, rather than living large off the hard work of other Canadians.