Alberta the angry: All about equalization
When Prime Minister Justin Trudeau forgot to mention Alberta during his Canada Day speech on the weekend, some aggrieved westerners reached for a familiar response to a slight from the East.
If you forget about us, tweet after tweet from Alberta read, perhaps we’ ll “forget” about our payments to the equalization program.
From the usual shortfused social media users to conservative leaders, it’s not hard to find anger in Alberta about equalization payments. The program intends to make sure provinces are providing comparable services across the country, but more often it is a political talking point.
In a bid to woo Albertans in the recent Conservative Party leadership race, Maxime Bernier said he would freeze the program and completely rethink it. That was enough to attract the support of eight MLAs from the province. In his failed bid for the leadership of the Alberta Progressive Conservatives, MLA Richard Starke said the province had to stop offering “charity” to the rest of the country when it had fiscal problems at home.
You can even find embryonic western separation movements cropping up in the comment sections of news stories about the equalization program.
Here, we answer common questions and dispel some myths about the most resilient Alberta bogeyman.
How much are these payments Alberta is making?
The idea that Alberta is making “payments” into an equalization fund is a common misconception and probably generates a lot of the misplaced ire for the program. In fact, the equalization fund comes from general federal revenues and grows each year in line with the economy.
This year, about $18 billion will be doled out to Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Ontario and Manitoba, with $11 billion going to Quebec alone.
Payments from the federal government to have-not provinces are based on their fiscal capacity, but wealthier provinces receive nothing.
So is Alberta getting screwed?
To paraphrase a proverb, screwing is in the eye of the beholder. An Albertan looking at equalization with the glass half-full might say the province’s wealth, relative to the rest of Canada, means it’s too rich to need help and that’s a good thing.
Some Albertans look at per capita federal transfer payments — equalization is just one — and the massive amount of federal income tax flooding into Ottawa from Alberta, and believe they’re getting a raw deal. And it is undeniable that Alberta is ponying up more money than it receives from the feds and it certainly receives less than other provinces.
For example, Alberta pulls in about $1,388 per capita, while Nova Scotia gets $3,243 per capita in federal transfers. Equalization only accounts for about eight per cent of the discrepancy in money going to the federal government and money going back to Alberta, but it tends to draw most of the anger.
Could Alberta withdraw from the program?
In an opinion article for the Calgary Herald, Alberta Wildrose Party leader Brian Jean said people constantly come up to him and ask him if the province could withdraw from the equalization program. That would be a virtual impossibility.
For one, it’s enshrined in the Constitution that the government is “committed to the principle of making equalization payments.” It’s tough to get around that.
And because the money comes out of general federal revenue, there’s no way for Albertans to stop funding it short of refusing to pay their taxes. Jean admits as much in his article, saying he’d rather work with other provinces to fix the program.
Can it be fixed? Does it even need to be fixed?
The equalization program has been changed often, with some minor tweaks and some major overhauls. University of Calgary economist Trevor Tombe said the program has room for improvement and agreed that some people may have legitimate grievances. For example, Quebec and Manitoba have government-owned hydro companies and could artificially keep prices low.
Bernier said this practice makes the provinces look poorer than they actually are and games the system. With lower prices, the two provinces take in less revenue and so receive more equalization money. They also reap the political rewards of the low hydro prices.
Alberta, with its lower tax rates and lack of provincial sales tax, doesn’t have the same luxury because the equalization program assumes the province could just raise taxes if it needed to. That’s one disadvantage of the Alberta Advantage.