Alberta doesn’t send oil money to have-nots, and Ontario contributes more than Alberta
The vitriol from Alberta’s loud and angry right started within hours of the announcement by Montréal-area mayors, back in January, that they would stand in opposition to the proposed Energy East Pipeline. In particular, Wildrose finance critic Derek Fildebrandt wasted no time jumping onto Twitter and asserting that: “If Quebec has such a big problem with our energy industry, it can give back the $73B in Equalization.”
This sentiment was quickly echoed—and continues to be repeated—by conservative politicians, pundits and media outlets across the country. Just last week, Wildrose leader Brian Jean announced that his party had pulled together an expert panel to study equalization and author a report on it for the provincial legislature.
The panel is headed by Frank Atkins, a University of Calgary professor and researcher at the ultra-conservative Frontier Centre for Public Policy. The panel also includes staffers from like-minded think tanks: the Atlantic Institute for Market Studies and the Fraser Institute. One of the panel’s first acts was convincing its right-wing friends at Postmedia to run an op-ed, penned by Atkins, highlighting the “problems” with equalization—which was published in the Edmonton Journal on the exact same day (February 18) that Postmedia papers featured articles about the creation of the panel.
The problem with all this noise from the right is that it appears to be less about highlighting the genuine issues and challenges that currently exist with equalization, and more about exploiting generally flawed assumptions about how equalization works, all for the sake of fuelling anger and resentment toward Quebec and the federal government.
Contrary to commonly held beliefs, the Alberta government does not actually send money to have-not provinces like Quebec. Nor do any of the revenues, collected by the Alberta government from the oil industry, make their way to Quebec through equalization. Nor are Albertans who have lost their jobs during the economic downturn currently contributing anything to equalization. Nor does any individual Albertan contribute disproportionately to equalization.
The equalization program was established by the federal government in 1957 and then enshrined in the Canadian Constitution in 1982. The program itself was, and is meant as, recognition that Canada is one country. As such, all Canadians should have access to comparable levels of services and infrastructure—regardless of whether they happen to live in a rich province or a poor one.
The federal government does this by calculating the average revenue-generating capacity among the 10 Canadian provinces, and then giving the provinces that fall shy of the line enough money to bring them up to the average. The calculation is based on the revenues you would receive if you charged the average tax rate of all the provinces combined—so a particular province’s actual tax rate doesn’t really impact how much that province receives. It also doesn’t matter how cheap child care or tuition is in your province, or how much your province spends on health care. The only thing that matters is what capacity your province has for generating revenue. Because it’s based on revenue rather than expenditures, the federal government puts no strings on what the provinces receiving equalization can or can’t do with the money they receive.
The most important thing to remember in all of this is that the federal government pays for equalization, and it does it out of the same general revenue pool used to fund all of its programs and services. In other words, every Canadian that pays federal taxes contributes to equalization payments on the exact same basis. A rich person in Quebec or New Brunswick will contribute more to equalization than a less wealthy person in Alberta or Saskatchewan. And because there are more Ontarians paying federal taxes than Albertans, more dollars for equalization actually come from Ontario than Alberta.
Alberta doesn’t send oil money to have-nots, and Ontario contributes more than Alberta | Vue Weekly
