Equalization payments: I’m North, I’m Canadian, I’m not happy about it

This was originally published by The Canadian Press Canadians woke up last month to a very real question, a national referendum on the future of equalization payments. In stark contrast to how Canadians in…

Equalization payments: I’m North, I’m Canadian, I’m not happy about it

This was originally published by The Canadian Press

Canadians woke up last month to a very real question, a national referendum on the future of equalization payments.

In stark contrast to how Canadians in Alberta choose to live, many in the rest of the country reacted with an, “it can’t happen here.”

Here’s why.

Look at the picture of what’s happening in Alberta and you see that prosperity does not simply begin at the Canadian border.

Alberta is the province that gets the largest share of equalization payments, paying some $21 billion over the last ten years.

That is 75% of Alberta’s spending.

In other words, over the last decade, Alberta has over a trillion dollars of revenue, yet it spends about $200 billion.

Clearly, Alberta has had a wealth, and higher than average, prosperity, and yet it has one of the largest share of equalization payments in the entire country.

Why? Because they are the province with the largest imbalance of prosperity and income growth between the North and the South.

And they are only one province.

The truth is, the whole country is out of balance.

The poorest provinces, are also getting the highest amount of transfer payments.

That means that in 2016, the poorest province, Saskatchewan, paid $26 billion to the richest province, Ontario, and yet, in 2016, Ontario had the largest deficit, an estimated $11 billion.

In other words, for every $5 in spending that Saskatchewan makes, Ontario made just 30 cents.

That’s why the City of Toronto alone consumes a larger portion of Ontario’s revenues than Ontario does of the revenues it receives.

The good news is that Canada’s transfer system recognizes that the federal government isn’t simply collecting money from all the provinces to give to other provinces to spend.

It also recognizes that we need to understand how the entire country’s economy functions, and the governments and societies within it.

The equalization system was designed as a counterweight to these states in differential prosperity and fairness.

Our system provides payments to lower middle-income households, because we know that the more highly educated a child is the greater the chances that that child is going to live a life of greater prosperity.

When working Canadians graduate, the child then moves from school to work, where they are likely to make more money than their parents, because our system enables that child to enter the workforce with greater potential.

The amount of income taxed is divided equally across the country, in a system that acknowledges that equalization payments help to mitigate these type of biases towards poorer populations.

But not all equalization payments are equal, especially not in terms of fairness.

The program currently in place helps pay for public pensions in specific provinces at the expense of the other provinces, even though those pension programs are non-taxable benefits.

Currently, the equalization programs make no attempt to help offset those lower taxes.

(the top one per cent of earners paid 58 per cent of the country’s income tax revenue in 2015, even though they represent only 35 per cent of workers and their earnings represented 29 per cent of GDP.)

And we know that public systems with low relative contributions to the overall economy simply work less well, meaning that, while their funding is less, the government ends up with a higher tax burden.

As a result, if equalization is to remain a financially viable system, then transfer payments should be significantly decreased.

Regardless of whether the system makes up for a higher fraction of provincial government spending, the system is expensive to administer and unsustainable long-term for a provincial economy.

Over time, at reduced amounts, our country will have fewer transfers to poorer provinces and higher amounts of spending to richer provinces.

But I think we need to ask ourselves, how would any one individual in any one of those provinces react to the loss of their universal public pension?

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