PLANT

Biting the hand that equalizes


February 19, 2010
by Roger Gibbins

Open pit mining using shovel and buckets that hold 100 tonnes.

Photo: Suncor Energy

Canadians are quick to complain about—and even quicker to forget—one of the reasons this is a great country. The federal government tries to ensure that no matter where Canadians choose to live, they receive roughly the same level of public services thanks to wealth transfers among the provinces.

While most Canadians have little understanding of the arcane mechanisms that drive the equalization program, most of us get these basics:

1) People who live in provinces that are doing well pay into the program through their federal taxes, but their governments get nothing in return.

2) People who live in provinces that are less well off also pay into the program through their federal taxes, but their governments receive equalization payments in return.

While we may habitually mutter about this wealth transfer, we accept some reasonable measure of wealth redistribution among provinces just as we accept some reasonable measure of wealth redistribution across income groups. It’s how Canada works.

That’s why when Ontario, Canada’s largest province and traditionally its wealthiest, joined the ranks of the “have not” provinces, the public services Ontarians have always enjoyed continue. Last year, Ontario received equalization payments of $31 per capita, a paltry amount compared to other recipient provinces to be sure, but it represents a huge change in Canada: a shift of the economy’s centre to the West.

In ways that are likely to endure, chronic economic weakness in Ontario is being offset by economic growth in the West. From now on, the western Canadian economy will carry even more of the fiscal load for the federation. That’s why opinions held across Canada about the West matter a great deal. 

The capacity of the regional economy to generate wealth is overlooked in gratuitous attacks on the West’s economic champions.

During the recent United Nations climate conference in Copenhagen, politicians from Ontario and Quebec criticized the oil sands, to the outrage of many Albertans. They were outraged both by the unprecedented attack on an international stage by fellow Canadians and by the fact that it ignored the contribution of the oil sands to Alberta’s economy, the same economy that helps ensure equality of public service across Canada.

Bloc Quebecois Leader Gilles Duceppe recently argued the federal government was supporting the oil sands at the expense of Quebec’s economy, a remark that was not only misleading and malicious, but ignored what are in effect substantial fiscal flows from Alberta’s energy industry to social programming in Quebec.