Given the keyword search activity on this blog, it is clear that many people are trying to determine how much a given province pays into the federal equalization program and if certain provinces pay more in federal tax than they receive in equalization. As I explained in my earlier post exploring certain myths and misconceptions about the equalization program, it is close to impossible to determine what percentage of equalization was funded by tax and other revenue from a given province. The reasons for that are primarily twofold. First of all, as I explained in that other post, the most important thing to remember is that equalization is not funded by the provinces. It is a federal program, paid for […]
(See this post for a closer look at federal revenues and expenditures by province.) When discussing the issue of federal transfers to provinces, most Canadians immediately think of equalization. However, it is important to remember that the Government of Canada provides significant financial support to all provincial and territorial governments on an ongoing basis to assist them in the provision of programs and services. There are four main transfer programs: The Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization and Territorial Formula Financing (TFF). The CHT and CST are federal transfers which support specific policy areas such as health care, post-secondary education, social assistance and social services, early childhood development and childcare. While the CHT and CST are the major […]
As discussed in Part 1, the equalization program was significantly overhauled in 2007. This was largely because it had become, in the minds of many critics, an overly-complex mishmash of special deals and formulae that benefited some more than others and pleased no one. From 1982 to 2004, in general terms, the program used a complex but consistent formula of an equalization standard that was based on the average of the fiscal capacities of five provinces (British Columbia, Saskatchewan, Manitoba, Ontario and Quebec), using 33 different tax bases (including 100% of natural resource revenue). In 2004, the Fixed Framework was adopted, which replaced that formula with a fixed pool of funds that was set in legislation (at a minimum of […]
The Rowell-Sirois Commission In the 1930s, after several provinces had gone bankrupt trying to cope with effects of the Great Depression, the federal government established a Royal Commission on Dominion-Provincial relations (the Rowell-Sirois Commission). In its 1940 report, the Commission concluded that the Constitution did not give the provinces sufficient taxing power to meet their constitutional responsibilities across the social policy areas for which they were responsible (outlined in sections 92 and 93 of the Constitution Act, 1867). The Report of the Rowell-Sirois Commission concluded that while the Depression certainly did make matters worse for the provinces fiscally-speaking, the difficulties the provinces and territories faced were inherently systemic in nature. When they established the Canadian federation, the founding fathers could not […]
This can't be stressed enough: no province "pays into equalization" - all individual taxpayers and businesses pay into the federal government's general revenue fund, from which equalization is just one of many programs funded.
UPDATE: Charts updated with 2015-17 economic data (If you are looking for information about federal transfers to a certain province, or federal expenditures vs revenues in the provinces, please go to either this post for information about all federal transfers to all the provinces, and this post for a closer look at federal revenues and expenditures by province. For some reason, Google always directs people to this post only, which doesn’t really address those issues in detail.) Equalization is the Government of Canada’s transfer program for addressing fiscal disparities among provinces. Equalization payments enable the recipient provinces to provide their residents with public services that are reasonably comparable to the national standard, at reasonably comparable levels of taxation. Not every province […]