Sometimes the only right thing to do with a bad idea is put it out to pasture. Instead of tinkering around the edges, Conservative Party leader hopefuls should commit to phasing out equalization at the Calgary Stampede debate hosted by the Western Standard..Equalization is unfair for taxpayers in provinces like Alberta that have been treated like the cash cow of confederation..Equalization costs each Albertan about $650 a year on average, or about $2,600 for an Alberta family of four. But it’s not the only federal program that has redistributed money away from Alberta taxpayers. Since the 1960s, Albertans have paid $600 billion more to Ottawa than received back in federal transfers or spending..Despite this super-sized contribution to the rest of Canada, the feds imposed a “no more pipelines” law, a discriminatory tanker ban on the West Coast, rejected the Northern Gateway pipeline, moved the regulatory goal posts on Energy East and continues to annually hike its carbon tax..And in what world does it make sense for a province to be considered a “have” province when its premier is worried about finding buyers for his bonds and the federal government announces backdoor bailouts that total $7.7 billion since 2019. That’s what happened in Newfoundland and Labrador..Equalization also harms taxpayers in have-not provinces because it allows their politicians to rely more on tax dollars from other provinces and less on good policies to grow their own economies..“If a have-not province sees an increase in natural resource revenues, the extra money is largely offset by a reduction in equalization payments,” explains the Fraser Institute..Equalization will always struggle to meet its goal of equalizing services across provinces. That’s because giving politicians more tax dollars doesn’t mean better services..“Alberta’s spending per capita is the highest in Canada and has consistently been higher than the average of the 10 provinces over the last 25 years,” reads the Blue Ribbon Panel Report on Alberta’s finances. “In spite of the higher levels of funding, the results achieved are no better and, in some cases, worse than in other provinces.”.With the federal government more than $1 trillion in debt and Conservative Party leader hopefuls touting the importance of fiscal responsibility, reining in the $20-billion-per-year equalization slush fund should be a top priority..One way to do this would be to fully phase out the program over a 20-year period, with the annual size of the funding declining by 10% per year..This compromise would mean some provinces would still receive about $19 billion this year and $186 billion by the end of the program in 2041, according to estimates in the Canadian Taxpayers Federation’s 2022 federal pre-budget submission. But it would also save taxpayers more than $45 billion over the next five years and put an end to the flawed program once and for all..The feds should add some strings to the smaller equalization cheques. For example, premiers shouldn’t see any of the cash unless they can prove they’re reducing their deficit or debt, reining in spending and aren’t raising taxes unless approved in a referendum..The federal government has made changes to equalization before and it can again. After six and-a-half decades of equalization payments, now is as good of a time as ever to push provincial governments to become more self-reliant through sound economic policies. Canada shouldn’t have a federal trap that keeps some provinces hooked on the tax dollars of others forever..The next Conservative Party leader should recognize equalization as the inherently flawed program that it is and, instead of tinkering, should promise to fully phase out one of several schemes that redistributes Albertans’ money to other provinces..Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation
Sometimes the only right thing to do with a bad idea is put it out to pasture. Instead of tinkering around the edges, Conservative Party leader hopefuls should commit to phasing out equalization at the Calgary Stampede debate hosted by the Western Standard..Equalization is unfair for taxpayers in provinces like Alberta that have been treated like the cash cow of confederation..Equalization costs each Albertan about $650 a year on average, or about $2,600 for an Alberta family of four. But it’s not the only federal program that has redistributed money away from Alberta taxpayers. Since the 1960s, Albertans have paid $600 billion more to Ottawa than received back in federal transfers or spending..Despite this super-sized contribution to the rest of Canada, the feds imposed a “no more pipelines” law, a discriminatory tanker ban on the West Coast, rejected the Northern Gateway pipeline, moved the regulatory goal posts on Energy East and continues to annually hike its carbon tax..And in what world does it make sense for a province to be considered a “have” province when its premier is worried about finding buyers for his bonds and the federal government announces backdoor bailouts that total $7.7 billion since 2019. That’s what happened in Newfoundland and Labrador..Equalization also harms taxpayers in have-not provinces because it allows their politicians to rely more on tax dollars from other provinces and less on good policies to grow their own economies..“If a have-not province sees an increase in natural resource revenues, the extra money is largely offset by a reduction in equalization payments,” explains the Fraser Institute..Equalization will always struggle to meet its goal of equalizing services across provinces. That’s because giving politicians more tax dollars doesn’t mean better services..“Alberta’s spending per capita is the highest in Canada and has consistently been higher than the average of the 10 provinces over the last 25 years,” reads the Blue Ribbon Panel Report on Alberta’s finances. “In spite of the higher levels of funding, the results achieved are no better and, in some cases, worse than in other provinces.”.With the federal government more than $1 trillion in debt and Conservative Party leader hopefuls touting the importance of fiscal responsibility, reining in the $20-billion-per-year equalization slush fund should be a top priority..One way to do this would be to fully phase out the program over a 20-year period, with the annual size of the funding declining by 10% per year..This compromise would mean some provinces would still receive about $19 billion this year and $186 billion by the end of the program in 2041, according to estimates in the Canadian Taxpayers Federation’s 2022 federal pre-budget submission. But it would also save taxpayers more than $45 billion over the next five years and put an end to the flawed program once and for all..The feds should add some strings to the smaller equalization cheques. For example, premiers shouldn’t see any of the cash unless they can prove they’re reducing their deficit or debt, reining in spending and aren’t raising taxes unless approved in a referendum..The federal government has made changes to equalization before and it can again. After six and-a-half decades of equalization payments, now is as good of a time as ever to push provincial governments to become more self-reliant through sound economic policies. Canada shouldn’t have a federal trap that keeps some provinces hooked on the tax dollars of others forever..The next Conservative Party leader should recognize equalization as the inherently flawed program that it is and, instead of tinkering, should promise to fully phase out one of several schemes that redistributes Albertans’ money to other provinces..Franco Terrazzano is the Federal Director of the Canadian Taxpayers Federation
