Equalization – why it’s bad for Canada

Equalization in Canada is severely misunderstood by Canadians and most politicians. Provincial leaders after studying the issue actually become more confused, take for example Danny Williams of Newfoundland. The reason equalization is so confusing is because the concept and formula is so complex, even experts have a hard time figuring it out.

Why was the equalization formula set up to be confusing? It was designed that way in order to unfairly transfer wealth by stealth between the provinces.

While reading this, don’t be confused between provincial transfer payments and equalization payments, two very different things. Both systems take money from taxpayers, shuffle it up and redistribute the money in a way that the public has no idea where the money came from and where it’s going.

The reason why equalization was created was to enable poor provinces to deliver the same level of social services as the rich provinces. A Robin Hood style of wealth distribution. This method may sound like utopia to a hard core socialist but it is actually a punishment to successful economies and a non motivator for poor and underachieving economies. Both lose under this program.

The province of Saskatchewan has been accused of in the past of limiting the amount of oil well leases it would approve in a given year. The only reasoning of this strategy would be to limit the amount of revenue flow to the government so that it would not become a “have” province and therefore not receive an equalization payment. In other words limit or suppress your economy or income so you can collect your equalization welfare check.

Who pays for this unfair system? Currently there are only two provinces not on equalization welfare, Ontario and Alberta with two provinces close to being not on welfare British Columbia and Saskatchewan. If Albertans knew how much they were paying out, they would be outraged. Albertan’s net federal fiscal contribution per person per year has been more than triple that of Ontarians. The actual numbers are always fudged on purpose but can possibly range about more than five thousand dollars per Albertan taxpayer per year. The Alberta Government should calculate and release the true numbers so Albertans know how much they are paying.

Why is Quebec on equalization welfare? Quebecers like to think of themselves as relatively smart, hard working, educated people. With a provincial debt over 150 billion (19,541 per person) and the highest unemployment rate in the country counted with provinces with a population over a million, equalization is clearly not working for Quebec. Since equalization, and including special treatment, Quebec has received over one hundred billion dollars in charity. The question is Quebec better off especially when they use the money mainly to subsidize tax breaks.

To add to this dilemma is the proposed Kyoto Carbon tax if implemented will further confuse taxpayers and also redistribute wealth from hard working people to free loaders.

What is the solution to this problem?

Solution 1 – This is by far the best of the solutions, that’s why it’s listed as number one – Cancel the equalization program outright. As stated above, it does not help the poor provinces; it just keeps them addicted and is a motivator for them not to improve.

Solution 2 – Make some hard rules within the program so that poor provinces can work towards improving their economy.

Rule 1 – The only way a province can receive an equalization payment is if they have a balanced or surplus budget. This rule will ensure they don’t spend more than they tax their people.

Rule 2 – Fifty percent of all receiving provincial equalization moneys must be applied to provincial debt reduction. This rule along with rule 1 would ensure their economies are improving and working their way off welfare.

You don’t make the poor rich by making the rich poor.