Equalization payments aren’t sexy but they deserve attention, too

TheGlobeandMail.com – Opinion/Editorials
Oct. 05, 2016.   Editorial

The haggling continues between Ottawa and the provinces on a new health transfer accord, which has left rather less oxygen for another multibillion dollar intergovernmental argument: equalization.

The current arrangement for regional wealth redistribution runs until 2019. The Institute for Research on Public Policy recently published an article that analyzed a series of possible improvements. It concluded it’s probably not useful at this point to consider things like raising the equalization ceiling or applying a needs-based test.

Our country could, however, fix long-standing governance deficiencies by creating an arm’s-length panel of experts, in the manner of Australia, to recommend appropriate levels of equalization.

It’s a proven, sensible idea that would create a fairer and more stable system, which is why it will probably be adamantly opposed.

Such a reform would require the federal government to cede some level of control; the provinces, meanwhile, would have to give up a favourite federal whipping horse. In politics, it’s seldom easy to do the right thing.

The authors also conclude more work needs to go into demystifying the program. In the spirit of public service, here goes.

Ottawa collects income and sales tax revenues for the provinces (except Quebec), and each year a portion of the general revenue fund, roughly $18-billion in 2016, is redistributed based on a complicated formula that changes over time.

The aim is to ensure all provinces have the wherewithal to pay for social programs of similar size and scope. It’s a nation-building exercise.

What it is not is an exchange of cheques between richer and poorer provinces. Everyone who pays taxes in Canada contributes to equalization, and every province has, at one time or another, benefited from it – yes, even Alberta.

Painting it unkindly, as a rigged interregional welfare scheme, is a disservice. It does make for good political theatre, though. Thus, depoliticizing one of the key levers in federal-provincial relations represents a considerable challenge.

It is also precisely what makes it worth doing.

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