Time for fairness for ailing Ontario

TheStar.com – comment/editorial – Time for fairness for ailing Ontario
May 10, 2008

The redistribution of income – from wealthy individuals to the less affluent, and from richer provinces to those that are less well off – has long been a defining Canadian value.

As a net contributor to Confederation throughout its history, Ontario and its people have grown accustomed to, and comfortable with, this principle of wealth sharing. In 2005, for example, the latest year for which numbers are available, Ontarians paid $21 billion more in taxes to Ottawa than they got back in terms of federal spending.

One of the clearest manifestations of this redistribution of wealth among provinces is equalization, a policy through which Ottawa transfers federal tax dollars collected in provinces that have above-average capacity to raise their own revenues to the so-called have-not provinces that do not have the same capacity.

Because equalization is a key element of inter-regional redistribution of wealth in Canada, it would lose all meaning if it somehow failed the test of redistribution. How, for example, would fairness be achieved if Ottawa were to pay equalization to a province that still ends up contributing significantly more to the rest of Canada than it gets back? But that could soon happen.

According to the TD Bank, Ontario could qualify for equalization payments from Ottawa in 2009-10, as its relative position deteriorates as a result of the U.S. downturn, the high Canadian dollar and the impact of rising commodity prices on the Western provinces.

Yet, as the TD report also points out, Ontario would continue to be a net contributor to redistribution benefiting other provinces, as the equalization payment would only put a small dent in the $21 billion gap between what the province’s taxpayers send to Ottawa and what comes back. “Ontario residents (would), in effect, be paying the equalization tab with their own money,” the TD report concludes.

It’s a possibility that has Premier Dalton McGuinty hopping mad, and it lends support to his claim that Ontario is being treated unfairly.

Take, for example, Ottawa’s treatment of the unemployed in Ontario versus the rest of the country. The average unemployed worker in Ontario last year received $5,110 in regular employment insurance benefits, compared to an average of $9,070 in the rest of Canada. Had Ontario’s unemployed been treated like jobless workers elsewhere, they would have received about $1.7 billion more in benefits last year alone.

McGuinty is not arguing that Ontarians should be ignoring the residents of poorer provinces. He isn’t arguing that Ontario should be on the receiving end of redistribution of wealth from other provinces. All he is saying is that Ontarians are being asked to share too much with other Canadians at a time when this province is struggling and that Ottawa shouldn’t be siphoning a massive $21 billion out of Ontario given the province’s own urgent needs.

As McGuinty told reporters in Ottawa Thursday, “sending all that Ontario money for redistribution to the rest of Canada made great sense a few decades ago when … other provinces needed the programs and services that help create prosperity and needed a little help getting there. But it doesn’t make sense today.”

With Ontario already close to Ottawa’s definition of a have-not province, McGuinty makes a compelling case.

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