Fixing equalization will not be easy, but there are other options, say experts

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Fixing equalization will not be easy, but there are other options, say experts

Nov 17, 2019 | 09:22 1 https://www.cbc.ca/news/politics/fixing-equalization-formula-challenge-options-1.5362056

Fixing equalization will not be easy, but there are other options, say experts

Enlarging the relatively small Fiscal Stabilization Program seen as a possible solution
Peter Zimonjic · CBC News · Posted: Nov 16, 2019 4:00 AM ET | Last Updated: November 16

As the premiers of Alberta and Saskatchewan continue to demand a better deal within the federation, all eyes are beginning to focus on the controversial government equalization program.

It was crafted to help poorer provinces deliver the same level of government services as richer ones, but Alberta Premier Jason Kenney and Saskatchewan Premier Scott Moe want to see it changed.

Last week Kenney announced the members of his Fair Deal Panel that will hold a series of town halls in an effort to push Ottawa for a better equalization deal, among other things.

Kenny has even promised to hold a referendum on the program as a way to pressure the federal government to improve the deal for Alberta.

Chief among his complaints is that Quebec receives $12 billion a year in equalization payments and is posting a provincial surplus, while an Alberta hard hit by the downturn in global oil prices is running deficits and gets no money under equalization.

But what the deal would look like if it were changed, and what it would mean for Alberta, say experts, might not be what Alberta and Saskatchewan would like to hear.

"For Alberta there is really a simple answer: nothing could be changed that would result in Alberta receiving payments," said Trevor Tombe, associate professor of economics at the University of Calgary.

The reason Tombe can be so confident in this proclamation lies in how the equalization formula that delivers federal dollars to provinces works. Tombe explains that the formula basically looks to even out "fiscal capacity" — a province's ability to generate revenue.

So a province like Alberta that does not have a provincial sales tax is considered to have much more room to increase its tax revenue than a province like Quebec, which has a relatively high provincial sales tax.

The same can be said for provincial income tax levels. The equalization formula takes into consideration how much income a province has to tax. According to Statistics Canada, Alberta's median household taxable income in 2015 was $93,835, the highest in the country, compared to Quebec's median of $59,822, one of the lowest.

The federal government could ... do a lot to help Alberta and Saskatchewan but not through equalization

With Alberta having a very low provincial income tax, compared to other provinces, the equalization program considers Alberta as having a high fiscal capacity, or an ability to increase taxes, and therefore is deemed not in need of assistance from the federal government. At least not before it raises tax levels to be more in line with the rest of the country.

"Even if you remove natural resources from the equation Alberta will not receive equalization payments, they are just way above the average. There is just no way that they would receive equalization." said Daniel Béland, a political science professor at McGill University in Montreal.


The Fiscal Stabilization Program

So putting aside, for the moment, the option of adjusting the equalization program to better help otherwise wealthy provinces hit by hard times, what else can be done?

"Maybe we need something on the fiscal stabilization side, which has always been a small program, not to be used often," said Kevin Page, president and CEO of the Institute of Fiscal Studies and Democracy at the University of Ottawa.

Bolstering that program could help provinces weather "the longer-term cyclical downturns in the economy to provide support for these provinces that have helped the federation."

The Fiscal Stabilization Program is a relatively small program, that provides financial assistance to provinces facing a year-over-year decline in non-resource revenues that are greater than five per cent. The maximum a province can receive under the program is $60 per person, or in Alberta's case about $260 million.

Boosting other transfers

Page said that with global oil prices likely to stay depressed for the significant future a program like this could be increased to help not only the West, but other provinces as well.

"Maybe we need to change that program and enrich that program so that when economies like Alberta or Saskatchewan or Newfoundland go through these periods, that we find ways to give them assistance," he said.

Béland said the formulas for other federal programs could also be adjusted to help provinces in a downturn by providing higher health and social transfers and investments.

"The federal government could help Alberta in certain ways, investments in infrastructure, helping them in terms of diversifying the economy. They can do a lot to help Alberta and Saskatchewan but not through equalization," he said.

That is not to say that Béland is completely against tweaking the equalization program but rather that he believes updating it should be left to experts and not politicians.

Fixing equalization

"We could try to isolate equalization from partisan politics and create a federal panel or permanent commission that will actually review the formula to have top economists and policy experts, non-partisan people who will sit at the table, review the equalization formula and make recommendations to government," he said.

Béland said such a panel could be made a permanent fixture that would make recommendations every couple of years to better reflect changing economic circumstances.

Tombe said he, too, isn't ready to give up on the program yet and that a commission could consider changing the equalization formula to scrap the limit on the transfer so that the formula itself decides how much money needs to be given to each province.

"We could move to a system where there's an objective formula-based determination of how large the program is and needs to be," he said. Reply With Quote
blackpowder's Avatar Nov 17, 2019 | 23:49 2 Unanswered for so long I couldn't resist. I unblocked Chuck just long enough to read the article.

Seems very few outside AB, and some in SK, will ever get it.
We've had enough. It's more than equalization. Which is only ink on paper and can be rewritten or scrapped if people have the will.
The whole thing flawed. And QC has special privileges regardless. Which is the flipping point!!!! Hydro sure gets a sweet deal.
Don't follow the law, change it completely!!
Rethink how to support the underemployed provinces. Start our own pension fund.
We are headed towards a standard of living closer to the Maritimes otherwise.
Inevitable result of being kept in our place. Everyone sharing but the 'ruling class'.
We don't want in or out this time.
We want the same deal as QC.
The rest is buffalo chips. Reply With Quote
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  • Nov 18, 2019 | 08:54 3 According to Statistics Canada, Alberta's median household taxable income in 2015 was $93,835, the highest in the country, compared to Quebec's median of $59,822, one of the lowest. Reply With Quote
    Partners's Avatar Nov 18, 2019 | 09:03 4
    Quote Originally Posted by chuckChuck View Post
    According to Statistics Canada, Alberta's median household taxable income in 2015 was $93,835, the highest in the country, compared to Quebec's median of $59,822, one of the lowest.
    SO? they need to get a job? Or a 2nd job like lots of people here.. Reply With Quote

  • Nov 18, 2019 | 09:59 5 Did you not see the map of GDP per capita and how high it was for resource rich states like ND, Texas and Alaska? Alberta and Saskatchewan have the same advantage. So your comments about getting a job or a second job are just plain ignorant. Reply With Quote
    Nov 18, 2019 | 10:11 6
    Quote Originally Posted by chuckChuck View Post
    Did you not see the map of GDP per capita and how high it was for resource rich states like ND, Texas and Alaska? Alberta and Saskatchewan have the same advantage. So your comments about getting a job or a second job are just plain ignorant.
    So maybe the Quebecers need to move to where the work is? Reply With Quote
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  • blackpowder's Avatar Nov 18, 2019 | 10:20 7 Oh no, we can't move there if we're not bilingual. Why should they be able to move here? Reply With Quote
    Partners's Avatar Nov 18, 2019 | 10:38 8
    Quote Originally Posted by chuckChuck View Post
    Did you not see the map of GDP per capita and how high it was for resource rich states like ND, Texas and Alaska? Alberta and Saskatchewan have the same advantage. So your comments about getting a job or a second job are just plain ignorant.
    But all the imagrants moved to where it's a better opportunity.
    So why can't the kebekers?? Reply With Quote
    Partners's Avatar Nov 18, 2019 | 10:40 9 Because they will keep milking the cow till it dies.. Reply With Quote
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  • Nov 18, 2019 | 19:42 10
    Quote Originally Posted by chuckChuck View Post
    Did you not see the map of GDP per capita and how high it was for resource rich states like ND, Texas and Alaska? Alberta and Saskatchewan have the same advantage. So your comments about getting a job or a second job are just plain ignorant.
    All the more reason to separate. Quebec is leaving their resources in the ground so they can collect more transfer payment and save them for when they separate. Reply With Quote
    Nov 18, 2019 | 22:21 11
    Quote Originally Posted by Partners View Post
    SO? they need to get a job? Or a 2nd job like lots of people here..
    For many Alberta families... Federal tax is the biggest single cost they must pay... progressive tax rates increase tax payable. Work harder... and take home less is the federal scam. It is bankrupting Alberta families... and Alberta small business... who have a heart ... and want their workers to survive. What a tread mill. Extraction by feds at a whole different level... here in Alberta. This is frankly depressing... and destroying young families. Reply With Quote

  • Nov 19, 2019 | 06:16 12 A fellow I used to work with came from Quebec and he said he was paid under the table. Reply With Quote
    Nov 19, 2019 | 09:10 13 Chuck, so all this time you've been defending equalization, and telling us what an effective system it is when us taxpayers tell you how it is broken.

    Now that your CBC claims it is broken, suddenly you agree that it is broken and needs to be fixed?

    It sure is a good thing that we have the CBC to tell you what your opinion is.


    And while the article makes it sound like the solution is so complicated, it is anything but.

    The solution is that the largest net contributors will exit confederation, the remaining Socialists will discover that equalization isn't as much fun when it involves equalizing poverty and debt as opposed to someone else's hard earned tax dollars. Reply With Quote
    blackpowder's Avatar Nov 19, 2019 | 09:28 14 Exactly Sum, the higher the taxes, the larger the underground economy. Reply With Quote
    Nov 19, 2019 | 11:38 15
    Quote Originally Posted by AlbertaFarmer5 View Post
    Chuck, so all this time you've been defending equalization, and telling us what an effective system it is when us taxpayers tell you how it is broken.

    Now that your CBC claims it is broken, suddenly you agree that it is broken and needs to be fixed?

    It sure is a good thing that we have the CBC to tell you what your opinion is.


    And while the article makes it sound like the solution is so complicated, it is anything but.

    The solution is that the largest net contributors will exit confederation, the remaining Socialists will discover that equalization isn't as much fun when it involves equalizing poverty and debt as opposed to someone else's hard earned tax dollars.
    By the way the points in the article are from economists at the U of C and U of Ottawa not the CBC.

    Which taxpayers? You mean the right wing conservative ones in Alberta who elected government after government who squandered billions of dollars in potential public revenues from a one time finite resource? While Norway and Alaska built a sizable heritage fund based on their resource for a rainy day!

    Norwegians and Alaskans were and are more fiscally responsible.

    Good luck with your utopian vision for an independent oil state because it is a dream. Once the Conservatives are reelected suddenly it will be less desirable. The wexiteers will run against the Conservatives splitting the vote. That sounds like a way to win power again!
    Last edited by chuckChuck; Nov 19, 2019 at 11:45.
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    Nov 19, 2019 | 13:32 16 well , another year or so of numbnuts , and that should be the end of that party for another decade or so Reply With Quote
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  • Nov 20, 2019 | 07:48 17 Daycare Quebec: 8.25 day under 200$ month
    Saskatoon: 650 to 800$ month
    Calgary: 1000$ month

    Tuition Quebec is much lower than any other province.

    Equalize these factors with a basket of goods formula. Reply With Quote
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  • Nov 20, 2019 | 07:54 18 The formula will never be fair, this is Canada.

    Like the CWB when the west had the war measures act that lasted well past the war with the five year agreements. Under the mandatory CWB the west sold wheat for 1.25$ a bushel, and the east sold at values of a world short of grain. The west happy to help out, the east never obliged to.

    Imagine what that wealth would have done for your forefathers?

    Canada has never been fair to the west, admit it.
    Last edited by westernvicki; Nov 20, 2019 at 08:06.
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  • Nov 20, 2019 | 08:06 19
    Quote Originally Posted by westernvicki View Post
    Like the CWB when the west had the war measures act that lasted well past the war with the five year agreements. Under the mandatory CWB the west sold wheat for 1.25$ a bushel, and the east sold at values of world short of grain. The west happy to help out, the east never obliged to.
    or that time when western farmers were used to bail out Chinese and Russian famines. Reply With Quote
    Nov 20, 2019 | 08:15 20 Alberta and Saskatchewan still both have higher GDP per capita than many other provinces. And higher average family incomes. And the ability to collect alot of taxes (large fiscal capacity)

    Alberta has chosen to have low tax rates and low royalties that could have provided significant revenue for the heritage savings account and all kinds of programs but they chose low taxes over more stable finances. That's their choice.

    The integrated oil producers in Alberta who produce upgraded and refined products are still very profitable with low prices. Probably even more so.

    Yes they need more access to markets. But they also need to match supply to market capacity so that they don't lower oil prices with over production. Line 3 and Keystone XL along with TMX will solve some of those issues. Most of the market for heavy oil refining is in the US. Line 3 and Keystone XL are being held up in the US. Reply With Quote
    Nov 20, 2019 | 08:21 21
    Quote Originally Posted by chuckChuck View Post
    Alberta and Saskatchewan still both have higher GDP per capita than many other provinces. And higher average family incomes. And the ability to collect alot of taxes (large fiscal capacity)

    Alberta has chosen to have low tax rates and low royalties that could have provided significant revenue for the heritage savings account and all kinds of programs but they chose low taxes over more stable finances. That's their choice.

    The integrated oil producers in Alberta who produce upgraded and refined products are still very profitable with low prices. Probably even more so.

    Yes they need more access to markets. But they also need to match supply to market capacity so that they don't lower oil prices with over production. Line 3 and Keystone XL along with TMX will solve some of those issues. Most of the market for heavy oil refining is in the US. Line 3 and Keystone XL are being held up in the US.
    dont you understand how it works?
    the more alberta makes , the more quebec takes?
    wtf is wrong with your head
    alberta has lost the oil patch and is still paying those freeloading bastards, and so are we
    every year chuck , EVERY ****ING YEAR SINCE INCEPTION , THEY HAVE BEEN SLOPPING AT THE TROUGH
    Last edited by caseih; Nov 20, 2019 at 08:23.
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  • Nov 20, 2019 | 08:26 22
    Quote Originally Posted by chuckChuck View Post
    Alberta and Saskatchewan still both have higher GDP per capita than many other provinces. And higher average family incomes. And the ability to collect alot of taxes (large fiscal capacity)

    Alberta has chosen to have low tax rates and low royalties that could have provided significant revenue for the heritage savings account and all kinds of programs but they chose low taxes over more stable finances. That's their choice.

    The integrated oil producers in Alberta who produce upgraded and refined products are still very profitable with low prices. Probably even more so.

    Yes they need more access to markets. But they also need to match supply to market capacity so that they don't lower oil prices with over production. Line 3 and Keystone XL along with TMX will solve some of those issues. Most of the market for heavy oil refining is in the US. Line 3 and Keystone XL are being held up in the US.
    170000 barrels of oil isn't moving every day due to the CN strike....


    Blanchet,.. the separatist... said Quebec was instrumental in helping getting the west's energy industry set up while failing to see that the money came from the west with the expansion of western canada.... Reply With Quote
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  • blackpowder's Avatar Nov 20, 2019 | 09:36 23 Reply With Quote

  • Nov 20, 2019 | 09:55 24 Chuck, why do you persist on comparing Alberta, a province within a country, with no autonomy over our federal "commitments", do Norway, a sovereign country, or Alaska, a state within a country which doesn't practice legalized theft from one region to buy votes from another region, one of many reasons why the contributing members of Canada will inevitably join the US.

    I realize that geography is not your strong suit, you are still upset about Saskatchewans off shore oil industry, and think Florida has no swamps, but at least try to comprehend that Alberta is not a country. Norway isn't forced to share its wealth with Sweden and Finland. We went through this exercise a while ago, and I showed you how much larger then Norway's, Alberta's sovereign wealth fund would be if we hadn't given it all to Quebec et al.

    In the mind of a socialist, it is always a revenue problem( more taxes solve everything), Never a spending problem. Reply With Quote
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  • Nov 20, 2019 | 10:44 25
    Quote Originally Posted by blackpowder View Post
    Wow , thats an interesting little tidbit of info Reply With Quote
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  • blackpowder's Avatar Nov 20, 2019 | 12:15 26 It's not about pipelines. It's about representation. Had we that, we would've had pipelines years ago. And a lot of other things. Reply With Quote
  • 1 Like


  • Nov 20, 2019 | 12:49 27
    Quote Originally Posted by blackpowder View Post
    It's not about pipelines. It's about representation. Had we that, we would've had pipelines years ago. And a lot of other things.
    Among those other things would be a sovereign wealth fund worth 100's of billions, and a separatist movement which would have no justification for existence. Reply With Quote
  • 1 Like


  • Nov 21, 2019 | 07:14 28 Name:  Alberta GDP.jpg
Views: 130
Size:  16.3 KB

    Alberta's GDP is just about back to where it was when Harper was in power and the world oil price fell. Reply With Quote
    Nov 21, 2019 | 07:37 29 https://en.wikipedia.org/wiki/Economy_of_Alberta

    Alberta's real per capita GDP

    In 2006 Alberta's per capita GDP was higher than all US states, and one of the highest figures in the world. In 2006, the deviation from the national average was the largest for any province in Canadian history.[8] In 2007, Alberta's per capita GDP in 2007 was C$74,825 (approx. US$75,000)—by far the highest of any Canadian province—61% higher than the Canadian average of C$46,441 and more than twice that of all the Maritime provinces. In 2017, Alberta's real per capita GDP—the economic output per person—was $71,092, compared to the Canadian average of $47,417.[11] Alberta's A grade on its income per capita was based on the fact that is was almost "identical" to that of the "top peer country" in 2016, Ireland.[12]

    In 2017, Alberta's real per capita GDP—the economic output per person—was $71,092 compared to the Canadian average output per person of $47, 417 and Prince Edward Island at $32,123 per person.[11] Since at least 1997, Alberta's per capita GDP has been higher than that of any other province. In 2014, Alberta's reached its highest gap ever—$30,069—between its real capita GDP and the Canadian average.[11]

    According to the Conference Board of Canada, in 2016 Alberta earned an "A grade with income per capita almost identical to the top peer country, Ireland."[12] In 2016 income per capita in Alberta was $59,259. Reply With Quote
    Nov 21, 2019 | 07:44 30 Alberta is still recovering from 2014 but it continues to grow. It still has the highest GDP per capita of any Canadian province.

    Is Alberta really in that bad of shape? Only if you compare it to the peak of the boom. But not if you compare it the rest of Canada.

    Yes parts of the oil industry are struggling. But integrated companies who upgrade and sell refined oil products are doing very well.

    Once Line 3 and Keystone XL and TMX are operating then pipeline constraints are reduced. Reply With Quote