Economy Canada's Insane "Equalization" Discussion: Ottawa Quietly Renewed Equalization Formula Until 2024

[Arkain2K]

Are you a province that doesn't want to develop its resources? Equalization has a nice, juicy payout just for you​

Here’s a quick primer on the inequality of equalization payments.

The federal government’s stated goal for the program is to “enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces.”

Ottawa will hand out $18.3 billion to so-called have-not provinces through equalization this year. That money, of course, comes from taxpayers. Each Canadian’s per-capita bill is $503.

While all Canadians pay into equalization, the benefits are unequal. The Quebec government will collect $11.1 billion from equalization next year and that means it’s getting $828 more per Quebecer than the amount average Quebecers pay into the program. Manitobans come out ahead by $878 per capita. Nova Scotians and New Brunswickers average $1,371 and $1,823 respectively. Prince Edward Island is the biggest winner with a per capita haul of $2,121.

Ontario collects some equalization money but, after accounting for the per-capita shares of the program’s costs, it loses $401 per Ontarian.

People in Alberta, British Columbia, Saskatchewan and Newfoundland and Labrador pay into equalization, but they get nothing back and they haven’t gotten anything back for years.

That means a family of four in Red Deer will pay$2,012 into equalization and the Quebec government will collect $3,312 for a corresponding family in Chicoutimi. A family of four in Moose Jaw will pay $2,012 while the Manitoba government will collect $3,512 for a corresponding family in Brandon. A family of four in St. John’s will pay $2,012 while the P.E.I. government will collect $8,484 for a corresponding family in Charlottetown.

Those who support the status quo hide behind equalization’s complex economic calculations, but there’s a clear pattern: People in provinces with significant non-renewable resources, such as oil and potash, pay for equalization and provinces that haven’t developed non-renewable resources collect from equalization. For example, Manitoba and Quebec continue to collect equalization while taking full advantage of their hydro resources, but Alberta and Newfoundland get nothing from equalization because the program penalizes them for developing their energy sectors.

Perhaps Ottawa could justify siphoning money from provinces such as Alberta and Saskatchewan while their oil patches were booming, but surely the program will reflect their struggles with depressed commodity prices, right?

The reality is the contrary.

The Saskatchewan government’s revenuesdropped by three per cent in 2015-16 compared to the previous year. During the same period, Newfoundland and Labrador’s revenues sank 13.7 per cent and Alberta’s sank 14.1 per cent. Yet, people in these provinces continue to pay into equalization and get nothing in return.

The lack of logic compounds when considering the situation of recipient provinces.

P.E.I.’s provincial revenues fell by 4.2 per cent in 2015-16 so maybe it could make a case for more help. But Manitoba’s provincial revenues went up slightly and it’s getting $84 million more in equalization payments. Quebec’s provincial revenues went up a healthy four per cent, but its equalization cheque will go up by more than a billion dollars.

So the provinces with growing revenues are “less prosperous” by Ottawa’s reckoning and need billions in handouts that are taken from provinces such as Alberta and Newfoundland that are dealing with plummeting revenues. There is no reason given to explain why recipient provinces need more equalization money. And there’s no consideration given to the fact that many of the people that pay the costs are struggling.


Todd MacKay is Prairie Director, Canadian Taxpayers Federation.

http://business.financialpost.com/o...tion-has-a-nice-juicy-payout-just-for-you/amp

 

[Arkain2K]

QUEBEC'S $300 BILLION IN EQUALIZATION PAYMENTS TOUCHES NERVE IN PIPELINE WARS​

The Petroleum Services Association of Canada (PSCA) has recommended to the federal government that inter-provincial transfer of goods should be factored into the country's equalization payments. The move reflects deep frustration over Quebec's constant pushback against Alberta's attempt to export its energy products.

Equalization payments are a hot-button item in Alberta and Saskatchewan, who consistently transfer funds to "have not" provinces, such as Quebec and the Maritimes. The formula takes into account taxes collected by the province and 50% of natural resource revenues, as measured per capita. Provinces above the national average pay into the fund, while those below average collect payments.

The province of Quebec has received the lion's share of the country's equalization payments, about 50% since the program began in 1957. The province received $10 billion this year, which the government put towards balancing its budget. Quebec has received almost $300 billion in equalization payments since 1957 and has never been a net contributor to the fund. The province's significant revenues from the sale of hydroelectric power are excluded from the equalization formula.

The current "have not" provinces are Quebec, Ontario, Manitoba, Nova Scotia, New Brunswick and PEI, with payments extending into the 2016/17 fiscal year.Despite Alberta's serious oil shock, payments are calculated on a 3 year rolling average, meaning the province will not qualify for several more years, assuming conditions do not improve. The last time Alberta qualified for equalization funds was 1963.

In 1982, former Prime Minister Pierre Trudeau amended the constitution to include equalization payments for "have not" provinces, making the program very difficult to undo.

PSAC president Mark Salkeld said he does not expect a response from the federal government but rather was trying to point out a huge hypocrisy in provincial trade politics.

http://www.oilsandsmagazine.com/new...ation-payments-touches-nerve-in-pipeline-wars

 

[Curmudgeon]

Yup.

 

[Arkain2K]

Quebec without equalization?
François Legault’s promise to wean Quebec off equalization payment isn’t realistic, but it’s good politics
Paul Wells | November 22, 2017​

Coalition Avenir Quebec Leader Francois Legault, centre, is applauded at a news conference marking the end of the spring session, Friday, June 16, 2017 at the legislature in Quebec City. ​

One of my superstitions is that when you watch a televised leaders’ debate, if there’s one leader everyone else is facing with an angry expression, that’s who’ll win the election. One leader sets the agenda, the others react. It actually doesn’t matter much who’s right on the facts: what matters is who’s making everyone dance.

On Wednesday in Quebec politics, that person was François Legault, the leader of the Coalition Avenir Québec party (shortened everywhere as CAQ, pronounced “cack.” I don’t make it up, I just report it). In Question Period, Legault was making the best of things, going after Premier Philippe Couillard for the previous day’s actually quite rosy fall economic update. Federal equalization payments to Quebec have tripled since 2003, Legault said, to more than $11 billion. Isn’t it a shame?

Then Legault uncorked the following: “What I want to tell Quebecers is that a CAQ government will aim for zero equalization. A CAQ government will eliminate the wealth gap with the rest of Canada. A CAQ government will have ambition, will aim high for Quebec.”

Couillard’s first response was to mock Legault for even imagining a CAQ government, for indeed Quebec has never had one. The CAQ was formed in 2011, usually wanders listlessly among mutually contradictory policies, and generally looks like a reasonable idea to a reasonable number of Quebecers until the actual voting day arrives, scaring them back to one of the more old-line parties.

But it’s getting hot for Couillard. The CAQ won a Liberal seat in a recent by-election, and a pollshows Legault’s party ahead of the Liberals. So Couillard decided to turn up the temperature on Legault. How’s he going to eliminate equalization payments to Quebec? “What’s he going to do, precisely?”

Then Couillard suggested these questions are part of a general change in his own attitude toward Legault’s party. “Until now, he’s had it easy,” the premier said. “They say whatever they want, they change their mind three times a day, and that’s all for the day. Starting now, we’re going to answer everything they say.”

On his way out of the National Assembly, Couillard gave Legault 24 hours to show how he’ll arrange things so that Quebec doesn’t need more than $11 billion in net payments from the federal government. Then he repeated the challenge on Twitter, saying, “I give François Legault 24 hours to explain to Quebecers how he will eliminate equalization in Quebec in 4 years, with numbers to support his argument.”



Not quite an ultimatum, I guess, because there’s no “or else.” Show us your numbers or… don’t?

In his own tweet in reply, Legault opted for the second choice.



“You need an objective and will to get there,” Legault wrote, vacuously. “Your party has dropped its arms for 15 years. I’ll enjoy debating this question with you. Quebecers will then decide on Oct. 1, 2018” — the date of the next provincial election.

The Parti Québécois leader Jean-François Lisée, who seems happier than any man in Canada that Twitter now has a 280-character limit, came late to the Tweet-fight. His reply was characteristic: it was long, unrealistic, and nobody had asked for it.

You get out of equalization, Lisée said, by cutting health care and education, boosting Quebec’s GDP spectacularly, or by “attaining independence and finally abolishing the grave deficit in productive federal investment in Quebec.” One of the more interesting things about this intervention is that Lisée isn’t even offering an independence referendum during the (profoundly hypothetical) first term of a PQ government. So the PQ leader has turned into one of these guys who suggests things on Twitter he doesn’t even plan to do.

For observers outside Quebec, all of this is a reminder that, contrary to rest-of-Canadian myth, nobody in Quebec is having a good chuckle over the scale of equalization payments to the province. Because equalization is received by provinces whose economies underperform, the program is a bit embarrassing for most Quebec politicians. And because Quebec, while not the poorest “have-not” province, is the largest by population, it’s by far the largest recipient of equalization. This makes Quebec a political target, one Alberta’s new opposition leader hasn’t been shy about mentioning.

It’s clever of Legault to “aim for zero equalization.” It’s the same as championing an economy on fire. It’s also not realistic. By most measures, Quebec’s economy is already on fire—it was “raining money” this summer, though growth should slow to a drizzle by next year—and equalization payments to Quebec have increased lately anyway.

We’re probably headed for at least a year of equalization debates anyway, which nobody would wish on their worst enemy, so I’ll avoid details for now. What strikes me, from the parochial perspective of an old Montreal Gazette reporter, is that dynamic we saw in Quebec City this morning. Couillard’s right: Legault is saying random things he can’t possibly mean. But Legault was leading the parade today, with the premier and the leader of a larger opposition party trying to squeeze into the frame. He must be pleased with his day. It’s the sort of day that improves his chances of replacing Couillard.

http://www.macleans.ca/news/canada/quebec-without-equalization/

 

[splendica]

The new smart car in Canada.

 

[Arkain2K]

Provinces, feds to debate proposed changes to ever divisive equalization program

OTTAWA _ A decades-old sore spot in the Canadian federation is days away from another flare-up as the country’s finance ministers prepare to discuss potential tweaks to the formula behind equalization payments.

British Columbia Finance Minister Carole James said in an interview that the federal government is proposing a change to include non-residential property values as part of the complex calculation.

The adjustment would likely make it more difficult for provinces with property values well above the national average _ such as B.C. and Ontario _ to qualify as recipients of equalization payments from Ottawa.

Equalization is designed to help poorer provincial governments provide public services that are reasonably comparable to those in other provinces. The program is coming due for its twice-a-decade update before the 2019-20 fiscal year _ and since it’s a federal program, Ottawa can make unilateral changes.

Historically, equalization has been a source of conflict between governments within the federation.

Under the current formula, the provinces that received shares of this year’s $18-billion equalization envelope _ the so-called “have-not” provinces _ included Quebec, Manitoba, Nova Scotia, New Brunswick Prince Edward Island and Ontario. Quebec easily took in the largest share in 2017-18 at $11 billion.

The other provinces _ B.C., Alberta, Saskatchewan and Newfoundland and Labrador _ did not receive anything through the constitutionally guaranteed equalization program.

The B.C. government warns that going forward the inclusion of non-residential property values in the formula would make it more difficult for the province to qualify for payments in the event of an economic downturn.

The issue is a top concern for James ahead of meetings Sunday and Monday in Ottawa with her federal, provincial and territorial counterparts.

“We certainly don’t agree with that direction _ we’ve seen no research that has shown that it makes sense to change the weighting in the equalization payments,” James told The Canadian Press.

“I’ll certainly be standing up for our province … and telling the federal minister of finance that these aren’t acceptable changes.”

James said the update would mean the formula would deem B.C. to have untapped capacity to generate additional property tax revenue. She argued it’s based on the assumption B.C. municipalities could raise tax rates on properties, which have seen their values soar in recent years.

To determine whether a province qualifies for an equalization payment, and for how much, the formula measures each province’s ability to raise revenues, or their fiscal capacity.

James wants Ottawa to make sure the short- and long-term impacts for all provinces have been explored before it moves forward.

With the renewal of the equalization formula scheduled for 2019, this weekend’s meeting will likely be the first of many federal-provincial discussions on the matter.

B.C. isn’t the only province with concerns about the proposal.

“When it comes to the potential of generating more revenue from the high prices of real estate, which is what British Columbia is arguing, we don’t have the capacity to squeeze out more money from the system,” Ontario Finance Minister Charles Sousa said in an interview.

Sousa said his province has lowered its revenue expectations for the real estate sector after the introduction of measures to cool red-hot markets, such as the Toronto region.

“So, I agree with British Columbia that we can’t basically assess certain real estate valuations as a means to assess equalization payments,” he said.

Ontario has been receiving equalization payments since 2009 as a have-not province. But after improvements to its economy in recent years, the province is expected to return to “have” status some time in the next couple of years.

A senior Ontario government official, who spoke on condition of anonymity because of the sensitivity of the issue, said the proposed change could be the difference between whether it collects equalization or not.

“Our concern is that if the last years taught us anything, it’s that property values are volatile in both British Columbia and in Ontario,” said the official, who would prefer a phased-in approach.

“We would rather have it dealt with in a more tempered way, rather than just jumping right off the cliff on it.”

Chloe Luciani-Girouard, a spokeswoman for federal Finance Minister Bill Morneau, wrote in an email Thursday that Ottawa will always listen to the concerns of provinces and territories _ and will take them “very seriously.”

The future of the equalization formula will also be a priority for Newfoundland and Labrador at the meetings.

The province’s economy, hit hard in recent years by the commodity slump, still failed to qualify for equalization payments this year and Finance Minister Tom Osborne doesn’t expect it to next year, either.

Osborne said in an interview that the current formula only addresses revenue and doesn’t account for the different costs of services between provinces.

He says his province, with its small, dispersed population, faces the highest costs of services in Canada _ and they’re growing at an “unsustainable” clip.

Osborne plans to push his counterparts on the issue in hope of changing the formula so that it reflects both revenue and expenditures.

“If anybody can explain to me how we’re a have-province, I’d like to hear it, because we’re certainly not a have-province,” he said.

The formula is also based on a three-year moving average of economic growth, so a province’s have- or have-not status can lag economy-altering events.

The country’s finance ministers will discuss a range of issues during the meetings _ from cannabis taxation, to the three-year review of the Canada Pension Plan, to the state of the global economy. The ministers are also scheduled to meet Bank of Canada governor Stephen Poloz.

Ahead of the meetings, Morneau will distribute updated figures outlining how much the neediest provinces can expect to receive from Ottawa in the next fiscal year, 2018-19.

http://www.canadianbusiness.com/bus...hanges-to-ever-divisive-equalization-program/

 

[Devout Pessimist]

The solution is for Western Canada to Separate from Eastern Canada. The Eastern provinces decide all of the federal elections and take all of the money. I'm all for a Republic of Western Canada.

 

[JDragon]

I live in one of the rich states of Germany. The same issue obviously exists here.

It is a tricky balance. On the one hand, you face financing the extravagances of other states (e.g. free kindergarten in Rhineland Palatinate when I pay 300 Euros a month for half day kindergarten). On the other hand, if you don't care about a certain level of equalization, you face strong domestic migration currents and the poorer states will lose all their talent, meaning they will be unable to reverse course eventually.

So IMO equalization payments are kind of a no-brainer, but it is always about the level of them.

 

[Grenz]

NB, NS and PEI can't function without equalization payments. Those provinces continue to suffer from brain drain, have aging populations and not enough industries to support them. Considering the small populations of those provinces though, they aren't an unmanageable burden. Then there's QC...

Canada's second most populous province, home to Montreal, Canada's third largest city. There's industry here, there's people and there''s also massive government and bureaucracy. Dealing with the QC government has got to the worst out of all ten provinces. If you want a truly Kafkaesque experience, try changing your driver's license to a Quebec license or switching your healthcare card - it's a fucking nightmare, and everyone will attest to that. There are all these government offices all over the place, but all of them offer only certain services and you need to check online to find out which outlet you need to go to. Every other province I've lived in has service outlets that offer identical services.

The system here is brutally inefficient, bloated and costly. If Quebec actually decided to clean up its shitty provincial government structure, a lot of the transfer payments could be eliminated.

 

[Law Talkin’ Guy]

As an Albertan born and raised, bitching about equalization payments is more than just a topic of conversation, it’s a way of life.

 

[Devout Pessimist]

I live in one of the rich states of Germany. The same issue obviously exists here.

It is a tricky balance. On the one hand, you face financing the extravagances of other states (e.g. free kindergarten in Rhineland Palatinate when I pay 300 Euros a month for half day kindergarten). On the other hand, if you don't care about a certain level of equalization, you face strong domestic migration currents and the poorer states will lose all their talent, meaning they will be unable to reverse course eventually.

So IMO equalization payments are kind of a no-brainer, but it is always about the level of them.

In Canada, many people are still leaving the provinces receiving equalization payments for the wealthier provinces.

 

[JudoThrowFiasco]

i dont mind paying for the east coast -- they actually have high taxation so they are doing what they can on their end. Plus they have gorgeous land and slutty women.

 

[KBE6EKCTAH_CCP]

Quebec without equalization?
François Legault’s promise to wean Quebec off equalization payment isn’t realistic, but it’s good politics
Paul Wells | November 22, 2017​

Coalition Avenir Quebec Leader Francois Legault, centre, is applauded at a news conference marking the end of the spring session, Friday, June 16, 2017 at the legislature in Quebec City. ​

One of my superstitions is that when you watch a televised leaders’ debate, if there’s one leader everyone else is facing with an angry expression, that’s who’ll win the election. One leader sets the agenda, the others react. It actually doesn’t matter much who’s right on the facts: what matters is who’s making everyone dance.

On Wednesday in Quebec politics, that person was François Legault, the leader of the Coalition Avenir Québec party (shortened everywhere as CAQ, pronounced “cack.” I don’t make it up, I just report it). In Question Period, Legault was making the best of things, going after Premier Philippe Couillard for the previous day’s actually quite rosy fall economic update. Federal equalization payments to Quebec have tripled since 2003, Legault said, to more than $11 billion. Isn’t it a shame?

Then Legault uncorked the following: “What I want to tell Quebecers is that a CAQ government will aim for zero equalization. A CAQ government will eliminate the wealth gap with the rest of Canada. A CAQ government will have ambition, will aim high for Quebec.”

Couillard’s first response was to mock Legault for even imagining a CAQ government, for indeed Quebec has never had one. The CAQ was formed in 2011, usually wanders listlessly among mutually contradictory policies, and generally looks like a reasonable idea to a reasonable number of Quebecers until the actual voting day arrives, scaring them back to one of the more old-line parties.

But it’s getting hot for Couillard. The CAQ won a Liberal seat in a recent by-election, and a pollshows Legault’s party ahead of the Liberals. So Couillard decided to turn up the temperature on Legault. How’s he going to eliminate equalization payments to Quebec? “What’s he going to do, precisely?”

Then Couillard suggested these questions are part of a general change in his own attitude toward Legault’s party. “Until now, he’s had it easy,” the premier said. “They say whatever they want, they change their mind three times a day, and that’s all for the day. Starting now, we’re going to answer everything they say.”

On his way out of the National Assembly, Couillard gave Legault 24 hours to show how he’ll arrange things so that Quebec doesn’t need more than $11 billion in net payments from the federal government. Then he repeated the challenge on Twitter, saying, “I give François Legault 24 hours to explain to Quebecers how he will eliminate equalization in Quebec in 4 years, with numbers to support his argument.”



Not quite an ultimatum, I guess, because there’s no “or else.” Show us your numbers or… don’t?

In his own tweet in reply, Legault opted for the second choice.



“You need an objective and will to get there,” Legault wrote, vacuously. “Your party has dropped its arms for 15 years. I’ll enjoy debating this question with you. Quebecers will then decide on Oct. 1, 2018” — the date of the next provincial election.

The Parti Québécois leader Jean-François Lisée, who seems happier than any man in Canada that Twitter now has a 280-character limit, came late to the Tweet-fight. His reply was characteristic: it was long, unrealistic, and nobody had asked for it.

You get out of equalization, Lisée said, by cutting health care and education, boosting Quebec’s GDP spectacularly, or by “attaining independence and finally abolishing the grave deficit in productive federal investment in Quebec.” One of the more interesting things about this intervention is that Lisée isn’t even offering an independence referendum during the (profoundly hypothetical) first term of a PQ government. So the PQ leader has turned into one of these guys who suggests things on Twitter he doesn’t even plan to do.

For observers outside Quebec, all of this is a reminder that, contrary to rest-of-Canadian myth, nobody in Quebec is having a good chuckle over the scale of equalization payments to the province. Because equalization is received by provinces whose economies underperform, the program is a bit embarrassing for most Quebec politicians. And because Quebec, while not the poorest “have-not” province, is the largest by population, it’s by far the largest recipient of equalization. This makes Quebec a political target, one Alberta’s new opposition leader hasn’t been shy about mentioning.

It’s clever of Legault to “aim for zero equalization.” It’s the same as championing an economy on fire. It’s also not realistic. By most measures, Quebec’s economy is already on fire—it was “raining money” this summer, though growth should slow to a drizzle by next year—and equalization payments to Quebec have increased lately anyway.

We’re probably headed for at least a year of equalization debates anyway, which nobody would wish on their worst enemy, so I’ll avoid details for now. What strikes me, from the parochial perspective of an old Montreal Gazette reporter, is that dynamic we saw in Quebec City this morning. Couillard’s right: Legault is saying random things he can’t possibly mean. But Legault was leading the parade today, with the premier and the leader of a larger opposition party trying to squeeze into the frame. He must be pleased with his day. It’s the sort of day that improves his chances of replacing Couillard.

http://www.macleans.ca/news/canada/quebec-without-equalization/

Lisee is the most honnest and decent politician in Québec, PQ or not.

Couillard, on the other hand, is an absolute piece of shit.

Random interesting act about Couillard : couilles mean balls in French.

Other interesting fact : I am pretty sure he is old French nobility by lineage.

 

[Black Helicopters]

That's interesting, it sounded good on paper.

 

[JDragon]

In Canada, many people are still leaving the provinces receiving equalization payments for the wealthier provinces.

Same here. And there certainly is an argument for doing away with equalization payments and making the poor states special economic zones.

 

[Literally Bricked]

i dont mind paying for the east coast -- they actually have high taxation so they are doing what they can on their end. Plus they have gorgeous land and slutty women.

How slutty are we talking?

I have only meet two chicks from the Atlantic region. For me QC has always provided the slobbers.

 

[JudoThrowFiasco]

How slutty are we talking?

I have only meet two chicks from the Atlantic region. For me QC has always provided the slobbers.

If can manage to brush your teeth regularly, good chances they'll polish your knob.

 

[Arkain2K]

i dont mind paying for the east coast -- they actually have high taxation so they are doing what they can on their end. Plus they have gorgeous land and slutty women.

With those valuable natural resources, sounds to me like they could get rich on domestic tourism alone.

 

[AnGrYcRoW]

The solution is for Western Canada to Separate from Eastern Canada. The Eastern provinces decide all of the federal elections and take all of the money. I'm all for a Republic of Western Canada.

If things get ugly this may be an option , we are no where near that yet imo

 

[BrotherClaudio]

I like when your politicians fight on YouTube

It's funny watching jr read his debate against the speaker, that the best part