Quebec tables fifth straight balanced budget with leftover billions from Liberals

[chuckChuck]

Distribution of Federal Revenues and Expenditures by Province
In Brief
Sirina Kerim‑Dikeni, Economics, Resources and International Affairs Division
2018-05-24

https://lop.parl.ca/sites/PublicWebsite/default/en_CA/ResearchPublications/201701E


Unpacking Canada’s Equalization Payments for 2018-19 by Trevor Tombe

https://www.policyschool.ca/unpacking-canadas-equalization-payments-2018-19/

"Equalization is complicated. And for detailed inner workings of the program, interested readers should see this report from the School of Public Policy and this one from the Parliamentary Budget Office. But the basics are fairly straightforward.

Equalization is a federal program that transfers federal funds to provinces with below average capacities to raise revenues. Provinces with stronger economies, and with high income households and businesses, raise more revenue for any given tax rate than provinces with lower incomes. This is true not just of personal and business income taxes, but also of sales and property taxes. Importantly, resource revenues like oil and gas royalties also go into the formula, but only 50% count in the formula (to preserve the incentive to develop a province’s resources).

With all this in mind, equalization asks a simple question: How much revenue would each province raise with tax rates equal to the national average? This is a province’s “fiscal capacity”. If a province would raise less than the average amount, per person, the federal government tops it up. I illustrate the 2018/19 results below."

[westernvicki]

Dear Up Chuck;

The formula is flawed which is why this administration renewed it without negotiation.

Vicki

[chuckChuck]

Specifically what part of the formula is flawed?

If the formula was or is flawed, why didn't Harper and Flaherty significantly change it while they were in power for almost 10 years?

"What about equalization? If the program was cancelled and all proceeds returned in equal per-person payments nationally, Alberta's $27-billion gap in 2015 would only fall to $25-billion.

Would excluding non-renewable resource revenue help? No. Alberta would still receive nothing, and Quebec would receive more. A lot more. I estimate its payment in 2017-18 would increase by $1.6-billion to nearly $12.7-billion." Trevor Tombe - associate professor of economics at the University of Calgary

Without equalization Albertans would still pay more federal taxes because their incomes and per capita GDP are much higher than the rest of Canada due only to large oil and gas resources and a relatively small population.

When the neighbor down the road complains that they are paying to much income tax because their income is too high because of oil and gas revenues, its hard to feel sorry for them. If you make 100,000 dollars in Ontario or Alberta you still pay the same amount of federal tax in each province.

[chuckChuck]

What were they thinking? How the equalization debate ended before it even began

https://www.cbc.ca/news/canada/calgary/equalization-renewal-a-surprise-1.4717501

Trevor Tombe

Trevor Tombe is an associate professor of economics at the University of Calgary and research fellow at the School of Public Policy.

[chuckChuck]

https://www.theglobeandmail.com/opinion/article-why-equalization-is-not-unfair-to-alberta/

Why equalization is not unfair to Alberta
Trevor Tombe
Contributed to The Globe and Mail
Published December 18, 2018

Trevor Tombe is an associate professor of economics at the University of Calgary, and a research fellow at the School of Public Policy.

Financial transfers from Ottawa – and the provinces' disputes over them – are central to the Canadian experience. They are a key reason why our country exists at all, but also a continual source of tension.

Part of this is unavoidable. Allocating scarce federal dollars is a zero-sum game, and flows to one province are lost to another. But much of the anger – especially in Alberta and Saskatchewan – is stoked by commentators and politicians who are deliberately fanning the flames.

There is “no earthly reason why the second-most populous province receives equalization,” former Wildrose Party leader and current media personality Danielle Smith wrote in an op-ed about Quebec. Alberta’s finance minister, Joe Ceci, said the equalization system “needs fixing” and “doesn’t work for Alberta.”

UCP leader Jason Kenney went even further. “Every year, Alberta sends $20-billion in transfers to other provinces through the federal government,” he wrote in a fundraising e-mail last Saturday, proposing a referendum on the issue. “It’s time to fight for fairness in the federation."

Sensational claims drive interest and, more importantly, votes. And Ottawa is always an easy target, even as the federal government prepares to provide a $1.6-billion support package for oil and gas companies. But those claims only work because we let them. So it’s up to each of us to be informed about how equalization actually works, and why struggling Alberta doesn’t receive any while surplus-rich Quebec does.

There are three major transfer programs: the Canada Health Transfer, the Canada Social Transfer and Equalization. The first two distribute funds to provinces according to their population. Quebec is twice Alberta’s size, so it receives twice the dollars. Today, nearly three in four federal transfer dollars are based on population, making transfers as equally distributed as at any point in Canadian history.

Only the equalization program itself is unequal. But that’s deliberate: Some provinces have an easier time raising revenue than others, so equalization provides additional funds to lower-income provinces to ensure adequate public services can be provided to all Canadians.

The formula itself asks what a province’s revenue would be if all its tax rates equalled the national average. Alberta would raise $12,327 per person, more than any other province, followed by B.C. at $11,052. Quebec is far behind, at $8,123, and Prince Edward Island lags even further, at $6,648, according to Finance Canada calculations. Equalization tops up provinces below the national average, which is why a province as populous as Quebec receives payments.

One can certainly disagree with providing more transfers to lower-income regions, but this is hardly a coherent argument against a program designed to do exactly that. Instead, many argue that it is unfair to Alberta, because of the province’s large deficit and deep recession. But these arguments don’t hold water, either.

Yes, Alberta’s recession has shrunk its economy by 12 per cent between 2014 and 2017 – but it remains on top. Alberta’s GDP per capita was nearly $77,500 last year, compared to the national average of $58,000; Quebec’s was $50,000. A strong economy means high income, and Alberta’s median household income was $93,000 in the last census, while more than two in three Albertans are employed today; both figures are higher than those in all other provinces.

Alberta’s large deficit also does not entitle it to equalization. After all, Alberta chooses to have low taxes and high spending, made possible by the luxury of high oil and gas royalties, which have now been reduced. Alberta’s politicians need to come to grips with the fiscal reality, not look to Ottawa for help. And while Quebec may be running a surplus, its taxes are double those in Alberta.

As Mr. Kenney says, Alberta does send more than $20-billion to Ottawa, though the federal government raises more from Alberta individuals and businesses than it spends in the province. My forthcoming research for the Canadian Tax Journal found that the federal revenue and spending gap represented an implicit transfer of $23.8-billion out of Alberta in 2017. And since 2007, this gap has totalled $264-billion.

But the claim is still misleading. The federal government raised nearly $400 more per Albertan in GST than it did from elsewhere, and it raised over $2,500 more per person in income taxes. Neither, however, are transfer programs; the same 5 per cent GST applies everywhere, and there is only one income-tax system.

So it’s not that Alberta pays more: high-income individuals do, regardless of where they live, and Alberta just happens to be home to a large number of them. That implicit, unavoidable transfer happens within provinces just as it does between them. But rather than unequal federal policy, it’s Alberta’s strengths, such as higher incomes and a younger population – which means fewer CPP and OAS cheques flow to Alberta – that are widening its federal fiscal gap.

We shouldn’t shy away from debates over transfer programs. They are hard conversations to have openly and honestly, but we must reject misleading claims and accept hard truths. Doing otherwise would be truly unfair.

[furrowtickler]

You do know that Quebec is the home of Canadian corruption right ? You miss the news lately chuck ??
A lot of unreported income
Ohh ya and why do you think the Hells Angels call Quebec home .
How many people from Quebec are listed in the Panama Papers ?
All those off shore trust accounts ...
Hydro Quebec..... yup exempted.

[chuckChuck]

There are no Hells Angels or organized crime in other provinces? Huh?

Only Quebecers are listed in the Pananma papers and rich Albertans don't have offshore accounts? haha.

Corruption only occurs in Quebec? LOL

The recent news suggests otherwise:

https://www.cbc.ca/news/canada/calgary/happy-mann-kamikaze-campaign-1.5061407

"A former Alberta United Conservative Party nomination race candidate who said he collaborated on a "kamikaze" campaign to tank Brian Jean and ensure Jason Kenney's success in the party's 2017 leadership race is calling for a judicial inquiry into the situation.

Hardyal Singh (Happy) Mann says he attended a meeting at Jeff Callaway's house on July 19, 2017, along with Kenney and other party insiders, where it was decided Callaway would join the UCP leadership race to run a campaign aimed at discrediting Jean, before dropping out of the race to endorse Kenney."

[furrowtickler]

Quebec.... A socialist province within a democratic nation . Your Numbers show it.

[AlbertaFarmer5]

Well, that is good news for you, Chuck, that means that you won't even miss us after we separate. You can continue to fund all of your Socialist wet dreams without Alberta's miniscule contribution.

Much ado about nothing after all.

[jazz]

Anyone claiming equalization is fair and just should have a padded room made up right away. basically Ottawa uses Ab to pay Quebec to stay in the country. Got nothing to do with incomes or wealth.

Tell us about Quebec daycare funding? Why are all the immigrants landing in Quebec? Because of the generous social programs, Alberta is paying for Quebec to stay in the country and paying for new immigrants to get on the govt tit and then vote liberal. Its totally stacked against the west and it will lead to the fracture of the country if it continues. We will see how unique Quebec culture is once it has to stand on its own feet.