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What’s so ‘unfair’ about equalization payments?

['Did You Know That with Alan Walter']
['Did You Know That with Alan Walter']

Did You Know with Alan Walter

The controversial debate over the level of equalization payments transferred via our federal government from one part of our country to another, shines a spotlight on what kind of a country we want to live in.

The purpose of equalization payments is to enable our "have not" provinces to provide public services to their communities comparable to those in more fortunate provinces, despite broad regional economic and demographic differences.

The public services this arrangement supports include both healthcare, old age security programs, employment insurance assistance, amongst many others.

Unfortunately, through no fault of their own, many Canadian families live in difficult circumstances across the land and desperately need the kind of help that this equalization payment scheme provides.

The nub of the controversy is that Alberta, British Columbia and Ontario pay significantly more in federal taxes than they get back in federal programs and transfers under this equalization arrangement. And Alberta in particular is making an issue of this as it complains about Ottawa being unsympathetic to their overall needs.

Alberta premier Jason Kenney has set up a panel to explore this situation and seek a “fair deal” from Ottawa..... yet to be defined. “Albertans have been working for Ottawa for too long, it’s time for Ottawa to start working for us,” Kenney declared in a recent speech.

The Kenney panel has also begun studying whether it should withdraw from the Canada Pension Plan and create its own. Kenney considers it "an idea worth serious consideration, estimating that Alberta could repatriate $40 billion from Ottawa by doing so ...an amount to be made up by the “have-not” provinces as part of the “fair deal” no doubt.

The fact is that If Canada was populated with communities made up of folk primarily of lower average age and better states of health, enjoying high levels of family income thanks to adequate conditions of employment, such equalization payments would be unnecessary.

However, the reality is that our country is not uniformly blessed with younger populations with good average incomes who make less demands on our social support systems.

By way of comparison the average age of Albertans, the youngest population group in Canada, is 36.9 years versus 45.1 years in our own province, which puts more stress on our health care and support programs.

And as for average household annual income, Nova Scotia’s $60,764 falls well below Alberta’s $93, 835, due to their strong economic activity notwithstanding their current difficulties in their resource sector.

Therefore, “have not” provinces, such as our own with older, less affluent populations needing more care, receive more back in federal programs and transfers than they give in taxes....and it is this situation that is seen as “unfair” by premier Kenny and a small but growing number of Canadians.

It’s sometimes useful in these situations to look into the rear-view mirror at how things were in past years.

over a century ago Canada had no social services worth mentioning for its growing population, nor did it extract any form of taxes from individuals or businesses. This was a main selling point to attract immigrants to settle our vast country back then. Back then the federal government’s main sources of revenue to operate, and service its debt were customs and excise taxes.

It was only when Canada joined the First World War that our government began collecting business taxes. Later in 1917, the government introduced taxation of both personal and business income, as a so-called temporary measure to help finance the war.

When the war ended in 1918, the government still needed to pay for war-related expenses such as heavy debt interest, and so, in addition to retaining taxation of incomes of individuals and businesses the federal government introduced sales taxes for the first time.

It took several more decades before the full slate of national social services we currently enjoy became available; services that now present the funding challenge at the heart of this debate.

So what kind of country do we want to live in? Do we see Canada as a welcoming, caring homeland concerned with the welfare of all its citizens, regardless of age and the cards they have been dealt in life? I sincerely hope so. Surely this is what “fairness” at a humanitarian level is all about.

Alan Walter is a retired professional engineer living in Oxford. He was born in Wales and worked in Halifax. He spends much of his time in Oxford, where he operates a small farm. He can be reached at alanwalter@eastlink.ca.

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