Jason Kenney has been railing against the federal government's equalization program. He claims that Alberta has been short changed and that Quebec is a provincial welfare bum. But he neglects a few facts. Alan Freeman writes:
As Trevor Tombe, a University of Calgary economist points out, even with the fall in oil revenues, Alberta remains the richest province in the country by far. “Quebec gets equalization because they’re poorer across a number of metrics.” And that’s what equalization is there for, to try and equalize the ability of provinces to provide services to their population depending on their fiscal capacity.
Quebec’s finances are healthier because its economy has strengthened, it’s got its spending under control and taxes are much higher than in Alberta. But to deal with its budget crisis, Kenney actually cut corporate taxes, digging the province deeper into the hole. The idea that Albertans should actually pay for the services they receive remains an alien idea to the United Conservative Party.
In fact, Tombe says that if Alberta imposed Quebec tax rates, the province would have an extra $21-billion in revenues and a surplus of $14-billion, rather an $8.7-billion deficit.
“A province’s budget balance has nothing to do with equalization,” says Tombe.
So, rather than rejigging the system, what should be done? After all, betting the farm on the oil sands has hurt Albertans. And there's a lot of hurt. Freeman suggests one time payments to help Albertans through this mess, while they -- hopefully -- rejig their economy and their tax system:
There may be small changes to equalization, but there’s no way the Trudeau government is going to scrap the program or make huge cuts that would undermine fiscal planning in the five recipient provinces. What’s more likely is that Ottawa tries to find a way to transfer some cash to Alberta and Saskatchewan by giving them one-off grants to compensate for their tough times.
Will that satisfy Kenney? Probably not. Bashing the feds has got him a long way. And Albertans seem to forget that he used to be a fed -- who, back in 2009, helped establish the present equalization formula.
Image: The Toronto Star