Ontario loses the most in federal equalization: new study

Andy Radia
Canada PoliticsDecember 23, 2012

Just in time for Christmas, a new report suggests that Ontarions are a very giving people.

Unfortunately, the giving is not on purpose.

The Mowat Centre for Policy Innovation's latest study about Canada's fiscal imbalance suggests that Ontario is the biggest loser when it comes to our country's equalization program — the federal scheme that redistributes federal tax dollars as a way to promote comparable public services in all 10 provinces.

"Fiscal disparities in Canada are increasingly driven by commodities, yet our fiscal arrangements do not redistribute commodity wealth. This places Ontario in a unique situation, lacking the natural resources of the oil and gas provinces, but also significantly more prosperous than the traditional Equalization-receiving provinces.

In practice, this means that funds continue to be redistributed away from Ontario to support traditional Equalization-receiving provinces at a time when Ontario’s fiscal capacity is below the national average."

The report goes on to say that while Ontario is now a receiver of equalization payments, this system is "not sustainable" and "undermines Ontario’s ability to provide comparable levels of public services to its residents."

"The Ontario tax base carries an enormous share of the burden to ensure that the governments of Manitoba, Quebec, and the Maritimes have comparable levels of fiscal capacity.

The situation needs urgent redress. Ontario currently has the largest per capita deficit in the country, but spends less per capita on just about every public service than any other province."

According to a recent Ontario Chamber of Commerce study, this year Ontario will contribute roughly $6 billion to the Equalization program and will receive only $3.3 billion in return.

In other words, as former civil servant David McKinnon puts it, "the federal government is robbing Peter [ie: Ontario] to pay Paul [ie: other provinces] so that Paul can live better than Peter."

And the living is better in some of the other provinces.

According to the Globe and Mail, Prince Edward Island — a habitual equalization receiving province — has 50 per cent more nurses, 28 per cent higher university funding and twice as many long-term-care spaces than Ontario.

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The Fraser Institute notes that Quebec — which has received 54 per cent of all the money the federal government spent on equalization payments since 2005/06 — has tuition rates of almost 60 per cent less than that of Ontario and 15 per cent more doctors.

With statistics like that, I don't think 'equal' still belongs in equalization.

While most analysts believe the system needs to be changed, don't expect any changes from the federal government — at least not while a separatist party rules the roost in Quebec.

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