It seems a simple enough concept: taxpayers in some provinces are paying more into the federal treasury than they get back in transfer payments.
But some economists think that it doesn't even exist:
Convincing arguments have been made by a wide array of economists that the whole concept is a provincial myth.
"The provinces have the means to fix their fiscal problems and we see little reason why Ottawa should do the job for them," Brian Crowley and Bruce Winchester, of the Atlantic Institute for Market Studies, argued in a submission to the Commons finance committee last February.
Their brief was particularly hard on Quebec, which has led the cries of fiscal imbalance for years.
The have-not province already gets favourable treatment on equalization and bloc transfers relative to most others, and has consistently spent more - in most cases much more - on its public sector than any other province over the past decade. As most provinces have scaled back public-sector expenditures relative to GDP, Quebec has not.
Two examples in the news today are Quebec's expansive subsidized day-care program and its rock-bottom tuition fees, the lowest in Canada.
Winchester and Crowley call this "a perfectly legitimate democratic choice . . . . It is certainly not an argument for taxpayers in other parts of the country to subsidize that political choice."
Quite an argument, if you think that the fiscal imbalance is nothing more than an accounting trick. But there is only one level of taxpayer to cover three levels of government. No matter how much one level raises or cuts taxes, it's still a zero-sum game, because there is only so much income and expenditure to be taxed at any time.
At some point, the feds will have to give back what isn't theirs. And then the blame will be solely on the other two levels if they squander it.
Source: Yahoo
2 comments:
So ..does that mean the provinces complaining are right or wrong?
I've been hearing for decades that one province or another is getting the short end on these federal transfer deals but for every claim going one way there seems to be evidence of the oppostite being true.
Personaly..... if the Provinces want to keep their taxes they should support parties and governments that wnat to reduce federal involvement.
It is true that Ottawa is currently overtaxing which is why it keeps spending money in provincial areas of responsibilities and generating surpluses. But the provinces are a bunch of hypocrites...they demand redress of the fiscal imbalance, and continued spending in their areas or responsibilities.
PMSH should tell them, I will lower federal taxes to the amount needed to fund federal responsibilities. I will no longer be funding provincial areas of responsibilities. We will continue the equalization payments, but that's it. You raise provincial taxes to meet your responsibilities.
Alas, it will never happen, but that is what is needed.
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