Equalization
I often use this space to complain about Alberta’s treatment in Canada. Perhaps this seems excessive to some of y’all. Please check out this graph:
This is a graphical representation of the current “equalization” regime whereby Alberta (and to a much lesser extent Ontario) is taxed to fund social services in the other provinces.
Note that the diagram excludes “floor provisions” — this a rule that a province’s equalization payment cannot decline by more than 1.6% in any given year, even if large fluctuations in that province’s “fiscal capacity” would justify such a decrease. For example, if there is a sudden sharp increase in the price of natural gas, Newfoundland and Saskatchewan do not suffer a compensating drop in their equalization transfer payment. It is an accounting identity, therefore, that Alberta does not see a compensating drop in its outgoing transfer payments.
There are additional provisions. For example, two special agreements with Newfoundland and Nova Scotia on the handling of offshore petroleum exploitation (15-year phaseout of equalization payments to “protect” the province from sudden drops). There is a “generic solution” to the concentration of a specific asset in a specific province (thus creating an incentive for a province receiving equalization to eliminate tax on that asset, knowing that equalization would make up the difference). The “generic solution” actually seems designed to protect Alberta…. I mean, the “have” provinces.
But my very favorite part in the whole site comes on this page:
The standard measures the average fiscal capacity of the five