December 13, 2018

Not Very Equal, Is It?

This year, the federal government will pay nearly 20 billion dollars to provinces through a program called Equalization.

Five provinces – Saskatchewan, Alberta, B.C., Ontario, and Newfoundland – all get zero while one province –Quebec– gets over 13 billion dollars, or about 66 per cent of the total. That's because Equalization is calculated based on a complicated formula that is supposed to reflect the relative strength of different provincial economies. So, the "have" provinces get nothing while the "have-not" provinces get billions of dollars.

Not very equal, is it?

The problem is, the formula is flawed and doesn't really reflect what is going on in different provincial economies. So even while the economies of Saskatchewan, Alberta and Newfoundland were being hit by a downturn in the resource sector, they continued to get nothing and were subsidizing other provinces whose economies were actually doing better.

That's not fair.

Equalization is a federal program funded by the taxes you pay through federal income tax and GST. That means every man, woman and child in Saskatchewan contributes on average a little over 500 dollars in federal taxes towards Equalization every year – money that is then handed out to other provinces.

In total, Saskatchewan taxpayers pay about 600 million dollars a year towards Equalization, to subsidize programs and services in other provinces. To put that into perspective, 600 million dollars is more than enough to balance the provincial budget in Saskatchewan.

This has to change.

Saskatchewan is proposing a simple change that doesn't require a complicated revision of the current Equalization formula. We call it the 50/50 formula. Under the 50/50 formula, half of the total Equalization pool would continue to be paid out under the current formula and the other half would be paid out on a per capita basis. This would ensure that every province would receive some money from Equalization while "have-not" provinces continue to receive more.

Under the 50/50 plan, Saskatchewan would still contribute to Equalization but would also receive about 300 million dollars while Quebec would continue to receive over 8 billion dollars a year. That seems more than fair. It's a simple, fair solution to fix Equalization and makes it just a little more equal for everyone.