Alberta referendum October 2021

On October 18th Alberta has a planned set of referendum questions to be mixed into municipal election votes. Now I think referendums are terrible anti-democratic procedural clown shows that hide the complexities of issues and allow our MPs/MPPs to avoid working on issues BUT this one is on and in the hopper.

So question 2 is about Day Light Savings and one wonders why MPPs can’t make this call themselves but the real fascinating one is about equalization.

Albertans will be asked the following question on the ballot:

Should section 36(2) of the Constitution Act, 1982 – Parliament and the government of Canada’s commitment to the principle of making equalization payments – be removed from the constitution?

A ‘yes’ vote means that Albertans are calling upon the federal government and other provinces to enter into discussions on a potential amendment to the Constitution of Canada in respect of equalization.

A ‘no’ vote means that Albertans are not calling upon the federal government and other provinces to enter into discussions on a potential amendment to the Constitution of Canada in respect of equalization.

Now there is no chance in hell that the provinces are going to get behind this. So for the locals out west what’s the game plan with this? A dangerous sop to the libertarians? A way to deflect attention from covid failures? Actual constitution concerns?

It’s pretty much pandering to the idiots in Alberta. One would hope that they’d notice that Alberta, by itself, has no power to actually do anything about this issue, so having a referendum on it is entirely pointless, but then, if they were capable of noticing that, they wouldn’t be idiots in the first place.

In the end, it will just end up one more decades-long talking point about how Alberta hates the rest of Canada, while they send their excess ICU patients to Ontario. “Equalization payments are illegal, because we voted against them! Fuck Trudeau!”

Alberta resents that the rest of Canada got to be on welfare while the big mean Feds came and took Alberta’s oil money away. Alberta wants to be on welfare too and if they can’t have it, no one can. After all, it’s called welFARE, not wel-unfair, right?

It does make me wonder what would happen if we discovered oil somewhere in Canada that was well above the jank-grade Satan’s taint runoff that comes from the tar sands. Like suppose someone in the middle of BC struck a huge deposit of that light sweet crude that is so pure you can drink it and piss gasoline. Do we suppose by any means that the Federal Government would not come along and help themselves to the profits? For that matter, forget oil, let’s say it’s any kind of unobtainium through which one Province and one Province only is getting rich. Again, do we expect the Feds to suck their thumbs while that sweet tax money pools to one side of this vast, largely broke country of ours?

I’m not even sure it’s that though.

Previous to 2007 equalization looked at 100% of natural resources when it came to figuring out a province’s fiscal capacity. After that, the Harper government implemented recommendations to set those to 50% as well as collapse the capacity calculation into 5 buckets - personal income taxes, business income taxes, consumption taxes, property taxes and natural resource revenues.

So it can’t just be natural resources can it? What part of the equalization piece does the Provincial government want to have altered? Or is it simply a question of scrapping it completely? And even if it did, since the money comes from general federal taxation what piece of it do they expect to recoup?

You’re putting more thought into this than they ever will. The section they want to scrap is this:

Commitment respecting public services

(2) Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation

So it seems they want to just eliminate equalization payments in their entirety, otherwise why bother?

And let’s not forget:

Problems and possible fixes

It has certainly been noted that the Alberta premier is complaining about an equalization formula that was last adjusted in 2009 by Stephen Harper’s Conservative government, of which Kenney was a cabinet minister.

“If Kenney hates the current formula so much, why didn’t he do something about it when had the chance,” asked an article published in Policy Options last year.

…Kenney was part of the government that created the current formula we use to determine equalization payments. He’s saying his own work is unfair. I’ll leave it as an exercise for the reader to determine what that indicates about his sincerity in holding this referendum.

Let me remind everyone how NFLD screamed like a stuck pig when their equalization payments (of which I assume they were the biggest recipients per capita) when oil was discovered off the coast. They complained that the oil was supposed to belong to them and now was being partly “taxed” by having their equalization payments reduced. Albertans should be careful what they wish for because if the oil sands get abandoned, they might turn out to be recipients of those payments. And I expect that will happen sooner or later.

Was reading a few comments on editorials in the Calgary Herald and oddly Quebec was brought up more often than the “evil” federal government. Well not totally unexpected but the comments focused a lot on Quebec’s electricity comparing it to western oil

Which is interesting. I’m not sure you can call electricity a natural resource so you can’t really say that Quebec’s hydro production should be grouped with natural resource extraction like oil. The follow on was that Hydro Quebec (the crown corp) apparently sells electricity below market value. Which mean technically the province could raise those rates and accumulate more fiscal capacity and so lower the need for equalization transfers.

However I don’t know of an equivalent market value for electricity similar to global oil prices. And HQ sells only 3.4 TWH and consumed the rest (~214TWH) so in a way it sets it’s own market rate.

Electricity is quite cheap here, but any attempt to raise the rates would result in a severe political backlash. In a sense it is the downside to socialism. If the government controls the price, then any rise is the fault of the government.

In addition, there are some environmental issues associated with hydro power, but I guess there are environmental issues with any source of power.

True but I wonder if people in Alberta consider electricity as oil or if they’re objecting to the fact the provincial government doesn’t maximize profit from HQ. It’s just odd.

So you expect the federal government to act in a blatently unconstitutional fashion, and take over the west’s natural resources?

In your hypothesis of a discovery of high-grade oil, it’s in the west. Do you think that if high-grade oil were discovered on Crown land 200 miles north of Toronto that the federal government would try to take it over, depriving the Ontario government of that tax revenue and resource management? It’s only when the resources are out west that it seems acceptable debate for the federal government to try to take it over.

It’s statements like that which fuel western alienation.

Electrical energy is considered a natural resource for constitutional purposes: Constitution Act, 1867, s. 92A.

So one province is lucky in that it has huge hydro resources, and another is lucky in that it has huge fossil resources. The idea that one should treated differently than the other is ridiculous. Focusing on ‘electricity’ is totally beside the point.

The idea behind equalization was that provinces were supposed to A) have varying levels of resource wealth but, B) have roughly the same social services. Therefore, the government taxes every province a little extra for equalization, then doles out money to the provinces that don’t have the money to pay for their social services. In theory.

One of the reasons I dislike equalization is that the formula incentivizes provinces to build bigger government and to tax higher. Alberta doesn’t have a sales tax, so we get dinged more for equalization. Quebec has more social services, so it gets more equalization money.

See that’s fascinating. “Non-Renewable Natural Resources, Forestry Resources and Electrical Energy” to me imply 3 distinct kinds of resources. I would never have considered electricity a natural resource anymore than steel. Anyway it is and there’s a neat paper (2014-2015 Federal Transfers to Provinces and Territories) showing how the shut down of a Quebec nuclear power plant back in 2012 led to a one time loss of 1.41 billion in dividend HQ pays to the provincial government.

Sam Stone you may have misspoke when you wrote

Therefore, the government taxes every province a little extra for equalization, then doles out money to the provinces that don’t have the money to pay for their social services"

No one is taxing Alberta. In fact as the Calgary Chamber has pointed out back in 2019

It is crucial to note that Equalization payments are not made between provinces. “Have” provinces do not directly transfer anything to the “have not” provinces. All monetary transfers are made by the federal government only and distributed from the pool of funds that are collected from the federal taxes levied. Equalization payments also do not affect funds collected by provincial governments, all taxes levied by provinces remain within their borders.

I do love the stupidity of referendum questions - always all or nothing. At least a serious proposal for a different calculation would have had the merit of being something other than a political stunt. All this will do it rile up a cohort of people that have no conception of what equalization is, how it’s calculated, what kinds of incentives (perverse or otherwise) it entails or how it could be updated. Rile them up and then, just for good measure since no one else in the country even knows about it, provide them an opportunity to feel ignored again. Oh, and it encourages the worst kind of inter-regional bickering amongst those that are watching.

The first preliminary report I saw showed that Albertans were voting something like 58-42 to end equalization. Of course. No report on the vote on year round DST. They didn’t expect final reports for a week.

The feds tax EVERY province more so they can maintain the equalization program. Or if they don’t, maybe you can tell me where the money comes from.

Because some provinces get the money back and then some as equalization payments while other provinces don’t, the net effect is a money transfer from the ‘have’ province(s) to the have not provinces. Because if equalization ended, our federal taxes could be lowered.

That said, I voted against ending equalization. I think passing it is likely going to be very divisive, and it will never happen anyway. It’s an unforced error.

I have no opinion on the DST referendum. The people it matters to most are likely farmers, so I would defer to them. I have very little skin in the game, other than how it might affect my astronomy.

Don’t bullshit me. The statement was that Alberta proper paid into equalization, it does not. Canadians pay into equalization. If you’d like to equivocate by saving Canadians in every province pay more in federal taxes because the federal government is legally obligate to tax them to ensure reasonable equitable fiscal capacity across provinces then … well no shit. You’ve cleverly addressed a question not asked.

Apologies for the tone. Too late to correct,

This. It’s just children having a tantrum about what reality is.

The best thing for the rest of the country to do is to simply ignore them, as you would any other tantrum.

No problem. When that happens, they’ll simply have a referendum and vote to increase equalization payments. As I said earlier; they’re children.

I mean there are legitimate issues you can raise over equalization and you can see how the program has changed to be more “accurate” moving from a high level “fiscal capacity = taxation” view to a more complex one. Which means harder to understand, and having more unexpected loopholes. I also don’t think you would find very many Canadians that aren’t surprised when they learn the second largest province is a perennial “have not”.

So articulate discussion around what should be changed are great, but this is not that. This is a stunt to placate political factions. For some reason people weren’t paying attention to the Scottish referendum or Brexit. Or maybe they were and that’s more worrisome.