One of the perverse incentives in equalization is that it’s partly based on how high your provincial taxes are. So a province can raise taxes to give the people some benefit, and that automatically boosts their equalization. So people in Quebec get $125/mo daycare, paid for by Albertans who pay $700-1000/mo for the same daycare.
So the more you tax and spend, the more money the rest of Canada has to pay you. It doesn’t matter if you are doing the taxing and spending to give your province’s people services that other provinces can’t afford. Equalization wax ‘supposed’ to make sure that provinces had equal social programs and services, but in practice it has been gamed by provinces like Quebec, which has more services like cheap daycare than most provinces, and is running a 4 billion dollar surplus, but will still receive the bulk of equalization payments because of their high taxes.
Alberta could lower our equalization payments by simply instituting a provincial sales tax, then giving everyone in Alberta free stuff with the money. That wouldn’t be good for Alberta or Canada, but the equalization system rewards that kind of behaviour.
You mean a pipeline that could not be built because of endless lawsuits and blocking by other provinces? Maybe we could build a big circular one that allows us to pump our oil around Alberta.
I have no idea. I doubt if they have one. I didn’t even know they were a thing until last week.
As I said, I’ll believe the west is serious about separation when I see governments building actual firewalls like provincial police and retirement programs like Quebec has. Until then, it’s all hot air and blather.
I do know that an equalization system that rewards provinces for taxing and spending is not healthy. It should be the other way around - if you offer more government services than other provinces, you have to pay equalization to them. Then we’d actually be rewarding fiscal responsibility.
Ending equalization is an utterly terrible and unworkable idea. Equalization has a sound and very important basis in economic theory: models predict that a region with a shared currency but no transfer payments from wealthier areas to poorer areas will be economically unstable. We saw a dramatic demonstration of that during the Greek crisis several years ago, in which the Greek economy was being crushed in part due to being part of the Eurozone without corresponding transfer payments to make up for it.
If we want to talk about tweaking the formula, that’s certainly fair game. Sam’s point about tax rates seems to be a good one, although I would caution that the devil is always in the details here and they may be a good reason for how the current system treats tax rates; I’d want to see some real economists weigh in before I formed an opinion.
Me too. It’s easy to say that stuff, and maybe even useful as a kind of early bargaining position to see where everyone stands. Actually doing something that radical is another matter.
However, if Alberta slides too much more, or Trudeau’s ‘enhanced focus on climate change’ in the second term puts more restrictions on Alberta’s economy, who knows?
For example, if Alberta seriously threatens equalization, Quebec will go nuts. And Quebec is Trudeau’s seat of power. He would have to at least placate them in some way. If whatever he chose to do to calm down Quebec put even more burdens on the west, you will see support for western separation jump.
At the same time, if Quebec thought it was going to lose its equalization payments, support for separation there will rise. That in turn could legitimize the West’s separation plans.
Do I think this is likely? Nope. But I think it’s one of the possible outcomes if things start to go sideways. Another global recession would add a huge amount of stress. That’s when shit happens.
It’s also an easy little thing for Westerners to focus in Quebec but the Liberals won more seats in Toronto than all of Quebec. You fool yourself into thinking that the Liberals are the Quebec party and miss the beam in your eye.
Right now I don’t want to discuss equalization or whether, as Sam Stone claims in [post=21960991]this post[/post], “Quebec hates [Alberta] now” (FWIW, I don’t hate Alberta.) However, I do want some clarification on the above. Why would Alberta establishing a provincial police force and its own pension fund suggest that it’s getting serious about separating from Canada? Those are powers that Canadian provinces do have and can very easily decide to exercise. Same with establishing an income tax collecting agency (although I suppose Alberta’s income tax is simple enough that they figure it’s not worth doing) and taking control of part of their own immigration policy. So why, in Albertan political discourse, would these things suggest separatism?
Just by way of comment, the significance of the tax proposal is that currently, the provincial income taxes in the province that rely on CRA for collection are closely tied to the federal income tax rules , with some additional tax deductions from the provincial tax. The argument for cutting loose from the CRA is that it would give a province greater freedom to define its own income tax system (eg a province might want to try a flat tax, or might institute more taxation brackets to make their tax more progressive, and so on.)
Whether that greater autonomy in setting one’s own tax system is worth instituting an entirely separate administrative and collection system is an interesting policy question. Since the end of WWII, Quebec has taken the position that it is worth it. The other nine provinces have been content to stick with the federal system.
These programs are currently run from Ottawa. Tax money goes from individuals directly to the federal government, which then disburses payments to the provinces. Canadians have their retirement program in the hands of the federal government.
So the thinking (by Quebec first) is that before you can credibly threaten separation, these programs need to be run by the provincial government so that it could separate from the federal government without causing huge amounts of dislocation. It also prevents the federal government from negotiating from a hardball position by threatening to cut off or reduce these services and payments unless we play along.
The ‘firewall’ concept has been around since Quebec did it. I’m surprised you hadn’t heard of this.
So are you just saying that taking control of these programs would be a necessary condition before starting to talk about separation, but not a sufficient one? In this case, then yes, that’s probably something they should do before they start talking about separation. I interpreted you as saying that it would in itself suggest that the Alberta government is getting serious about separating from Canada, which I don’t think follows.
Your understanding of Union National and Liberal party policies in the mid 60’s is remarkable. Consider the emerging Quiet Revolution and the desire by the province to fund economical growth outside of agriculture. The Caisse de dépôt et placement du Québec which managed the plan used it, initially, to invest in Quebec companies. The opportunity to use the savings from a province containing 30% of the country’s population was not a necessary step to separation - it was an opportunity for a government to get some money.
Except you specifically said it was a step taken “before you can credibly threaten separation”. At no point in the past 40 years has the future of the country hung in balance due to some sort of leverage the QPP provides to Quebec.
I mean it’s not as nonsensical as “threatening” to have a provincial police force; knock yourself out. I assume extricating the province from the the contract to 2032 winds up costing something but it makes a lot of sense for a province with sufficient tax room to have their own police force.