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definitely less than say, the average I would estimate.

   

As a point of clarity, equalization technically is not a special redistribution of taxes from rich provinces directly to poorer provinces. Equalization is a federal budget spending item, paid for by federal taxes, which are the same no matter what province you're from. A Quebec taxpayer pays the same federal tax as an Albetan of similar income level and therefore equally pays into equalization. Even if equalization was completely scrapped, the money is still from federal tax revenue, so would it just be rolled into some other federal budget item like Defence, not returned to the provinces.

The controversy with Equalization is not in the collection of revenue but the distribution of the payments. As the programs name suggests, the purpose of the program is to help ensure that standards of living in poorer provinces are more or less even with the rest of the the country so that necessarily requires uneven distribution which necessarily generates controversy. I don't think most people oppose the concept of equalization, but everyone has a different idea of what the formula should be and of course the actual final payments are subject to political agendas and backroom deals,etc, it's never been a transparent and administrative task.

   

You are correct, the vast majority have no issue with equalization, or how the equalization funds are raised. The problem is the lack of accountability.

When you have a formula that makes it advantageous to NOT develop, you have a problem. If anything, the entire purpose of the equalization should be the reverse.

   

So you would favor paying for the services you use as you go? Ie all the free or subsidized schooling you got, you would have wanted to pay way higher taxes to pay for it as you used it? While you were not earning any money? As you age and start needing more and more healthcare, you want to start paying more and more taxes in your retirement to pay for it, because you didn't want to pay during your earning years? Your parents should have been handed a high bill for your birth, rather than averaging it out over time?

Just a couple of examples.

   

I'm not sure it does that....

   

So maybe Quebec gets so much equalization because it has so many residents.

   

So a province with low tax rates would get more than one with high tax rates.

   

Incorrect.

The formula is based on REVENUES, not RATES.

And, no, revenues do not always increase as the rate increases, nor does it fall as the rate falls.

   

A better question would be; why are some provinces perpetual 'have not's'?

The equalization program has been around long enough now for every Province to have gone through a complete economic cycle. Some have gone from have to have not, and back...some have remained suspiciously consistent.

   

The lower your revenues, the higher your payments.

That is a recipe for success, if I have ever seen one.

   

I interpreted that as being the other way around - the province that is taxing at less than its full potential (the national average) gets less equalization than one that is already taxing at more than the average.

   

So you're saying that lower tax rates would bring in more revenues? The old Laffer thing?

   

Maybe because they don't have a ton of oil in the ground say, or other sources of revenues. You really expect all provinces to perform equally?

   

Thanks for the clarification Dr. & Beaver. Following this thread and now I have a better understanding of what's going on.

   

Assuming that higher tax rates produce higher revenue (seems reasonable) the province with lower tax rates will have lower revenue from those sources of tax, so receive more equalization.

   

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