Equalization: The UCP is seeking reform, but what does it mean?

CALGARY(CITYNEWS) – The conversation about equalization payments is ramping up once again as the UCP government’s Fair Deal Panel report was released earlier this week.

A slowing economy, oil slump, and a pandemic are all fueling the frustration as well.

But are we really – just handing over a big fat envelope each and every year? CityNews spoke with economist Trevor Tombe from the university of Calgary for an equalization breakdown.

No province pays the federal government anything. Provinces only receive transfers from the federal government. Full stop,” explained Tombe.

“Individual tax payers do pay, of course, taxes, to the federal government. Small businesses, larger business and so on. That goes into a general federal revenue, so equalization- those payments are funded from the same pot that is used to buy paper clips and fighter jets.”

So if Alberta isn’t signing over a huge cheque to provinces like Quebec and those in the Maritimes, then where does this money come from?

Equalization payments are based on a province’s ability to raise revenue – and generate taxes. Alberta hasn’t received a transfer payment since 1961. Alberta’s economy is of the best in the country, even today.

READ MORE: ‘Not a lot of public appetite’ for Fair Deal policies: data scientist

“We tend to pay more in federal revenue than other province because we have higher income so we pay higher– higher income taxes. We also buy more stuff, so we pay more GST. We’re also a young population so the federal government spends less in Alberta like old age security,” said Tombe.

Jason Kenney has said in the past, “on an annual basis – Alberta tax payers contribute about $23 billion more in federal taxes than what they get back in services, or around $5,004 per person, per year.”

Alberta’s 2019 unemployment rate was over a full percentage point higher than the national average.

That frustration could be heard at Fair Deal Panels throughout the province last fall, and has culminated with the Fair Deal report. The province is promising a referendum next year on equalization reform, but Tombe says it may not produce the results the UCP is looking for.

READ MORE: Kenney responds to Fair Deal panel, promises referendum on equalization reform

“It’s a pure political play,” he said. “It has no legal significance whatsoever, and economically, there’s no sensible change that anyone has ever proposed that would see Alberta ever getting anything from it.”