In Canada, taxpayers support governments in other provinces through federal transfer programs
Troy Media – by Mark Milke
Imagine you’re a German asked to pay for the lifestyle of a Greek through ever-more transfers to the European Union or through bailouts for Greek debt. Imagine you, as a German, know the average age for a German retiree is 62 while the average Greek is in his retirement villa at age 60. That knowledge explains why northern Europeans may not wish to indulge Greek lifestyles much longer.
If such demands seem absurd in the case of Greeks and Germans, they are apparently seen as acceptable by politicians in Quebec. Quebec’s three political parties are falling over themselves to invent an even more lavish welfare state. Too bad for Quebec’s already heavily-taxed families. But it’s also too bad that Quebec political promises are partly paid for by other Canadians.
Some samples of expensive promises: The Coalition Avenir Québec (CAQ) has promised more doctors. Meanwhile, Parti Quebecois leader Pauline Marois says that if her party is elected, tuition in Quebec will be free. She also wants 15,000 more daycare spaces.
The Quebec Liberal party under Premier Jean Charest says it will create a $1-billion fund so Quebec’s governments can make “strategic investments” in business (AKA, more corporate welfare). Also, Charest pledges to subsidize wages of Quebec workers older than age 55.
If past history is any guide, those and other promises (if implemented) will be paid for by taking more fur from the hide of Quebec’s taxpayers. (Charest’s government has increased sales taxes.) But the invoices for election promises will also be forwarded to taxpayers outside of Quebec.
Some perspective: In Canada, taxpayers support governments in other provinces through federal transfer programs, including equalization, which is mentioned in the constitution.
For the record, that equalization provision is weak and unenforceable according to constitutional experts such as Peter Hogg and others.
Still, that has never stopped have-not provinces from demanding ever-more from the federal government. Calls have come for higher equalization payments (from have-nots) and from all premiers for more cash from other federal transfer programs.
From 2005/06 (as far back as publicly available Finance department data goes) up to the present year, Quebec has received $56.7 billion, or 54 per cent, of the$107.4 billion the federal government spent on equalization.
Astonishingly, Quebec’s finance minister and even some journalists and policy analysts maintain that other Canadians are not subsidizing Quebec. They argue that because every Canadian pays federal taxes, including those in Quebec, no net subsidies exist.
This is daft. When 10 people show up at a poker table and throw money down, and six leave with the winnings, there has been a net transfer of wealth from four people to the other six.
It’s the same with equalization. Six provinces now receive equalization. That leaves taxpayers in four provinces – British Columbia, Alberta, Saskatchewan and Newfoundland – as losers. They (or more precisely, their governments) walk away from the equalization game with less cash.
Federal transfer payment programs are admittedly confusing. Here’s where it gets even more confusing: When all federal transfers beyond equalization are accounted for, Ontario’s taxpayers still inject more into the federal system than that province receives back.
The Commission on the Reform of Ontario’s Public Services notes that Ontario taxpayers account for 39 per cent of federal tax revenues but the federal government spends only 34 per cent of its revenues in that province.
Some of that difference makes sense. A province with higher unemployment than Ontario is not likely to contribute as much, proportionally, into federal coffers. But it begs this question: are promises made by Quebec’s political class defensible when they also cost other Canadians more money?
Answer: Not likely. Let’s compare Quebec with the three main “have” provinces under the equalization formula and do so on two Quebec campaign promises: tuition rates and hiring more doctors. Also, let’s add Ontario for reasons just noted, (I’ll exclude Newfoundland for reasons of space.)
Quebec’s undergraduate tuition rates were just $2,519 this past year. That was: 38 per cent of what an Ontario student paid ($6,640); 44 per cent of the cost to a student in Alberta ($5,662); 45 per cent of what a Saskatchewan student paid ($5,601); and 52 per cent of what a B.C. student shelled out ($4,852).
On physician ratios, in 2010, British Columbia and Alberta had 213 and 211 general physicians respectively per 100,000 people; the numbers for Ontario and Saskatchewan were 189 and 169. Meanwhile, the Quebec ratio was 224 general physicians per 100,000 people.
Canadians, especially in provinces where taxpayers are net contributors to federal coffers, should pay close attention to the Quebec election. After all, they’ll be paying for a chunk of any expensive promises eventually delivered to Quebec’s voters.
Mark Milke is a Senior Fellow at the Fraser Institute.
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