Moe’s Equalization Misrepresentation

Premier Scott Moe tweeted this graphic on equalization yesterday. The tweet continues the Saskatchewan government’s long record of misrepresenting how equalization works in the hopes of ginning up anti-Quebec and anti-Ottawa sentiment among the Saskatchewan electorate. However, this time the misrepresentation goes one further, as it implies the graph is somehow based on research from the Canadian Centre for Policy Alternatives.

Let’s be clear about why this messaging is inaccurate.

First off, the study cited, Time Out: Child care fees in Canada 2017 by David Macdonald and Martha Friendly makes absolutely no reference to equalization payments. It is a compilation of median child care fees paid in cities across the country, illustrating how provincial policy can work to achieve more affordable childcare. In no way does it imply that Quebec’s lower fees are a result of equalization. This is simply a blatant misuse and misrepresentation of CCPA’s research to further the Saskatchewan government’s willful distortion of equalization to convince the Saskatchewan public that we are somehow “paying” for Quebec’s subsidized childcare system. Either Mr. Moe is completely unaware of how equalization actually works, or he is purposively misleading the Saskatchewan public.

In actual fact, no province “pays into” the equalization program. Equalization is administered through federal taxes that we all pay equally (we all pay the same GST and federal tax rates regardless of what province we live in, including Quebec). As Economist Trevor Tombe succinctly explains, “equalization asks a simple question: How much revenue would each province raise with tax rates equal to the national average? This is a province’s “fiscal capacity.” If a province would raise less than the average amount, per person, the federal government tops it up.” As François Boucher and Jocelyn Maclure explain, “Quebec and other recipient provinces are not on the receiving end of the equalization plan because of excessive spending and lower taxation rates but rather because they are less wealthy in the sense that their fiscal capacity is smaller: they have to apply higher taxation rates than the wealthiest provinces do in order to secure comparable revenue from their income sources.” Indeed, as Tombe illustrates, Quebec’s tax rates are nearly 30 percent higher than the national average, whereas Saskatchewan’s are about 10 percent lower. Saskatchewan already has the fiscal capacity to afford a childcare program similar to Quebec without equalization. We just refuse to raise the money to pay for it. If the Premier was serious about instituting a universal childcare program in Saskatchewan he might consider moving our business tax rates closer to that of Quebec (see below). Quebec’s affordable childcare program has nothing to do with equalization. Our lack of affordable childcare has nothing to do with Quebec. That responsibility lies squarely on the shoulders of the current provincial government, and no amount of misrepresentation will change that fact.


Simon Enoch is the Director of the Saskatchewan Office of the Canadian Centre for Policy Alternatives. 

 

2 comments

  1. I totally get your rebuttal vis a vis the childcare graphic, but the other graphic he tweeted came from Finance Canada showing all equalization payouts in the last 61 years – any thoughts on that one – it must be skewed eh?

    1. Hi Lynn,

      That particular graphic may very well be accurate, there is no doubt that Quebec receives the lion’s share of equalization, but that is due to its population. On a per person basis, Quebec receives less than other provinces. In 2013, it received $961 per inhabitant, thus ranking 5th among the 6 recipient provinces, behind Prince-Edward Island, New Brunswick, Nova Scotia and Manitoba (who received, respectively $2343, $2001, $1549 and $1418 per inhabitant). But because it has such a large population, it receives a larger share of equalization. Also, let’s remember what equalization is for – it is to equalize the less wealthy provinces in relation to the wealthier ones. It is only one federal transfer among many others – all of which are based on a per capita basis. As Trevor Tombe notes, this year, “Ottawa will transfer nearly $72 billion to the provinces. Roughly three in four of those dollars are allocated based on population. Larger provinces get more than small, but all receive the same per person. Equalization is different. It allocates dollars based on economic strength, not just population. Provinces with stronger economies get less (or none) while provinces with weak economies get more. That’s it. That’s how equalization works.”

      I fear that people forget that equalization is just one program among many that transfers federal money to the provinces. Saskatchewan still receives those other transfers. I highly recommend Trevor Tombe’s most recent column on equalization and his analysis of Premier Moe’s 50/50 plan: http://www.cbc.ca/news/canada/calgary/equalization-renewal-a-surprise-1.4717501

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