Quote:
Originally Posted by Tinordi
Thanks, it always disheartening to see how few people actually understand what equalization is and how it works.
The concept is so amendable to distortion and illusion by talk radio "the federal government is forcing us to pay money to Quebec!!!"
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Quebec manipulates the process to its advantage and that is what ticks off other provinces....when the fact remains that the other provinces could do some manipulation of their own as well.
For instance, Quebec artificially reduces its fiscal capacity by allowing provincially ownded Hydro-Quebec to charge consumers, especially large industrial ones, a price far below market value. Quebec shortchanges itself on the potential revenue, and in the process qualifies for higher equalization payments. This does not imply that Quebec is any poorer, only that they are smart enough to manipulate the process.
Also, profits from crown owned hydro utilities get treated as business income rather than resource revenues and that minimizes their negative impact on equalization payments.