[Makarov]

Originally Posted by SeoulFire

It all depends on the personal spin and the source of the information. Tons of information on this at the Fraser Institute questioning the efficiency, equality, equity, legality, etc and it also provides some models of reform to improve the system - not just to abolish it.

The mere existence of "information" is not particularly persuasive. If that "information" is incorrect, incomplete, or irrelevant, or if the conclusions drawn in that "information" do not logically follow from the data, it has little or no value (indeed, it may have negative value in the sense that it is misleading or distracts from the real issues.) Case in point: the Fraser Institute.

Originally Posted by SeoulFire

The articles are there with a different perspective than the ones posted but I doubt they would be of interest to those with a left-leaning, socialist, free **** for everybody slant.

Quite the contrary. Your reference to information published by the Fraser Institute piqued my interest so I decided to take a look. The first article I found is entitled "Some Inconvenient Facts about Equalization".

I'll quickly discuss each "inconvenient fact" (and I apologize for turning the Trudeau thread into the equalization thread; perhaps a mod should split this discussion into a new thread?):

(1) Inconvenient Fact #1: Canada’s founders didn’t want transfers between governments;

Well, this is an easy one to dismiss because it is totally irrelevant to a discussion of the merits of the equalization program.

(2) Inconvenient Fact #2: Public services are often more generous in havenot provinces;

In support of this "inconvenient fact", the article relies on the following evidence:

In theory, as Section 36(2) of the Constitution Act, 1982 states, equalization is meant to “provide reasonably comparable levels of public services at reasonably comparable levels of taxation” (Department of Justice, undated). In practice, nothing of the sort occurs.

For example, Quebec, the biggest equalization recipient (which receives almost half of the $14.8 billion federal transfer to six provinces), also has the lowest tuition fees for post-secondary education among all the provinces (Statistics Canada, 2011). It also has universal $7 per day daycare (Quebec, undated). One of the more comprehensive studies (Eisen and Milke, 2010) noted how social and government services including the above-noted benefits in Quebec and other “have-not” provinces, are actually often more generous and lavish in such provinces when compared to the “have” provinces such as Alberta and British Columbia.

As has already been pointed out in this thread, this is simply incorrect. The natural resource rich provinces of Newfoundland, Alberta, Saskatchewan, ec. all spend more on social programs than the other provinces. Cherry-picking particular programs is incomplete, incorrect, and totally misleading.

The authors also state:

This policy means that low-income taxpayers in “have” provinces pay for the benefits of the well-off in recipient provinces. That’s an indefensible transfer of income and is fiscally Kafkaesque—think of a waitress in Vancouver whose federal taxes are partly transferred to “have-not” provincial governments.

This completely ignores two key facts: (1) equalization accounts for a small portion of federal government expenditures (roughly 5%); and, (2) Canada has a progressive tax code, which means that high wage earners in a havenot province pay many, many times more taxes than low wage earners in a have province. This means that, totally contrary to the authors' assertion, high wage earners in havenot provinces subsidize the services of low income wage earners in have provinces (as they should.)

(3) Inconvenient Fact #3: Equalization is actually a transfer of wealth from high-cost provinces to low-cost provinces;

In support of this fact, the authors state:

For example, in so-called “have-not” provinces, and according to a Royal LePage survey of housing prices in the first quarter of 2012, a bungalow in Halifax, Charlottetown, Saint John, Quebec City, Montreal, and Winnipeg varies in price from a low of $170,000 (in Charlottetown) to a high of $380,000 (in Quebec City’s most expensive neighbourhood; a similar bungalow goes for $239,000 in that city’s cheapest neighbourhood). In contrast, in “have” provinces a similar bungalow will set a buyer back between $291,700 and $697,800 in Calgary; and between $477,000 and $1.4 million in greater Vancouver (Royal LePage, 2012).

Equalization is supposed to reduce inequalities in government services. However, because costs are lower in “have-not” provinces, services can be provided at a lower cost—a civil servant needs a much higher salary in Vancouver than Charlottetown for an equivalent standard of living. Thus “equalizing” funds available for services means recipient provinces can afford a higher level of services than the provinces that fund them (McMahon, 2001 and 2011).

It sounds like a plausible argument. Unfortunately, a real estate price survey from Royal LePage has exactly nothing to do with the cost of delivering public services in different provinces. A much more relevant statistic (although surely not the only one) would be average public sector wages in each province. Curiously, those statistics do not support the authors' argument. For example, PEI, Nova Scotia, and New Brunswick (all havenot provinces) have the third, fourth, and fifth highest average public sector wages. BC and Ontario (traditionally have provinces) have the two lowest (Alberta is fourth lowest.) [Source (not the best source but I don't have time to look for anything more authoritative.] Therefore there does not appear to be any correlation between equalization status and the cost of delivering public services.

(4) Inconvenient Fact #4: Transfer programs weaken the economies of poorer provinces;

The authors rely exclusively on a "series of studies by Fred McMahon" which apparently show that:

As pointed out in a series of studies by Fred McMahon, lagging regions in Canada have been catching up more slowly than poorer regions in the United States, Europe, and Asia (2001). In fact, “over-equalization” weakens the economies of poorer provinces.

Unfortunately, this fact, if true, means nothing without knowing if there are any sort of "equalization" programs present in these regions, or what other factors might be influencing "catch up" of poorer regions to more productive regions (such as rapid industrialization in Eastern Europe and Asia, etc.).

I would also note that Fred McMahon, whose studies are cited and relied on in the article, is also one of the two co-authors of the article. It seems a bit disingenuous for Mr. McMahon to simply cite himself but not to provide any of the data or arguments that ultimately underlie his position in this article.

(5) Inconvenient Fact #5: Equalization is likely not enforceable in court;

This may well be true. However, it is again totally irrelevant to a discussion of the merits of the program itself.

There are a couple of other articles on equalization published by the Fraser Institute that I am curious to look at, but I will have to do so when I have more time (or, if there is one in particular that you (SeoulFire, or anyone else) found persuasive, please recommend it to me and I'll take a look and see if it changes my mind.)