[redforever]

Originally Posted by CaptainCrunch

Great then lets follow their lead, lets cut all government salaries and change our tax rates. But that doesn't change that the equalization formula is not working when a province running a surplus and a economy that's not in jeopardy is getting a 10% increase in the money they're receiving, and receiving 2/3rds of the pot.

Quebec (Manitoba too) don't share revenues from their hydro the same as other provinces share revenues from their oil and gas resources.

A quirk in the equalization formula excludes the true value of hydro electric energy produced by Manitoba and Quebec, which sell their hydropower in local markets for below-market prices without penalty. An analogy would be Saskatchewan selling its oil, with a market value of about $95 a barrel, in its local market for $50. The formula is correct to deduct the market price of oil ($95) rather than the artificially low price ($50 in this example) from any equalization payments. The same logic should apply to Quebec and Manitoba’s hydro revenues under the equalization rules — but doesn’t. By creating a massive financial incentive for Quebec and Manitoba to subsidize hydro power heavily, the current arrangements generate market inefficiencies and encourage resource waste.

Between 2005 and 2010, Quebec received $42.4-billion in equalization. Lost revenues resulting from excessively low electricity pricing during that period was $28.6-billion (calculations are available at Fcpp.org). Since the equalization formula deducts 50% as a clawback from additional resource proceeds, an extra $14.3-billion (half of $28.6-billion) should have been deducted from Quebec’s equalization if its hydro revenues were treated the same as Alberta’s oil revenues under the rules. That would yield total equalization payments of $28.1-billion instead of $42.4-billion for the 2005-2010 period.

In other words, the federal government paid 34% more equalization to Quebec than it should have under more equitable rules. Alberta and Ontario taxpayers are effectively paying Quebec (and Manitoba) to consume artificially inexpensive power.

A basic minimum reform of equalization should make hydro revenues subject to the same treatment as revenues from non-renewable sources such as oil extracted in Newfoundland, Saskatchewan and Alberta.

Equalization has stimulated the development of bloated, public-sector-dominated high-tax economies, and created a corrosive dependency syndrome in have-not provinces.

https://nationalpost.com/opinion/pet...ollars-at-work


Harper would not touch the equalization formula in 2014 anymore than Trudeau would touch it this year...elections coming up. That does not make it right but that is how it was and is.