Tories' reported plan for equalization changes provokes backlash

[FlamesAddiction]

Originally Posted by MarchHare

And without energy revenues, Alberta still would be considered a "have" province, given our very strong economy (personal and corparate income tax are included in the equalization formula, including taxation from energy companies), so saying that Alberta would be a "have not" province if you took away our resource revenues is a bit of a spurious claim.

But without the resource revenues, would those other things even exist?

[MarchHare]

Originally Posted by FlamesAddiction

But without the resource revenues, would those other things even exist?

No, but that's neither here nor there. Corporate taxation and personal income taxation are already included in the equalization formula regardless of what industry those taxes come from. What isn't currently included in the equalization formula (and what the Tories plan to change) is energy royalty payments to the provincial governments.

[FireFly]

Originally Posted by MarchHare

Simply terrible management by the provincial NDP government during the 90s...BC was a "have" province until 1999, but by then the repercussions of some awful policy decisions were felt.

Actually, some of it has to do with the way they calculate their revenue. By changing their own taxation formula, they changed their revenue, and so became a have not.

[MarchHare]

Originally Posted by FireFly

Actually, some of it has to do with the way they calculate their revenue. By changing their own taxation formula, they changed their revenue, and so became a have not.

How does that work exactly? It's the federal -- not provincial -- government that determines what counts as revenue for the purposes of calculating equalization. Equalization is also calculated using a standard level of taxation too, so a province couldn't cut their taxes to nothing and then have equalization make up for it.

[FireFly]

Originally Posted by MarchHare

How does that work exactly? It's the federal -- not provincial -- government that determines what counts as revenue for the purposes of calculating equalization. Equalization is also calculated using a standard level of taxation too, so a province couldn't cut their taxes to nothing and then have equalization make up for it.

Well if they adjust their taxes so they receive less revenue from, say, the lumber companies, how then will the federal government add that back on as revenue?

[Hakan]

BC will get her due in this new formula as well. The new report recommends that property value is included in fiscal capacity for each province. BC will see it's have-not status rejected by that new calculation alone.

In the end, resources need to be included in one way or another otherwise the country's industrial and manufacturing base in Ontario will just not be able to shoulder the burden any longer.

Remember that Ontario is the leveling off point for resource rich provinces. No province should have a fiscal capacity above the average and still receive equalization. Newfoundlanders and Saskatchewanites can moan all they want, it just simply isn't fair to the rest of the federation and to the biggest payer of the bill, Ontario.

[MarchHare]

Well if they adjust their taxes so they receive less revenue from, say, the lumber companies, how then will the federal government add that back on as revenue?

The level of taxation used in determining the equalization formula is a standard set by the federal government, regardless of what rate any given province actually uses.

For example, if the average level of taxation for the forestry industry in most provinces was 15%, but BC only taxes forestry at 5%, (both numbers made up) Ottawa would calculate BC's ability to generate revenue from the forestry sector at a taxation rate of 15% for the purposes of determining equalization.

http://www.fin.gc.ca/FEDPROV/eqpe.html

The fiscal capacity of a province is a measure of its ability to raise revenues from each of 33 revenue sources – including personal income tax, corporate income tax, sales taxes, property tax, and other sources – assuming that province levies average tax rates.

Emphasis mine.

[fanforever1986]

Originally Posted by Hakan

BC will get her due in this new formula as well. The new report recommends that property value is included in fiscal capacity for each province. BC will see it's have-not status rejected by that new calculation alone.

In the end, resources need to be included in one way or another otherwise the country's industrial and manufacturing base in Ontario will just not be able to shoulder the burden any longer.

Remember that Ontario is the leveling off point for resource rich provinces. No province should have a fiscal capacity above the average and still receive equalization. Newfoundlanders and Saskatchewanites can moan all they want, it just simply isn't fair to the rest of the federation and to the biggest payer of the bill, Ontario.

That's very interesting...Not doubting it, but I'd like to read about the speculation of that happening...Have a link for it?

[FireFly]

Originally Posted by MarchHare

The level of taxation used in determining the equalization formula is a standard set by the federal government, regardless of what rate any given province actually uses.

For example, if the average level of taxation for the forestry industry in most provinces was 15%, but BC only taxes forestry at 5%, (both numbers made up) Ottawa would calculate BC's ability to generate revenue from the forestry sector at a taxation rate of 15% for the purposes of determining equalization.

http://www.fin.gc.ca/FEDPROV/eqpe.html


Emphasis mine.

And If I lower my tax rate, does that not also lower the standard?

From the same source:

Provinces with revenue raising ability, or fiscal capacity, below a threshold or standard amount received Equalization payments from the Government of Canada to bring their capacity up to that standard:

So it's BC's ability to raise revenue. If BC keeps their taxes high, they lose residents and so lose revenue. If they lower their taxes, they lose revenue but not residents. So if going by the 'standard' would cause them to lose residents, they lower their fiscal capacity.

It's such a complicated formula that I don't know the specifics of how they did it, all I know is they adjusted their corporate tax structure which lowered their revenue, be it capacity or standard or whatever... they managed to squeak under. It was a combination of economic decline and their need to adjust their tax structure to fight the decline that put them into the have not category.

[RedHot25]

Originally Posted by FireFly

And If I lower my tax rate, does that not also lower the standard?

From the same source:



So it's BC's ability to raise revenue. If BC keeps their taxes high, they lose residents and so lose revenue. If they lower their taxes, they lose revenue but not residents. So if going by the 'standard' would cause them to lose residents, they lower their fiscal capacity.

It's such a complicated formula that I don't know the specifics of how they did it, all I know is they adjusted their corporate tax structure which lowered their revenue, be it capacity or standard or whatever... they managed to squeak under. It was a combination of economic decline and their need to adjust their tax structure to fight the decline that put them into the have not category.

I'm no expert, Firefly, but I think that you may be getting things mixed up a bit?

I believe like Marchare said that a standard level of taxation is used. So each province is based on (in his/her example) a 15% rate, no matter what each individual province's rate is.

Secondly, it is the ability to raise revenue, but the fiscal capacity part is talking about overall I believe...in the sense that after the formula calculations have been done, if your "total revenue" (or fiscal capacity or whatever they call it) is below the "total revenue" of the calculated average I believe of the 5 provinces mentioned earlier in this thread, then you get money. If its above, you chip the difference back in.

Now theoretically, yes a province could raise its tax rates so high...say to 30% in this example...and it might have some overall effect on their revenue, I don't think it is done as a conspiratorial (I know you don't mean it to this extent) means of getting more equalization payments/money...

[FireFly]

Originally Posted by RedHot25

I'm no expert, Firefly, but I think that you may be getting things mixed up a bit?

I believe like Marchare said that a standard level of taxation is used. So each province is based on (in his/her example) a 15% rate, no matter what each individual province's rate is.

Secondly, it is the ability to raise revenue, but the fiscal capacity part is talking about overall I believe...in the sense that after the formula calculations have been done, if your "total revenue" (or fiscal capacity or whatever they call it) is below the "total revenue" of the calculated average I believe of the 5 provinces mentioned earlier in this thread, then you get money. If its above, you chip the difference back in.

Now theoretically, yes a province could raise its tax rates so high...say to 30% in this example...and it might have some overall effect on their revenue, I don't think it is done as a conspiratorial (I know you don't mean it to this extent) means of getting more equalization payments/money...

It's not that simple though. They don't just say that Province A has the capacity to make 8 billion dollars and Province B can only make 3 so let's even it out. There are ways to adjust your capacity...

You have to realize that BC was only barely a have province and is now barely a have not. It's not like they changed their own taxation formulas drastically. BC is one of the 5 provinces that make up the standard, so when they adjust it adjusts the standard.

[Lurch]

Secondly, it is the ability to raise revenue, but the fiscal capacity part is talking about overall I believe...in the sense that after the formula calculations have been done, if your "total revenue" (or fiscal capacity or whatever they call it) is below the "total revenue" of the calculated average I believe of the 5 provinces mentioned earlier in this thread, then you get money. If its above, you chip the difference back in.

There is no 'chipping back in'. Transfer payments really reflect how the federal gov't distributes the total taxes it raises. There is no 'make up' tax on Alberta, for example.

[Hakan]

Originally Posted by fanforever1986

That's very interesting...Not doubting it, but I'd like to read about the speculation of that happening...Have a link for it?

It's in the report.

http://www.eqtff-pfft.ca/english/EQT.../annex05-1.asp

Also of note, the reports author, Al O'Brien, was the deputy minister of finance for Alberta for years. I saw him present this report and he believes that 50% of resource revenue is a classic Canadian compromise.

[CrusaderPi]

In case anyone is wondering Alberta contributed roughly 11.1 billion to the equalization pool out of a total of 11.5 billion in 2006. This year Alberta will be handing over 14 billion (ish) for which we will see no benefit.

[Hakan]

This year Alberta will be handing over 14 billion (ish) for which we will see no benefit.

Unless you of course count the benefits of having a stable federal system and relatively universal levels of services between provinces.

But yeah, those are only minor benefits.

[CrusaderPi]

Originally Posted by Hakan

Unless you of course count the benefits of having a stable federal system and relatively universal levels of services between provinces.

But yeah, those are only minor benefits.

Not for Alberta they aren't. I'm pretty sure we could set up a fairly stable national government on our own. As far as universal levels between the provinces goes. Well, a thank you every now and again would be nice.

[RougeUnderoos]

Originally Posted by CrusaderPi

I'm pretty sure we could set up a fairly stable national government on our own.

Ah yes, "we could go it alone". Hostile borders on three sides and no access to the ocean. Luckily the Americans are so friendly and would be willing to buy the oil at top dollar even if we don't have anyone else to sell it to.

[jolinar of malkshor]

Originally Posted by RougeUnderoos

Ah yes, "we could go it alone". Hostile borders on three sides and no access to the ocean. Luckily the Americans are so friendly and would be willing to buy the oil at top dollar even if we don't have anyone else to sell it to.

Why would there be hostile borders?

Also...I don't think it would be to hard to convince Norther BC to join us. That way we could have access to the ocean.

[Devils'Advocate]

Originally Posted by CrusaderPi

In case anyone is wondering Alberta contributed roughly 11.1 billion to the equalization pool out of a total of 11.5 billion in 2006. This year Alberta will be handing over 14 billion (ish) for which we will see no benefit.

Can I see your reference for that? Because I have Ontario contributing $5billion. Which would be *AT LEAST* 10x what you are suggesting here.

As for those that espouse Albertan separation, I think those along with the separatists in Quebec should all be locked up for treason. I, as someone in Ontario, am *HAPPY* that we are giving $5B and think we should be giving a hell of a lot more for health care and education to the folks back home in the Maritimes. I hear about the conditions that the schools are in and how bad health care is getting, especially in the rural regions and I think, how can *I*, as a Canadian want my own countrymen to not have access to health care and education. But apparently some Albertans are a different sort. Instead of helping out other Canadians they talk about separation so they don't have to lend a hand.

I take it that when the Canadian junior teams win their gold medals, you don't watch? Or do you hate the country so much that you want to leave it, yet still cheer the national hockey team? When the Olympics are on, you cheer only the Alberta born atheletes and boo the Canadian ones? I don't get how being part of one of the greatest countries on the planet makes people of provinces to the east and to the west want to rip it to shreds.

[Hakan]

I knew it would come to this. The nation of Alberta. Uh huh. Have fun renegotiating every international treaty that you enjoyed as being a member province of Canada.

Seriously. Our federal state is a good thing. It has led to a very prosperous and stable country. Why some Albertans choose to ignore this fact is beyond me.