Equalization transfers

AB referendum on equalization

October 2021: Should section 36(2) of Constitution Act be removed? 62% Yes for a 40% turnout→ $J. Kenny demands of J. Trudeau to negociate a fair deal w/AB$

BUT J. Kenny was part of gov when current formula decided + $no obligation of the fed to negociate (not legally binding)$

BC AB incomes are high, $pay more fed taxes but get less redistribution$

Constitution Act (1982) Part III: Equalization and regional disparities

Commitment to promote equal opportunities, making sure allows to provide ==reasonably comparable public services== at comparable tax levels ==between provinces==

Constitutional principle of regional equity

started in 1957, %%horizontal fiscal imbalance addressed%% by %%unconditional transfers%% → province can do anything they want with that money (use it for education, to repay debts, to pay vacations…)

Have vs %%Have nots provinces%%, latter get check bc need it

Key issues

^^Not need based but fiscal capacity based^^ (if same tax level, how much $ per Povince?)

PB of ^^estimating fiscal capacity^^ (count all potential sources of revenue, only non renewable/renewable…)

If calculating per capita threshold → ^^fed = incentive to lower threshold^^ (if high, more $ to have nots bc need more $ to reach it)→ to manage cost = ^^N-province formula^^ (basically excluding AB

Does it work + creates perverse incentives + dependency ?

observation: ^^QC fiscal capacity is weakening^^, from 44% of total transfers in 2004 to 66% in 2020.