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Thursday, August 12, 2010
Breakfast of Moochers
Most of Canadian politics can be explained by one word: Quebec.
Equalization is supposed to allow the six recipient provinces to provide “comparable services” to the four donor provinces.
But Quebec, which received $8.3 billion or 60% of all equalization transfers in the last fiscal year, provides services as a have-not province that are nowhere available among the haves.
There is no other province where publicly funded daycare is available for $7 a day, when its total cost is seven times that, $49 a day.
This is why Quebec, with only 20% of the daycare-age kids in the country, has about half the daycare spaces in the country. Thanks, Alberta.
There is no other province where university tuition fees are $1,800 a year for undergraduates, allowing Quebec residents to attend McGill, the country’s most renowned university, for about half what it would cost to attend the University of Alberta, the biggest donor province.
Quebec is a have-not province in the sense that a psychosomatic is sick. From time to time members of the mainstream media ask, genuinely perplexed, why some in Alberta want to separate. The above is the answer. Quebec is not like Newfoundland, which is a small island far away from the economic heartland of North America. It is not like Saskatchewan, with a population of only a million people, deep in the interior of the continent. Quebec has a superb strategic location, vast mineral resources and a highly educated workforce. If it is indeed relatively poorer than Ontario, than it has only its own policies to blame.
Whatever the well intentioned rhetoric at the start of the Equalization program, in practice it has become a colossal bribe to keep Quebec in Canada, and the Atlantic provinces voting for the government of the day. With the sole exception of Medicare, there is no other government program that does more to promote statism in Canada as Equalization. It has distorted the political cultures of at least five of the ten provinces. It grants the advocates of big government a permanent natural base of perhaps 30% of the national electorate.
To break Equalization would mean breaking the culture of dependency across much of this country. It would be a dramatic victory for freedom in Canada. We have seen the yelping generated by making the Census long-form voluntary. Any politician who would dare challenge the Cult of Equalization would face a barrage ten times worse than Tony Clement now faces. Stephen Harper, we can be sure, doesn't have that kind of guts.
Posted by Richard Anderson on August 12, 2010 | Permalink
Comments
Any politician who would dare challenge the Cult of Equalization would face a barrage ten times worse than Tony Clement now faces. Stephen Harper, we can be sure, doesn't have that kind of guts.
Then who does?
Posted by: Shane Matthews | 2010-08-12 6:58:06 AM
Bang on. When you shed the cloak of 'redneck hick' and 'spoilt Albertan' crap that has been perpetuated by Eastern ignorance and media complicity, what you are left with are valid and troubling issues regarding Confailuration.
Why would Quebec buy a cow when they get the Alberta milk for free?
Posted by: Leigh Patrick Sullivan | 2010-08-12 7:14:06 AM
Shane, nobody does.
Posted by: TM | 2010-08-12 8:43:44 AM
Then we'll have to wait until the people are ready for it, TM.
Posted by: Shane Matthews | 2010-08-12 9:40:23 AM
Quebec is like a mega Indian Reserve - ethnically motivated, addicted to entitlements and blessed with the never-ending politics of grievance. Despite their outward attitudes they are both a kept people. Where IR's are kept by all Canadians, Quebec is fiscally kept by Alberta. Albertans would be better off sending separatists to Ottawa than Harper and company.
Posted by: John Chittick | 2010-08-12 10:17:36 AM
"Shane, nobody does."
Which is exactly why we're screwed.
Posted by: Charles | 2010-08-12 10:50:03 AM
I know this will be received as pearls before swine, but I'll try anyway:
It is only faulty collectivist thinking that would lead one to think of Alberta as giving tax money to Quebec. "Alberta" is not a singular, collectivist taxpayer and "Quebec" is not a singular, collectivist recipient. Individual Canadians pay taxes and individual Canadians receive services paid for by taxes.
So what does this mean? Well, for one thing, rich Canadians typically (no matter what province they live in) pay more money in taxes than they receive back in services. Poor Canadians typically (no matter what province they live in) receive more in tax-paid services than they pay for. But we all already knew that. So if you want to know who is paying for the daycare of children in Quebec or the university fees for McGill attending Quebeckers, the answer is not "Albertans", but rich Canadians, no matter what province they live in. Even more so, childless Canadians are paying for daycare services they never receive at all, so even some less-than-rich Canadians are paying for that. (The same is true for the childless who never attended university when it comes to the McGill fees). Some of those people live in Alberta, some in Newfoundland, some in Quebec, some in Manitoba, etc.
So what does this mean? It means that the average individual Albertan does not pay for Quebec services at all. The average individual Albertan pays federal taxes and receives services paid for by those taxes. And poorer-than average Albertans are net gainers in the taxes paid /paid-for services received game. That only leaves rich Albertans who might gripe. But their complaint is no different from that of rich Canadians anywhere (including in Quebec), who might not want to pay for services that other individuals receive.
The conflict, insofar as there is one, is not Alberta vs Quebec, but rich vs poor. And this is the same conflict that exists within any province as well. Rich Albertans not only pay more for services the federal government gives to poorer people all across the country, they pay more in provincial taxes for services poorer Albertans receive. And rich childless Albertans pay for the schooling of other Albertans, healthy rich Albertans pay for the medical care of sick Albertans, etc.
To see the issue as one that is fundamentally about geography is collectivist thinking that misses the point of how taxes work. I bet there are a lot of less-well-educated, poorer-than average Albertans who really think they are paying for the daycare and McGill educations of Quebeckers. It is in the interests of rich, libertarian, Albertans to perpetuate this myth. But it just ain't so. Individuals pay taxes. Individuals receive benefits. Transfer payments are ultimately transfers from some individuals to others, and those transfers are not well tracked by where those people live, but by how much money they make on the one hand and whether they have kids, get sick a lot, or like watching the CBC on the other.
Posted by: Fact Check | 2010-08-12 11:19:40 AM
FC claims this is a conflict of rich vs poor, but actually it is a conflict of those who work for a living vs those who demand handouts. The communist solution is to steal from the workers in order to give to those who prefer not to work.
Still all this pales in comparison to the claim that equalisation is not about provinces but about individual citizens, the poor and the rich.
Posted by: Alain | 2010-08-12 11:41:09 AM
As a Swine responding to the Oyster, your "pearls" conveniently ignore the role of provincially owned resource revenues which, in the case of Alberta, is the majority of the source of the equalization transfer funding. If there were no transfer, Albertans from libertarian to communist and in all tax brackets would enjoy the benefits of a provincial budget that could afford more "free goodies" for their "unenlightened collective swine".
Posted by: John Chittick | 2010-08-12 11:49:59 AM
Fact Check,
But you're completely wrong in a sense. There is geographical considerations to it.
Quebec's social safety net, which is far more extensive than any other Canadian province, and the extremely high tax burden that Quebec has, relative to other provinces, arguably accounts for the lower productivity of it's economy and diminishing returns on it's tax revenue.
So, other more productive provinces, are through fiscal crowding out by Quebec, deprived of that fiscal room which could either be translated into provincial tax relief or better funding of provincial services.
I think the question being asked, Fact Check, why is it, that people living in Quebec have to subsidize Quebec's welfare programs, which are the most generous in Canada?
It's a perfectly reasonable question to ask. And it's not simply a matter of the rich versus the poor.
A few points:
1. Quebec has the highest provincial income taxes in Canada. Someone living in Montreal will pay 13% more in income taxes then someone living in Toronto. (income tax calculator here: http://lsminsurance.ca/calculators/canada/income-tax)
2. Quebec has the worst fiscal position in Canada, with a provincial Debt-to-GDB ratio of 96%, meaning that if Quebec were it's own country, it would basically be in almost as bad shape as Greece.
3. Quebec's daycare subsidies and education subsidies are far more generous than any other province.
So the question is completely legitimate to ask: if we don't get comparable services in the rest of the country, then why should Canadians across the country be forced to contribute tax dollars to help Quebecers pay for their welfare state, which they cannot even afford at current taxation and funding levels -- as per the fiscal situation outlined above?
Posted by: Mike Brock | 2010-08-12 12:15:30 PM
Then I guess the federal bureaucrats who actually handle the money are also guilty of such faulty collectivist thinking, FC, because that is how they allocate the money. How it's divvied up to the individual taxpayers is left largely to the provincial government of the day.
It's like the view that property is theft: If everyone owns property, then it becomes difficult to call them all thieves.
Posted by: Shane Matthews | 2010-08-12 12:20:05 PM
Fact Check,
I guess it comes down to that old American concept: "no taxation without representation". Quebec, for whom I have no political representation as an Ontario resident, is able to, through what is arguably it's own mismanagement and overbearing taxation and regulatory environment, coupled with it's language laws, has found itself not economically able to sustain the level of welfare funding it's population desires.
I don't think it's callus to say: well: "boo-fucking-hoo!"
They *want* $8/day daycare. And they've voted for it. But their government cannot fiscally maintain social spending with things like this without reaching into the pocket of those don't *have* $8/day daycare.
Quebec isn't "equally poor" to Ontario.
It's like saying Sammy spend $1500/month and only has $1000/income. And Jimmy spends $800/month on $1000 of income. So Sammy is poorer and needs some of Jimmy's money to help make up the difference.
Posted by: Mike Brock | 2010-08-12 12:22:48 PM
It's like saying Sammy spend $1500/month and only has $1000/income. And Jimmy spends $800/month on $1000 of income. So Sammy is poorer and needs some of Jimmy's money to help make up the difference.
Posted by: Mike Brock | 2010-08-12 12:22:48 PM
That sums it up very well.
FC, If there are transfer payements from Alberta, then that money comes from individuals. If it is leaving Alberta as a transfer payment then it is not staying in Alberta, where it would otherwise be invested by Albertans, or spent by the government. In either case it would have benefited, to one degree or another, those that lived or visited Alberta. That means everyone in Alberta, not just the "rich."
Posted by: TM | 2010-08-12 1:00:08 PM
Mike,
"I think the question being asked, Fact Check, why is it, that people living in Quebec have to subsidize Quebec's welfare programs, which are the most generous in Canada?"
That's a very fair question, but notice that it has nothing at all to do with some mythical Alberta-to-Quebec payments, which was my point.
"So the question is completely legitimate to ask: if we don't get comparable services in the rest of the country, then why should Canadians across the country be forced to contribute tax dollars to help Quebecers pay for their welfare state...?"
No. Whether or not other Canadians get comparable services is neither here nor there. If the Alberta government raised provincial taxes so that they could subsidize daycare to $7 per day for all Albertans, the childless, rich Albertan would not have any more or less a complaint about his tax money going to pay for daycare in Quebec. He also would have the exact same level of complaint about the new taxes in Alberta as he would about his federal taxes going to daycare in Quebec.
"I guess it comes down to that old American concept: 'no taxation without representation'."
Huh? The "taxation" in question is federal taxes. An individual Albertan who pays taxes to the federal government that then are transferred to the Quebec government that then, in turn, are spent on little Jacques' daycare costs is not being denied representation. He has an MP who is part of the very government that makes this spending decision. In fact, he might well have the PM himself as his representation.
TM,
"FC, If there are transfer payements from Alberta, then that money comes from individuals."
True, but there are not transfer payments from Alberta. The transfer payments come from Ottawa and come from federal income taxes that are paid by all Canadians. It sounds like you think transfer payments come from provincial income taxes, which they don't. The "transfer" going on is not from one province to another. It is from the federal government to some provincial governments, which means the money ultimately comes from people who pay a greater amount of taxes than they receive in tax-funded services, regardless of which province (or territory) they live in. Many of them even live in Quebec! So ultimately the "transfer" in question is not from one province to another, it is from higher income people to lower income people.
Posted by: Fact Check | 2010-08-12 1:24:04 PM
The linguistic yoga of FC is interesting to say the least.
Posted by: Alain | 2010-08-12 1:37:08 PM
FC, It is tax money flowing out of Alberta. Period. That means all Albertans have less and recipient provinces have more as a result. If the feds did not transfer this wealth and reduced taxes proportionatly, then there would be more left in Alberta. So it matters little whether federal or provincial, it is still money leaving our individual pockets and benefiting other provinces.
Posted by: TM | 2010-08-12 1:42:38 PM
Hey, Fact Check. Send me some money. I need to pay Mike Brock. Rest assured the money you send will come to me, not Mike Brock.
Posted by: Agha Ali Arkhan | 2010-08-12 1:48:12 PM
FC,
You're right in saying that higher income individuals are subsidizing lower income individuals in Canada.
But you're wrong to state that there are no regional distortions. I live in MTL, am in the upper 1% of income earners, and still benefit from the services offered by the province. I can bring my children (one day) to daycare for $7, go to the clinic or hospital and be covered by universal healthcare, and I benefited from very low tuition fees at McGill and HEC. My government cannot afford to pay these services. Instead of taxing me more, they get it from the federal government (who obviously gets it from all Canadians). So in essense, rich Ontarians, British Columbians, and Albertans are subsidizing all income earners in Quebec.
Posted by: Charles | 2010-08-12 2:30:39 PM
TM,
"FC, It is tax money flowing out of Alberta. Period."
Nope. The tax money is flowing out of BC, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, PEI, NS, Newfoundland, Nunavut, the Yukon, the NWT, and even out of Quebec, too. It is not flowing out of the pockets of ALL Canadians, just the ones who make a more than average income. It is not flowing to all Quebeckers, as the childless get none of that daycare money. But even rich Quebeckers with kids end up paying for their own kids daycare plus that of the kids of some other Quebeckers through those same transfer payments. You really don't understand how the tax system and transfer payments works.
Charles,
"You're right in saying that higher income individuals are subsidizing lower income individuals in Canada.'
Yes, I know :)
"But you're wrong to state that there are no regional distortions. I live in MTL, am in the upper 1% of income earners, and still benefit from the services offered by the province."
Since you are in the top 1% of earners, you actually pay for your own kids daycare, partly through your provincial taxes and partly through your federal taxes that get transferred to the Quebec government. You also pay for the daycare of some poorer Quebeckers through those same taxes. Same goes for your health care and McGill education. If you think you "benefit" from these services, it is only if you ignore the taxes you pay that cover those costs. If you think your "benefit" comes from non-Quebeckers, then you are also ignoring the extra amount you paid in federal and provincial taxes that went to your fellow citizens.
Posted by: Fact Check | 2010-08-12 3:11:51 PM
Fact Check,
I never said I receive any benefit in the current arrangement as a high income earner. In fact, I pay too many taxes for the services I receive. I'm simply saying that I'd be paying EVEN more if it wasn't for equalization - and that's thanks to rich taxpayers from other provinces. Currently, the taxes I pay (and including of course all other taxpayers in Quebec) at the federal and provincial level are not enough to support the services we all receive in Quebec. The Feds have to take a part of the federal taxes Ontarians, Albertans, and BC'ers pay and hand them over to the Quebec provincial government. So rich people in other provinces are still subsidizing services I receive here in Quebec. So my statement still stands. Rich people outside Quebec are subsidizing all citizens in Quebec.
Posted by: Charles | 2010-08-12 3:24:52 PM
Charles,
You're still wrong. Suppose that transfer payments ended tomorrow. What would be the result? Well, the cynical view would be that federal taxes would not be reduced at all to reflect this. But if you take that view, then it's hard to claim that continuing transfer payments is really related to the amount of taxes anyone pays. So let's assume that the result would be a reduction of taxes equal to the amount of money that Ottawa transfers to some provinces. And this would mean that you pay less in taxes, so you would benefit from ending transfers.
But there is more to the story. You are right that without transfers from Ottawa that the Quebec government would not have enough money for all their programs. So what might they do? Well, one possibility is to raise taxes equal to the amount lost in transfers to cover the shortfall. In that event you would end up not only paying more in provincial taxes, but the amount more would be greater than the amount you would save in federal taxes. But this scenario seems unlikely.
A more likely solution is that the Quebec government would scale back their services by the amount that they lost in transfers. So, for example, daycare costs might rise from $7 per day to $14 per day. McGill tuition fees might rise as well. In this scenario, it is entirely possible that the amount you save in federal taxes is greater than the extra you would have to pay for services. But you also ignore the situation of many of your fellow Quebeckers. Rich Quebeckers without kids would not even have to pay any of those extra fees for daycare or tuition, so an end to transfers would be entirely a net gain for them. So even if you are not convinced that you are a net loser because of transfer payments, your claim that all Quebeckers benefit from transfers is certainly false. Many, if not all, rich Quebeckers are net losers.
Posted by: Fact Check | 2010-08-12 3:53:41 PM
Three words: Constitution Act, 1907
Posted by: Paul McKeever | 2010-08-12 4:40:14 PM
In case anyone was fuzzy on how this works, from: http://www.fin.gc.ca/fedprov/eqp-eng.asp
How Equalization Works
•Equalization entitlements are determined by measuring provinces’ ability to raise revenues – known as "fiscal capacity".
•Before any adjustments, a province’s per capita Equalization entitlement is equal to the amount by which its fiscal capacity is below the average fiscal capacity of all provinces – known as the "10 province standard".
•Provinces get the greater of the amount they would receive by fully excluding natural resource revenues, or by excluding 50% of natural resource revenues.
•Equalization is adjusted to ensure fairness among provinces while ensuring that receiving provinces can get a net fiscal benefit from their resources equivalent to half the per capita resource revenues of the receiving.....
Posted by: John Chittick | 2010-08-12 6:26:32 PM
FC: Both Quebec and Alberta peoples pay taxes. Quebecers gets billions of dollars from equalization, Albertans don't. Hence, the money is flowing to Quebec from Alberta. Not that hard. We aren't the ones collectivizing the country; the federal government is.
This is reason 45334 that Harper is a waste of time. Better to send separatists.
Posted by: Cytotoxic | 2010-08-12 7:11:09 PM
"... [Equalization] in practice ... has become a colossal bribe to keep Quebec in Canada, and the Atlantic provinces voting for the government of the day."
Unfortunately, the Atlantic provinces have not provided many votes to government of the day in the last few years, and yet the money keeps coming.
Posted by: Roseberry | 2010-08-12 9:26:28 PM
Cytotoxic: "FC: Both Quebec and Alberta peoples pay taxes. Quebecers gets billions of dollars from equalization, Albertans don't. Hence, the money is flowing to Quebec from Alberta. Not that hard. We aren't the ones collectivizing the country; the federal government is."
And to add to the myth that Albertans are directly paying Quebec's transfer payments alone, is that the amount of Albertan money paid yearly matches almost exactly what Quebec receives yearly.
Posted by: Ed Ellison | 2010-08-13 10:44:06 AM
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