Quebec City protesters shot directly with tear gas

Are Albertans really paying for Quebec�s social programs?

Release Date: April 20, 2012

Student protests in Quebec have triggered a curious response from some observers. Appalled that Quebecers have the audacity to protest tuition fees rising from the lowest in the country to possibly the second-lowest, they opine that the only reason Quebec can afford such fees in the first place is on the back of the Alberta taxpayer. As the narrative goes, Quebec�s low tuition, $7-a-day daycare and other generous social programs are all being paid for by hard-working Albertans who could only dream of affording such luxuries themselves.

This story appeals to Albertans convinced that Ottawa and Quebec are stealing our wealth, but this is simply not the case. Let�s start with the idea that Alberta sends money to Quebec. This is incorrect on two levels.

First, Ottawa charges people the same taxes regardless of where they live and puts all the money into a big pot called general revenue. Assuming a balanced budget, all federal program spending, including on transfers like equalization, comes out of that same pot. As such, federal taxes raised in Quebec help fund farm subsidies in Alberta. Taxpaying New Brunswickers contribute to Employment Insurance payments in Saskatchewan. And yes, federal taxes raised in Alberta help pay for equalization in Quebec.

Second is the mistaken belief that the Alberta government cuts a cheque to Ottawa to pay for equalization and other transfers. In fact, these are paid by federal taxpayers (including those in Alberta) with no involvement from the provincial government. Equalization does not affect the Alberta government�s bottom line. But at the same time, Alberta cannot therefore simply �opt out� of equalization.

It is also untrue that equalization allows Quebec to afford services that are impossibly generous for Alberta. The equalization formula tells us that the Alberta government could collect twice as much revenue as Quebec (including its equalization payments) if both provinces had identical tax rates. In other words, Alberta could easily afford tuition rates lower than those in Quebec, and plenty more besides, if it was willing to pay for them.

This brings us to another misunderstanding about equalization. Its purpose is not to ensure a uniform level of provincial government services across Canada, but rather to ensure that provinces have the ability to provide comparable services at comparable tax rates. Each province can choose how much�and on what�to spend, but they have to pay for those choices. Yes, Quebec has more generous social programs than Alberta. It also has taxes that most Albertans would consider appallingly high.

But are we just confusing the issue? Do Albertans not contribute more to federal coffers compared to people living in other provinces? Of course we do. And Canadians across the country benefit from that contribution. But this is not the result of some elaborate plot to drain wealth out of the West and give it to welfare recipients in the East. It�s simply because our economy is strong. The �problem� is that wages and employment rates in Alberta are much higher than anywhere else in Canada. More of us have jobs and earn higher incomes, so we end up paying more in taxes.

Can we eliminate this �injustice?� Sure. One option is to shut down some of our industries to bring economic output and unemployment rates closer to the national average. Alternatively, all Albertans could take a voluntary pay cut to bring our salaries in line with those of other Canadians. Or, we could ask the federal government to implement a special �Alberta� set of tax rates�so that we can pay lower taxes than all other Canadians to compensate us for being richer than the rest of the country.

The bottom line is that Albertans contribute more to confederation because our economy is strong. Someone earning $100,000 pays more taxes than someone earning $50,000. Alberta is simply home to more 6-figure salaries.

Because of that wealth, the Alberta government could afford to provide social services that would make Quebec�s seem miserly by comparison. But Albertans have chosen a different path. If Quebecers wish to keep tuition low, enjoy $7-a-day daycare while paying high taxes that risk discouraging economic growth, that�s their decision to make. Besides, would you want to trade places?

Michael Holden is the Senior Economist at the Canada West Foundation. Canada West Foundation is the only think tank dedicated to being the objective, nonpartisan voice for issues of vital concern to Western Canadians.

Equalization payments are based on a formula that calculates the difference between the per capita revenue yield that a particular province would obtain using average tax rates and the national average per capita revenue yield at average tax rates. The current formula considers five major revenue sources (see below). The objective of the program is to ensure that all provinces have access to per capita revenues equal to the potential average of all ten provinces. The formula is based solely on revenues and does not consider the cost of providing services or the expenditure need of the provinces.

Equalization payments happen via the federal treasury. As an example, a wealthy citizen in New Brunswick, a so-called "have not" province, pays more into equalization than a poorer citizen in Alberta, a so-called "have" province. However, because of Alberta's greater wealth, the citizens of Alberta as a whole are net contributors to Equalization, while the citizens of New Brunswick are net receivers of Equalization payments.

"BeaverFever" said
Ya? You think she needed to be smashed in the face and should've gotten it worse?

"N_Fiddledog" said
Let's separate the editorializing from the facts though, and have another look at it.

This is the way equalization works.



http://en.wikipedia.org/wiki/Equalizati ... _in_Canada

Quebec got about 8 billion bucks for equalization payments in 2013. That's the most of any province. It was about 4 billion more than the next highest on the list, which was Ontario. It's based on a per capita formula.

Here's a graph of what Quebec students were paying for tuition in 2011 versus other provinces.

http://news.nationalpost.com/2012/05/18 ... a-graphic/

The average tuition rounded out to 6 grand in Alberta. 2 grand in Quebec.

So the real question is at what point does a non Quebecois citizen have the right to tell Quebec's pampered, precious, socialist snowflake students to stop whining and get to class?

The only problem I have with that cop is his aim was bad. He should have gone for one of those black bloc, wannabes hiding in the hoodies.