Kenney should be careful what he wishes for

Alberta Premier Jason Kenney wants Canada’s equalization formula adjusted to be fairer to Albertans.

image: Macleans

When it comes to equalization payments to provinces, Albertans think that there must be a mistake. They see themselves as contributors to Quebec at a time when Quebec’s economy is on a roll and Alberta is in the dumps.

Kenney is being disingenuous when he claims that the current formula is unfair. His government was the author of the current formula in 2009 when he was a cabinet minister under the Harper Conservatives.

Kenney surely knows that one of the reasons Alberta pays more into equalization is that the province has more high-income earners. While only eleven per cent of Canadians live in Alberta, 21 per cent of Canada’s $100,000-plus earners live there.

Of course, high-income earners mean little if you are unemployed.  In October, 2019, Alberta’s seasonally adjusted unemployment rate was 6.7 per cent compared to Quebec at 4.7 per cent.

Income is just one factor in determining equalization says business reporter Konrad Yakabuski:

“The basis for determining whether any province qualifies for equalization payments is whether its fiscal capacity – the amount of revenue it could raise if it applied average tax rates, combined with its natural resource royalties – is below the national average. Despite a recession in Alberta following the 2014 crash in oil prices, and a slow recovery since, that province’s fiscal capacity remains far above the national average (Globe and Mail, Nov. 27, 2019).”

Kenny would like to see Alberta’s natural resources removed from this calculation, presumably so that Quebec would receive less. That plan would backfire because Quebec, too, has vast hydroelectric resources. Quebec would actually receive more according to calculations prepared by University of Calgary economics professor Trevor Tombe.  Kenney’s plan would have seen Quebec receive $10.1 billion more in equalization payments over the past decade.

Kenney argues that unlike Quebec, Alberta’s resources are non-renewable and should be an exempt. Yet it was Kenney’s government that decided it would be unfair to distinguish between renewable and non-renewable resources.

Quebec is a convenient straw man for Kenney, deflecting attention from the fact that Alberta’s riches were used in averting a provincial sales tax and not saved for a rainy day. Oil production was unwisely increased without the infrastructure to deliver it to market –a remedy my pipeline, the “people’s pipeline,” is about to resolve with construction under way.

Quebec’s budget surplus has to do with taxes –Quebec’s tax rates are 30 per cent higher than the Canadian average, whereas Alberta’s are 30 per cent lower. Kenny doesn’t have the courage to address Alberta’s real tax problem: no provincial sales tax.

Alberta’s wealth is, in part, the result of my tax dollars being pumped into the oil and gas industry. The feds recently announced a federal aid package for Canada’s oil and gas industry amounting to $1.6-billion.

As an author of the current formula, Kenney knows that the equalization is fair and yet he prefers to whip Albertans into a frenzy of retaliation and separation.

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