For more than a decade, AIMS has been publishing papers and Commentaries about Canada’s equalization program. The most recent series clearly shows that while equalization-receiving-provinces (ERPs) are asking for more, those same provinces actually spend more money per resident on services than non-ERPs.
As the Senate Standing Committee on National Finance met to discuss the issue of equalization and examine whether there is a fiscal imbalance, it turned to AIMS for answers. AIMS vice president Charles Cirtwill and policy analyst Bobby O’Keefe travelled to Ottawa to meet with the Senate Committee.
They explained that there is no such thing as a vertical or horizontal fiscal imbalance.
Cirtwill told the Senators, “Equalization receiving provinces tend to have larger numbers of public service employees on a per capita basis and pay their public servants a greater wage premium (compared to the average industrial wage) than the national average of these measures. On top of this, the equalization receivers have higher than average debt levels.”
He explained that while not eliminating the need for equalization, the AIMS analysis provides further support to the argument that the current system over-equalizes, with the result that the extra cash is captured by well-organized public servants — who turn the extra money into either substantially higher wage premiums, extra public employees, or both — or it allows politicians to shift taxation into the future by using equalization to finance high levels of public debt.
To read the complete presentation, click here.