Finding a way out of the equalization trap

Halifax — The Ontario Chamber of Commerce (OCC) has joined the Atlantic Institute for Market Studies (AIMS) in calling for reforms to the country’s equalization program.

The OCC has released a second paper on the damaging impact of equalization on the nation. In “Fairness in Confederation, Fiscal Imbalance: A Roadmap to Recovery”, author David MacKinnon draws on the research conducted by AIMS to help provide recommendations to restore fairness to the transfer system.

“The OCC reports make use of “Retreat from Growth”, and other AIMS publications on this topic over the past ten years,” says AIMS president Brian Lee Crowley. “It is good to see the Chamber use our work to make such an effective case in Ontario against a public policy that has clearly hurt both the contributing and recipient provinces.”

The OCC is calling on the provinces and the federal government to work together to restore fairness to Confederation by ending the current equalization practices and by putting in place systems to measure success or failures of government programs.

As referenced in the OCC paper, AIMS made the following recommendations to the Expert Panel on Equalization and Territorial Financing Formula in July:

• Remove non-renewable natural resources from the calculations of fiscal capacities;
• Return to a 10-province standard to determine all averages and representative tax systems;
• Cap payments so that equalization payments do not increase total provincial revenues greater than the average of spending in a bundle of key spending areas;
• Allocate a portion of overall equalization entitlements to the repayment of provincial government debts.

“Equalization was not a program developed to stunt or hinder prosperity, although increasingly that is what it is doing in both the contributing and recipient provinces,” says Crowley. “If major subsidies like equalization were the solution to our problems of regional disparity, those problems would have been solved long ago.”

This is the second paper produced by the OCC on equalization. OCC president and CEO Len Crispino says AIMS’ contribution was invaluable.

“AIMS’ exceptional efforts in the development of sound research and public policy recommendations on the issue of Canada’s equalization program have significantly contributed to and complemented our own work in this area,” says Crispino. “Several key components of our fiscal imbalance work would not have been as compelling or substantive if it were not for AIMS’ policy work on this issue. Indeed, Canada and Canadians are well served because of the professionalism and dedication exhibited form public policy and research organizations like the Atlantic Institute for Market Studies.”

To read further on AIMS’ extensive work on the issue of equalization and the harm it causes to all parts of the country, click here.