Article content continued

The federal government has the right to collect tax revenues from all provinces — rich and poor. Rich provinces like Alberta, with higher per-capita incomes, pay higher taxes on their tax returns. When incomes fall as a result of a recession or oil price drop, less tax is paid to the federal government.

These revenues go into the federal government’s general-revenue fund and it decides how those funds are allocated, without input from the provinces. Similarly, Alberta collects resource royalties from crude oil and natural gas production, and the federal government has no say in how those revenues are used. So individual rich provinces do not subsidize public services in other provinces.

Equalization is unique, however, in that provinces and the federal government do get together to discuss the mechanisms by which the funds are transferred. There are five-year renewal processes whereby the federal government seeks input and suggestions from provinces to streamline the processes.

However, in the end, it is a federal program using federal funds and the federal government can make any changes it wishes to the program, which has occurred numerous times in the past.

While Alberta parties can posture about threatening to hold a referendum on the equalization formula or amounts transferred, such threats are, as we have outlined above, essentially hollow, designed to fire up a party’s base and to rile up voters who are genuinely hurting.

They will not change the Canadian constitution. Empty threats and promises that cannot be delivered are not the way to stimulate thoughtful, informed debate in the campaign about the real challenges facing the Alberta economy and how to address them.

Oliver Franke is an assistant professor of economics at Concordia University of Edmonton. Elizabeth Smythe is a professor of political science at Concordia University of Edmonton.