Article content continued

So instead of a simple program to top up revenues in “have-not” provinces, that they might be able to provide services to their citizens that are “reasonably comparable” to those in other provinces, we have a complex, jury-rigged mess. Total payments under the program do not vary with the degree of disparity between the provinces’ “fiscal capacities,” for example, but must increase every year in line with the economy — no faster but also no slower.

No one can agree on which revenue sources to include in the definition of fiscal capacity — in particular, whether to include 50 per cent of resource revenues, as now, or zero, as Kenney and others demand. No matter: provinces can choose between 50 per cent and zero, depending on which pays them more. And if this should result in a “have-not” province having a greater fiscal capacity than the “haves”? Then part of the payment is clawed back.

Photo by Martin Ouellet-Diotte/AFP/Getty Images; Ryan Remiorz/The Canadian Press

That doesn’t begin to describe the complexity of the program. As a result it is broadly misunderstood, notably in the persistent myth that some provinces “pay in” to the program while it “pays out” to others. Not so: it is a federal program, financed entirely by federal taxes. When Alberta leaders complain that the program is funded by Albertans, they mean that Albertans pay a disproportionate amount in federal tax. Yes, they do: because Albertans are, on average, richer than the average Canadian — yes, even today.

The same explains why Alberta does not receive equalization payments: because its own “fiscal capacity,” thanks to Alberta’s oil wealth, is also much higher than the national average. And fiscal capacity is what it’s all about. Equalization has nothing to do with whether a province is in deficit or surplus, since that is a result of all sorts of political decisions unrelated to how rich its economy is. Alberta has a deficit, for example, largely because it spends more on its citizens than other provinces do.

Those leading the charge for a “review” of equalization therefore have an obligation to spell out what they mean. They cannot possibly mean it should be rejigged in such a way as to make Alberta eligible to receive equalization payments: that would make the program even more nonsensical than it is now.