Fixing Equalization for Albertans
Plus the failed FTHBI program, update on the Liberal's firearms legislation, Bill C-10, and more confusion on cross-border vaccinations
Fixing Equalization for Albertans
Equalization is one of the most controversial federal fiscal programs, and rightly so. Many Albertans feel like the program is unfair, and it is, but there are many misconceptions about equalization that can get in the way of finding a credible solution to fix the problem.
Let’s talking about where equalization originates. Equalization is outlined in Section 36 (2) of the Canadian Constitution which states,
“Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.”
Prior to 1982, when the Constitution was repatriated from the United Kingdom, it was a major federal transfer program that began in the late 1950s as a means of encouraging provinces to forego their provincial income taxes in favour of a federal government collection program with a remittance to the provinces. The difference between a province collecting revenue itself and the federal government doing it with a fixed transfer regardless of totals raised was called equalization. While the program began with the best of intentions to ensure that Canadians across the country could access the same levels of service it is now the last wealth redistribution project that has unfairly targeted Western Canadians, especially those of us in Alberta.
Many Albertans think that equalization involves the government of Alberta cutting a cheque for billions of dollars to the federal government to be redistributed. Equalization is much more complex than that. Canadians pay personal income taxes directly to the federal government. The federal government then calculates every province’s fiscal capacity and takes the average, then, the federal government redistributes wealth from “have” provinces to “have not” provinces. The federal government redistributes federal tax dollars through a variety of programs and federal benefits beyond just equalization.
Albertans contribute an average of $3 billion a year to the $20 billion a year equalization program. This is in addition and separate from the $3 billion it nets to the federal government for the Canada Health Transfer and Canada Social Transfer.
The Constitution requires the equalization program, but it does not specify the amount or size of the program. The federal government sets the equalization formula. In the spring of 2018, the Liberals extended the equalization formula in an omnibus budget bill. This was done without approvals from the provinces and without a fulsome debate in Parliament. The Liberal extension failed to take into account the massive GDP drops Alberta experienced from 2014-2018.
At the time, the Liberal government had spent three years pilling on one devasting policy after another for Albertans. This was on top of the precipitous drop in oil prices between 2014-2019. This formula extension only aggravated an existing problem, the convergence of provincial fiscal capacity.
Provincial fiscal capacity has been converging, meaning that the gap between “have” provinces and “have-not” provinces has been shrinking. This is not because lower-income provinces are earning more, it’s because everyone is getting poorer. In 2007, Alberta’s fiscal capacity was 92% higher than the average, now, it’s only 4% higher. Because of bad Liberal policies in Ottawa, the entire country is worse off.
Despite this, equalization continues to grow. It grows because of the fixed growth rate rule. This rule was enacted during the second Harper minority government to control the growth of the equalization program. This made sense at the time as equalization was set to grow by double digits as royalty revenues far outpaced anything seen before. The fixed growth rate rule states that equalization will grow every year in proportion to overall GDP growth. This rule was a good fix when the gap between provinces was astronomically large like it was when the rule was enacted. However, now, this rule means that equalization will continue to increase in size even though the fiscal capacity of provinces has become more and more equal. The federal government knew this in 2018 and should have addressed this reality by abolishing the rule entirely as a starting point.
A close cousin of equalization is the fiscal stabilization fund. The fiscal stabilization fund exists to provide a transfer from the federal government to a province when the province experiences a massive drop in revenues. Fiscal stabilization payments are currently capped at $60 per capita. This is an arbitrary cap established in the 1980s based on drops in forestry prices in British Columbia. The program has been largely ignored since then, but recent revenue price shocks have brought this program back into the public focus.
In 2015-2016, Alberta’s revenues dropped by $8.8 billion. Because of the cap on fiscal stabilization payments, Alberta only received $248.3 million from the fiscal stabilization program. If the cap were removed, Alberta would have received $2.9 billion.
In Bill C-14, the Liberals increased the cap on fiscal stabilization payments to $170 per capita. This cap is still arbitrary and based only on indexation for inflation. In 2020-20201 based on revenue drops, Alberta would have received $3 billion without the per capita cap. With the cap, Alberta will only receive $750 million, a difference of $2.25 billion. This is why I introduced a private member’s bill on equalization to specifically address this $3 billion shortfall to get Albertans the full amount instead of the capped amount.
There public outrage from Alberta is warranted. Equalization is increasing while Alberta’s revenues are decreasing and federal programs that are supposed to help Alberta are outdated and fail to address massive revenue drops. Currently, 70% of Canadians pay massive amounts into equalization for only 30% of the country.
This is why I tabled Bill C-263 The Equalization and Transfers Fairness Act as a starting point to restoring fairness to Canada’s equalization and transfer system. My bill removes the cap on fiscal stabilization payments entirely, ensures the federal government cannot unilaterally change the equalization formula and makes a successful referendum on equalization impossible to ignore. If the Conservatives were in government, I would do much more.
You can read more about the specifics of my bill and add your support at the link below.
The First Time Home Buyers Incentive – Doomed to Fail From the Beginning
“It sounds like something good – but really isn’t.” That is what James Laird, the president of mortgage broker CanWise Financial, had to say about the Liberal government’s First Time Home Buyers Incentive (FTHBI). The FTHBI is a $1.25 billion program managed by the Canada Mortgage and Housing Corporation (CMHC) with the goal to help over 100,000 Canadians become new homeowners by 2022. I have excoriated the government at length for their handling of this program, pointing out early on that the numbers simply did not add up. I’ve been proven right. A government response to my Order Paper Question revealed the FTHBI has been a disaster from the beginning, only approving 9,108 applicants as of January 31 2021, less than 10% of what the CMHC and the Liberal government had promised. The program saw more approvals in Medicine Hat, population 63,000, than Toronto. These approvals do not indicate that homebuyers followed through on the proposal, meaning fewer Canadians have been helped through this program.
Yet despite such obvious shortfalls in the program, the Trudeau Liberals have chosen to double down, expanding eligibility rules in Toronto, Vancouver, and Victoria to include homes up to $722,000. This comes at a time that the average home price in Toronto and Vancouver has surpassed $1 million, an eye-watering figure for Canadians dreaming of purchasing a home for the first time. This program will have wasted three years in the adult lives of Canadians, having done nothing to address housing affordability or supply. Canada can no longer afford the Trudeau Liberals’ incompetence on this issue, and I will continue holding the government to account on this program and press them to abandon it once and for all.
Ottawa Liberals Borderline Inept on Communications on Cross-Border Vaccinations
This past Tuesday, CTV released an article announcing that the Public Health Agency of Canada would permit Canadians to cross the border into the U.S to be vaccinated. The article further stated that those that travelled into the US for the sole purpose of being vaccinated would be exempt from the mandatory two-week quarantine.
Two days later, in an interview with CBC, the Public Health Agency of Canada reversed its position and said that while individuals could get vaccinations in the United States, they are not exempt from the two-week quarantine.
This is yet another flipflop on pandemic information that has left Canadians confused and unsure. Many Canadians have received vaccines from the United States. Recently, the Blackfeet Tribe in Montana has been providing hundreds of vaccines to Albertans at the Carway border crossing. At the Carway crossing, Albertans crossed into the United States, remained in their vehicles, were vaccinated immediately across the border, then returned back to Canada. This past Tuesday, there was a lineup over a kilometer in length by 9 am of Albertans waiting to get their vaccines. Will these individuals who have benefitted from the generosity of the Americans be subject to the two-week quarantine for driving less than 100 m across the border?
Mistakes and policy flip-flopping on essential pandemic information is unacceptable. Canada’s Conservatives will continue to press for answers and clarification on cross-border vaccinations.
Bloc and NDP Confirm Support of Bill C-10
Despite widespread opposition from free-speech experts and interest groups from across the country, the Liberal government’s online censorship legislation, Bill C-10, appears poised to pass its third reading in the House with support from the NDP and Bloc Quebecois. While acknowledging that the legislation has the potential to “engage” upon Canadians’ rights to free expression, the government has maintained its steadfast support of the poorly drafted legislation that fails to include safeguards for online content from CRTC regulation. University professor and internet law expert Michael Geist summarized this development best, stating “I would have thought that standing behind freedom of expression would be an easy choice to make, and I’ve been genuinely shaken to find that my government thinks otherwise”.
As stated before, I opposed Bill C-10 before it went to the heritage parliamentary committee and will continue to oppose it when it returns to Parliament from the committee for its final vote before heading to the Senate.
Update on Bill C-21: The Liberal Firearms Confiscation Legislation
Recently, members of the Liberal government have been accusing Conservative members of parliament for stalling the debate on Bill C-21, a proposed piece of legislation that would penalize legal firearm owners while doing nothing to target criminals, gun smugglers, or gang violence. C-21 has been roundly condemned by families of victims of gun violence, provincial legislatures, and the Canadian Association of Chiefs of Police, among others. In a CityNews story published last month, even criminals convicted of firearms-related charges have expressed doubt that this piece of legislation will combat the proliferation of illegal firearms. With all that being said, the Liberal government’s attempt to blame Conservatives for stalling on C-21 is absolutely absurd.
As the largest party in the House of Commons, the Liberals control the legislative agenda and calendar for Parliament. Despite tabling the legislation back in February, the Liberals have allotted hardly any time for debate on C-21 over the previous three months. It is up to the Liberal government to set debate days on their preferred legislative initiatives and obviously have found no serious urgency to passing this law.
Whether the Liberals decide to keep their bill in the shadows or open it up for robust debate in the House, the fact remains that C-21 is bad legislation. I sponsored a petition calling on the federal government to immediately scrap C-21 and the accompanying two regulations from May 1st, 2020. This petition has now received over 19,300 signatures. If you agree with me that legal firearm owners should not be punished for the activity of criminals using illegally obtained firearms, click the link below to sign the petition.