The Fact and Fiction of Equalization Payments

What is the cost of fixing this? (Photo Courtesy of

There is an incontrovertible truth to economics: the consumers are the kings.

Every dollar spent, no matter where you are in the country, is a dollar spent.  It is what is known as GDP.   What may often be overlooked when equating the equity of an Equalization Transfer is the federal tax of %5 withdrawn from each transaction in the provinces themselves, the %5 Federal Tax of commerce in the provinces.

Federally, the province of Quebec accounts for %19.65 in the total Canadian GDP at $303.7bn in 2009 – which means that off the top roughly $15.19bn (+/-) entered Ottawa coffers due to being the second most populated province (at almost 8mn Citizens) in the Canadian Confederation, each citizen paying %5 at the cash register on every transaction into the Federal Principle of a shared, national coffer.

This of course does not account for Federal Income tax withdrawn from higher income earners yearly off wages at the source.

Only the province of Ontario, being the most populated province, paid more. Ontario GDP is Twice that of Quebec’s, so double the numbers, and take note that they received less than half of what Quebec did in return Equalization payment.  In 2010, Quebec received $14.2bn in equalization payments back from the Federal Government.  Much hay has been made on this because of the fact that the rest of the provinces received substantially less than this.  Many self serving parties have taken this further, saying that taxes drawn across the country are paying for “$7 per day care” and “low tuition costs” of Quebec’s “socialist” citizen-first (uncompetitive) systems, and yet the Quebec Government still somehow operates with a $1bn yearly deficit into Federal Coffers – even if almost all of the Federal tax withdrawn at our cash registers is actually returned to the province in the guise of an “Equalization Payment”.  We are hardly getting rich here in Quebec on the Tar Sands, even if we aren’t paying “our fair share”.

Ontario, currently in the grip of Austerity measures, is operating with a much higher ratio of defecit into Federal coffers.  They are in all probability funding federal reclamation projects in Alberta as well as tax breaks for oil exploration while cutting services to their own citizens.

If there was ever a political wedge being drawn between the West and the East it would be this, not the inflated pressure of an over valued currency which will inevitably be burdened once we factor the cost of production into the equity of the resources we base them on.  How much is a barrel of fresh water worth? Right now, in the eyes of the Federal government, it is free for the deedholder and it actually takes four of them to produce just one barrel of Tar Sands oil.  What about the Natural Gas used in the cost of production?  The cost of reclaiming the lands and wetlands destroyed in the process of extraction? What will happen to the viability of the Tar Sands when all of these factors are added to the overhead of the Exploitation of these Tar Sands?

Canada currently has 3bn barrels of Tar Sands oil in reserve, which of course is what is bolstering the strength of our dollar – and yet how much future debt have we accrued in the production of that wealth, and who will pay for it?  That should be the question on everyone’s lips.  The best price I could find commercially for a barrel of water was about $12 – but as scarcity increases that number will rise and devalue the very oil some of us hold so dear.

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