Originally Posted by
04Terminator
Maybe I can be of some use here. I worked for the CRA many years ago, and am now an auditor for a provincial government.
Simply, the transfer system is the way Ottawa sends money to the provinces for roads, hospitals, schools, services and things such as that. On top of those transfers, Ottawa also sends an equalization payment to provinces that lag behind on their own fiscal ability to provide equitable government services to Canadians.
The source of funds to Ottawa for those transfers are varied, I don’t have the report in front of me, but last year, about $140 billion was from personal federal income taxes, $50 billion was from “other taxes and duties”, and about $40 billion from corporate federal taxes.
There is no actual physical transfer from one province to another, or sharing of resource revenue (check any provincial budget).
The typical source of argument is that a particular region or province contributes more through these personal, other, or corporate taxes to the federal government, then they get back in transfer payments. This is true, the government typically runs a deficit, provides strictly federal services, and not all provinces qualify for equalization payments.
The regional argument is arbitrary in my opinion, as any area with higher average income and employment, though paying the same federal income tax rates, will pay more than they receive. Not just on the provincial level. From the transfers that Alberta receives from Ottawa, it will spend more per capita on more remote regions. Similar to Ontario, and the Greater Toronto Area. They have very high income, and contribute more than all Alberta residence do to Ottawa in taxes, but the Ontario government spends less per capita on that region then perhaps more remote places.
No doubt the system is not perfect, but I really do not perceive it as unfair.
The other arguemnt is that fiscal capacity calucalations are unfair, such as Alberta and Quebec using a subsidized industry's income instead of market value in the calcualtion, but that sounds reasonable to me as well.