Saturday, February 25, 2006

Fiscal Revisionism

The provinces have been complaining about the fiscal imbalance for some time now after years of federal surpluses and corresponding provincial deficits.

It seems a simple enough concept: taxpayers in some provinces are paying more into the federal treasury than they get back in transfer payments.

But some economists think that it doesn't even exist:

Convincing arguments have been made by a wide array of economists that the whole concept is a provincial myth.

"The provinces have the means to fix their fiscal problems and we see little reason why Ottawa should do the job for them," Brian Crowley and Bruce Winchester, of the Atlantic Institute for Market Studies, argued in a submission to the Commons finance committee last February.

Their brief was particularly hard on Quebec, which has led the cries of fiscal imbalance for years.

The have-not province already gets favourable treatment on equalization and bloc transfers relative to most others, and has consistently spent more - in most cases much more - on its public sector than any other province over the past decade. As most provinces have scaled back public-sector expenditures relative to GDP, Quebec has not.

Two examples in the news today are Quebec's expansive subsidized day-care program and its rock-bottom tuition fees, the lowest in Canada.

Winchester and Crowley call this "a perfectly legitimate democratic choice . . . . It is certainly not an argument for taxpayers in other parts of the country to subsidize that political choice."

Quite an argument, if you think that the fiscal imbalance is nothing more than an accounting trick. But there is only one level of taxpayer to cover three levels of government. No matter how much one level raises or cuts taxes, it's still a zero-sum game, because there is only so much income and expenditure to be taxed at any time.

At some point, the feds will have to give back what isn't theirs. And then the blame will be solely on the other two levels if they squander it.

Source: Yahoo


Myrddin Wyllt said...

If only our constitution were followed as written rather than as interpreted by the vested interests of the courts we would not even be discussing fiscal imbalance as it would not, could not exist.
The very fact Ottawa is in the tax business is proof our constitution means squat to politicians, judges and lawyers in this country, unless of coarse they can use it in their own interpretation to foist some twisted new social engineering scheme on us.

I find it very strange that the people's Constitution, which is our protection from corrupt governments and legal systems can be changed without our consent.
Can you imagine what would happen if the President of the USA and the Governors of say 38 states got together and unilaterally changed the US Constitution? Bloody revolution would be my guess.
Here we just allow it then wonder why our country resembles a backwater socialist state in a constant power struggle between the provinces(the true powers) and Ottawa (their secretary/messenger), Somehow the secretary has taken over the office and is now making the rules.

It's a pity all the self-serving politicians wanted to put their stamp on the country or province instead of realizing they inherited a great system that only needed oiling not re-tooling.

Our once great country was stolen from us by unscrupulous politicians and delivered back to us a weak fragile state that lacks even a national identity.

PGP said...

So ..does that mean the provinces complaining are right or wrong?

I've been hearing for decades that one province or another is getting the short end on these federal transfer deals but for every claim going one way there seems to be evidence of the oppostite being true.

Personaly..... if the Provinces want to keep their taxes they should support parties and governments that wnat to reduce federal involvement.

Anonymous said...

It is true that Ottawa is currently overtaxing which is why it keeps spending money in provincial areas of responsibilities and generating surpluses. But the provinces are a bunch of hypocrites...they demand redress of the fiscal imbalance, and continued spending in their areas or responsibilities.

PMSH should tell them, I will lower federal taxes to the amount needed to fund federal responsibilities. I will no longer be funding provincial areas of responsibilities. We will continue the equalization payments, but that's it. You raise provincial taxes to meet your responsibilities.

Alas, it will never happen, but that is what is needed.