Sunday, February 14, 2016

Brad Wall's War On Equalization (Unless It's Called Something Else)

Saskatchewan Premier Brad Wall recently posted two info graphics on his Facebook page about equalization. People loathe Premier Wall and people love him. I have no particular issue one way or the other. My guess is he sees his role as putting Saskatchewan first, and as premier (and given he recently said he isn't interested in federal party leadership) he is trying to be seen to do just that. I don't fault him for that. However, while his recent arguments on equalization might be great "let's tap into lowest common denominator anger Donald Trump style" politics, they are more likely to put a stake through any hope he might have of having a meaningful discussion about federal transfers.

Premier Brad Wall's Facebook infographics

Wall has repeatedly promoted the idea that taxpayers in western provinces are paying less well off provinces. Some have taken this to suggest that provinces in the west are transferring money to the east. The problem with this argument is provinces DON'T pay into the equalization program. Individual and corporate taxpayers across Canada do. And not just from certain provinces. Every single individual and corporate taxpayer in Canada pays into the federal coffers from which the equalization program is funded through the same federal tax rates. It's impossible to know how much individual companies pay in taxes (particularly privately held companies), but if you look at the largest publicly traded companies, the majority are headquartered, at least for federal tax purposes, in Central Canada. Not Western Canada.

The other issue with the numbers Wall is using is that they are misleading. First, the federal government has legal and constitutional responsibilities to help ensure that all Canadians have relatively equitable access to primary services such as healthcare and education. Second, by focusing on only one program, Wall ignores all the other programs. 

Other programs you say? Well yes, there are a whole slew of other federal programs moving funding into provinces such as the Canada Health Transfer and Canada Social Transfer. Saskatchewan receives annual funding from both of these programs. Both of which are effectively equalization programs. Indeed, recent changes to the Canada Health Transfer disproportionately benefited populations with younger demographics. Saskatchewan benefited from this change.

There are also a wealth of other programs and services through which provinces benefit from federal spending. Infrastructure programs are at the top of the list, and again, the fiscal capacity for provinces like Saskatchewan to participate exceeds that of many other provinces. Then there are hidden subsidies like the subsidies to the oil and gas industry which the IMF puts at something around $34 billion each year. While many industries in Canada and other countries receive some kind of "subsidy" that doesn't seem to disappear once the industry is profitable, Wall blissfully ignores decades of subsidy in this industry paid for by all Canadians. 

Wall also seems to not recognize the irony in his asking the federal government to provide funding to pay for the clean up of abandoned oil and gas wells. Clean up of the wells is important. According to media reports from the province, companies in Saskatchewan have apparently already paid a fee for the clean up (the Saskatchewan government requires this) so wasn't that money segregated for that purpose? If not, doesn't that indicate poor financial management? Now is a good time to do this work and and tap an available labour pool. However, it would be nice if Wall recognized that he has spent considerable effort over the years criticizing exactly the kind of funding he is now seeking.

I am not sure whether Wall is trying to boost his "Saskatchewan first" credentials in advance of the next provincial election, or whether he is really trying to affect change to federal equalization. His approval ratings are so stratospherically high that I tend to think he really wants changes. 

Saskatchewan, despite the downturn in resource industries, still enjoys lower fuel and income taxes than much of the country. This means for those working, there remains more disposable income going around. But that doesn't mean a reasonable discussion on these issues doesn't make sense. It just seems discussing all the facts isn't the way Wall wants to go about this.

There is good reason to have a discussion about federal funding programs to provinces. On this Wall is right. There are many sources of funding so if a discussion is going to happen, then it makes sense to put everything on the table. By simply picking on provinces that receive funding from one of the programs, and choosing to pit regions of the country against one another, Wall pretty much closes the door to any chance of a realistic discussion that actually might make the federation stronger.