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Calvert's equalization complaints humiliating

Author: David Maclean 2004/08/24
The Saskatchewan government has made Canada's equalization formula their excuse for all things great and small.

When they break their election promise to provide school tax relief, their excuse is equalization.

When they run consecutive deficit budgets it has nothing to do with them and everything to do with Ottawa and their "punitive" equalization formula. Ditto for their failure to fully fund farm relief programs or other legitimate social programs that don't get them a lot of votes.

The equalization program is Ottawa's scheme to spread dollars from wealthier "have" provinces to poorer "have-not" provinces. It functions a lot like a social welfare program - you get handouts from the program until you get a job and get back on your feet. As it stands, Canada has only two "have" provinces - Alberta and Ontario. They are the only net contributors to the program, the rest take more than they contribute.

Like all welfare programs, equalization has a fatal flaw - it takes away incentives to improve and become self-sufficient. Human beings, like water, always follow the path of least resistance. Equalization subsidizes inertia, and there is no better example than Saskatchewan.

First off, the Canadian Taxpayers Federation (CTF) has been critical of the program and supports the provincial government's desire to have it changed. As it stands, if Saskatchewan's resource revenues spike in any given year, we're hit with an immediate offsetting cut to our equalization handout. If our province finally chooses to provide meaningful tax relief to actually grow the economy and provide jobs, they are penalized for reducing their "fiscal capacity." The feds don't want "have-not" provinces like Saskatchewan cutting taxes when they can't pay their bills. On the surface this seems reasonable, but in over-taxed and over-regulated economies like ours, lower taxes are a much-needed tonic.

If we are to have an equalization program at all (and smart people disagree on this), it should include built-in incentives for economic growth. Instead of clawing back Saskatchewan's handout as soon we have windfall oil revenues, the system should give us a year to allow us to put part of the windfall toward reducing school taxes to improve the rural economy, or cutting business taxes to create jobs.

Nevertheless, this government has no right to blame equalization for all their ills. It's akin to a welfare recipient griping about losing their benefits after they get a full time job. Premier Calvert's endless call for more handouts is an embarrassment to the people of Saskatchewan, and we deserve better. Equalization is meant to be a hand up when times are tough - not a reward for laziness.

Meaningful economic reform is hard work. In our case it means leveling the playing field to compete with Manitoba, North Dakota, Montana and Alberta for businesses and jobs. That would require lowering or eliminating corporate capital and business income taxes, reforming our labour laws to harmonize them with neighbouring jurisdictions, and cutting school taxes to make cities and our rural economy more competitive. That's the hard way to grow government revenues to pay for health and education, but it has proven successful in countries around the world.

Equalization payments from other provinces provide a politically-expedient way of barely keeping the ship afloat. Premier Calvert is content to patch the leaks with equalization duct tape and continue his humiliating cry for more handouts. This is all fine and good, if your goal is just to remain afloat. But if you want to actually move forward, you need to re-build the ship from bow to stern.

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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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