Policy Forum: Equalization and Canada's Fiscal Constitution — The Tie That Binds?

Canadian Tax Journal/Revue Fiscale Canadienne, Vol. 66, No. 4, 2018

24 Pages Posted: 28 Jan 2019

See all articles by Richard M. Bird

Richard M. Bird

affiliation not provided to SSRN

Date Written: December 13, 2018

Abstract

Canada has had a fiscal equalization system since 1957, and equalization was formally embedded in the constitution in 1982. However, the rationale for equalization, how the concept is defined and applied, and what its effects are or should be are all issues that continue to be vigorously debated in both political and expert circles. This article reviews some of these issues and concludes that, on the whole, equalization has played a useful role in helping Canada to get through the last half-century as well as it has. However, the system could be improved by making it more transparent--for example, by fixing the amount to be distributed at (say) the present share of the federal budget (instead of indexing it to a moving average of nominal growth in the gross domestic product), and making the distributional formula less overtly political by establishing a quasi-independent board to examine the allocation formula from time to time and make recommendations for change. Governments at both the federal and provincial levels would then be more accountable for their actions, as they should be in a democracy.

Keywords: Equalization, Fiscal, Constitution, Federal-Provincial, Transfer Payments

Suggested Citation

Bird, Richard Miller, Policy Forum: Equalization and Canada's Fiscal Constitution — The Tie That Binds? (December 13, 2018). Canadian Tax Journal/Revue Fiscale Canadienne, Vol. 66, No. 4, 2018, Available at SSRN: https://ssrn.com/abstract=3309707

Richard Miller Bird (Contact Author)

affiliation not provided to SSRN

No Address Available

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