The Reminder is making its archives back to 2003 available on our website. Please note that, due to technical limitations, archive articles are presented without the usual formatting.
The existing federal redistribution schemes, such as equalization and transfer payments, are counter-productive for all of Canada. Manitoba is a terrific case study in how the good intentions of equalization payments can lead to bad results. Manitoba, a have-not province, receives about $2 billion in equalization payments from the ÒhaveÓ provinces via federal taxes. So whatÕs wrong with that? Plenty. The inter-provincial welfare scheme means the Manitoba government can and does charge less than market rates for its hydro electric power, about $1.2 billion less. Absent $2 billion in equalization payments, ManitobaÕs government would be forced to stop undercharging for its own natural resource. An important side benefit is that proper pricing would also be more environmentally friendly. ItÕs a given that people use less of something as it becomes more pricey. Another result of OttawaÕs charity is that Canadians who live in high-cost provinces subsidize those in low-cost regions. For example, in the first quarter of this year, the average price of a detached bungalow sold for $155,000 in Charlottetown, $235,000 in Halifax, $199,786 in Saint John, and for $170,000 in St. Johns (in the high-end area). Depending on the neighbourhood, the average bungalow price in Montreal went for between $180,000 and $270,000 and between $215,000 and $240,000 in Winnipeg. Now consider the provinces which have been mostly in the have category over the last several decades. A detached bungalow sold for between $315,000 and $700,000 in Toronto and for between $363,950 and $681,040 in Calgary. In greater Vancouver, prices ranged from $350,000 to $1,050,000. Worse, the inter-regional rip-offs only exacerbate regional tensions. Several years back, Bloc Quebecois leader Gilles Duceppe told me Quebecers paid more into federal coffers than they receive back. I asked him and his staff to send proof, as anyone who understands the nationÕs finances knows thatÕs nonsense. They never got back to me. Duceppe can be economical with the truth in Quebec and ramp up anti-Canada sentiment as a result precisely because of the existence of federal transfers. Such opportunistic politics could end tomorrow. All the federal government need do is kill cash transfers. In exchange, Ottawa could hand over the GST to the provinces (and other tax points if necessary). ThereÕs nothing selfish about defending the constitutional separation of powers, including provincial power over resources.
