Monday, February 6, 2012

Canada's interprovincial equalization payments are unfair

A group at the University of Toronto has discovered what must always have been self-evident to anyone but a liberal fanatic for total government control of everything, that a program to equalize incomes that ignores differences in the cost of living between town and country, and between the rich provinces and the poor is bound to be unfair.

As the reports:
In a 41-page paper to be released Monday by the Mowat Centre for Policy Innovation at the University of Toronto, equalization expert Peter Gusen said the status quo is unconstitutional.

And that [it] costs Ontario, British Columbia, Alberta, Saskatchewan, Newfoundland, Nova Scotia and New Brunswick billions of dollars annually that go instead to Quebec, Manitoba and Prince Edward Island.

“If equalization continues to ignore differences in expenditure need it will not be treating provinces fairly and it will not be fulfilling its constitutional mandate,” writes Gusen.

When dispensing equalization payouts from the taxpayer-funded $15.4 billion pool, Ottawa doesn’t take into account that wages and cost-of-living expenses are higher in Ontario and B.C. than in much of the country.

“Provinces … differ in their ability ‘to provide reasonably comparable levels of public services’ because they have to spend different amounts to offer similar services; in other words, because they have different expenditure needs,” he writes, quoting Section 36.2 of the Constitution Act.
So far as it goes, the argument seems reasonable, but it could certainly go much further. For example, why are Federal public servants of the same grade paid the same salary wherever they live in Canada, even though costs of living vary greatly. This is surely grossly unfair since it means that either those whose work requires them to live in Toronto or Vancouver are grossly underpaid or that a civil servant in Come By Chance, Newfoundland or Pelican Narrows, Saskatchewan is greatly overpaid.

If salaries currently paid to Federal civil servants in Toronto are adequate, as they must be since vacant positions with the Federal Government in Toronto are promptly filled, the Federal Government must have very substantial scope for savings to the taxpayer by adjusting civil service wages downward in areas with a lower cost of living than Toronto.

But better still would be to cut the Federal public service, currently numbering 250,000, and return the resultant savings to the taxpayer. The job cuts, apparently, are coming. Whether we see the tax cuts, remains to be seen. We may not even see a spending cut. If Harper has his way, we will almost certainly see a Canadian role in any new Middle-East war, and keeping a soldier in the field is even more costly than employing a Field Interviewer for Statistical Survey Operations in Iqaluit, Nunavut.

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