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The Reform of Equalization Payments

Author

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  • Dan Usher

    () (Queen's University)

Abstract

A reasonable and fair interpretation of the mandate for equalization payments in Section 36(2) of the Canadian Constitution differs from the present equalization formula in these respects: Transfers to the poorer provinces would be financed by transfers from the richer provinces rather than from the Federal government. Entitlement to equalization payments would depend on provincial income rather than upon a tax-by-tax comparison of the provinces’ many tax bases. For this comparison, provincial income would include revenue accruing directly to the provincial governments as well as private income of the residents of the province. Compensation would be made for the exemption of provincial resource revenue from Federal income tax. The most pronounced effect of these proposals would be to transfer the greater burden of equalization payments from Ontario to Alberta which is now, by far, the richest province.

Suggested Citation

  • Dan Usher, 2007. "The Reform of Equalization Payments," Working Papers 1121, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1121
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1121.pdf
    File Function: First version 2007
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    References listed on IDEAS

    as
    1. Thomas J. Courchene & David A. Beavis, 1973. "Federal-Provincial Tax Equalization: An Evaluation," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 483-502, November.
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    Cited by:

    1. Albouy, David, 2012. "Evaluating the efficiency and equity of federal fiscal equalization," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 824-839.

    More about this item

    Keywords

    Equilization; Federal-provincial transfers;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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