Three things to know about Canada’s system of inter-regional redistribution:
- Because of progressive taxation and federal programs that support lower-income Canadians (and less wealthy provinces through Equalization), we would expect wealthier provinces to be net contributors and less-wealthy ones to be net beneficiaries. Yet this is not the case.
- We found that Ontario is a net contributor of inter-regional redistribution – with a “gap” of $9-11 Billion (depending on how you measure), while Saskatchewan and Newfoundland & Labrador are net beneficiaries.
- Our fiscal arrangements were not designed to moderate inequities between provinces during times of sustained commodity booms. While eligibility for Equalization is largely driven by disparities in natural resource wealth, the program does little to bridge those gaps.