March 13, 2014
DGD 6 – Equalization
Equalization: It’s About Values, Not Money
Joe Ruggeri and Frank Strain
• Equalization is evaluated in terms of five fundamental principles:
o Economic justice
o Social justice
o Promotion of human rights
o Social cohesion
o Effective democracy
Economic Justice: Equalization is enshrined in the Constitution (Section 36 – responsibilities of
• A) the provision of public service of reasonable quality to all Canadians
• The promotion of equal opportunities for well-being for all Canadians
• Reduces inequality of opportunities among Canadians by helping governments in less
• *Equality of opportunity cannot be achieved if the governments of less affluent provinces
cannot afford to finance national programs at close to national standards.
• Economic justice is a fundamental right of citizenship
Social justice: provincial governments use nearly three-fourths of their budgets to finance public
programs – healthcare, education, and social services.
• Must be offered at comparable levels to all Canadians
• John Rawls – liberties of equal citizenship and equality of opportunity – especially access
to healthcare and education.
• By ensuring that all Canadians have access to these most basic prerequisites to
human development, equalization makes an important contribution to social justice. • Provincial governments fund programs designed to improve capabilities and open
opportunities for development
• Social assistance: ensure the poor have the basic income needed to function as full
members of a society
• Equalization strengthens the federation and raises our international standing by
promoting human rights, social cohesion, and effective democracy.
Promotion of Human Rights
• Canada supports the UN’s declarations and resolutions in support of human rights
• Pursuit of human rights for all Canadians must involve some form of equalization
program to assure that all provincial governments have the necessary resources to fulfill
• Link between social capital and economic development
• Equalization strengthens social cohesion by:
(1) institutionalizing a pattern of sharing of wealth among Canadians
(2) promoting a sense of national identity through the pursuit of economic and social
(3) facilitating the mobility of human capital by helping to finance national standards of
health and education across the country
(4) helping prevent the widening of regional income disparities that would hinder
economic growth and human development
• Federalism provides a balance between common preferences and preferences that differ
• By helping provincial governments in less affluent provinces deliver “citizenship rights,”
equalization strengthens Canadian ties.
• Equalization is about values, not money.
Equalization – Who Pays? How Does it Work?
Doug Brown • Equalization: the transfer of cash, four times a year, from the Government of Canada to
those provinces which, according to a formula set out in federal legislation, have
revenue-generating capacity that is below the national average.
• This year, onlyAlberta and Ontario are above that national average
• What’s the point? Constitution equalization is to ensure that provincial governments
have sufficient revenues to provide “reasonably comparable levels of public services at
reasonably comparable levels of taxation.”
• Who pays? Paid by the federal Department of Finance – comes from the “consolidated
revenue fund” of the federal government
• General pool of federal revenues to which all Canadians contribute through taxes
Not a Payment from Rich to Poor Provinces
• Canadians with higher incomes contribute more
• Regardless of province, equal income Canadians contribute the same
• Equalization is an investment in promoting national standards of public services and
fairer tax burdens across the country to produce economic, social, and political benefits.