The fair distribution of income may be the most value-laden of all economic goals; it is certainly the most controversial. When it comes to dividing the total national output, there can be many interpretations of what makes for a fair division of wealth, as there are people. The issue of income equalization is further complicated by regional differences, as identified in the article.
The equalization program, which is funded through general tax revenue collected from all Canadians, transfers dollars to poorer provinces so they can offer programs and services reasonably comparable to those offered in the wealthier provinces, at similar levels of taxation. There is a controversial overhaul of transfer payments under study by federal government. The six “have-not” provinces are splitting $15. 4 billion in equalization payments in 2012-13: Quebec ($7. billion), Ontario ($3. 3 billion), Manitoba ($1. 7 billion), New Brunswick ($1. 5 billion), Nova Scotia ($1. 3 billion) and Prince Edward Island ($337 million).
The other four provinces (B. C. , Alberta, Saskatchewan and Newfoundland and Labrador) are considered to have greater revenue-generating capacity and don’t currently qualify for equalization. The Conservative government has been examining substantial changes to the $15. -billion federal equalization program that could dramatically affect transfers sent to provinces and their ability to pay for programs and services. The concern in this article is the proposal, if implemented, could have multibillion-dollar consequences on hydro-producing provinces such as Quebec, Manitoba, British Columbia, and possibly Newfoundland and Labrador. Any reforms to how hydroelectricity is calculated in equalization would almost certainly prove to be one of the most contentious issues, especially in the hydro-producing provinces.
The current equalization program calculates 50 per cent of a province’s natural resource revenues in determining its revenue-generating ability — or “fiscal capacity” — and whether it deserves an annual equalization payment. But, the economic value of hydroelectricity isn’t necessarily calculated the same as oil and gas, partly because of the difficulty in determining the value of hydro power due to a lack of a competitive market in Canada. However, any changes to how hydroelectricity is calculated in equalization could have a “huge impact” on how much — if any — a province receives from Ottawa in equalization.
For example, some studies have suggested Quebec could lose billions of dollars in equalization payments if the true value of hydroelectricity were calculated in the program. If the true economic value of the hydroelectricity were calculated, it would amount to a larger fiscal capacity for equalization-receiving provinces such as Quebec and Manitoba and possibly mean billions of dollars less in federal payments sent to those provinces in the coming years. I feel that the issue of equalization payments with regard to hydroelectricity generating provinces is a controversial one.
Although, my opinion on such is that these “have” provinces (Quebec, Manitoba, British Columbia, and Newfoundland and Labrador) which are producing the hydroelectricity should be compensated for such. Due to the fact that hydroelectricity isn’t calculated like another resource doesn’t mean these hydroelectricity providing provinces should suffer. Currently, the equalization program takes into account differences in revenue-generating capacity among the provinces, but not the varying costs of providing services in each of the jurisdictions.
Considering the revenues from hydro generation account for less than 20 per cent of total natural resource revenues across the country. However, hydro makes up nearly 80 per cent of natural resource revenues of equalization-receiving provinces, making it particularly important for distribution of equalization. Regardless if one province would suffer dramatically, I feel it is important to focus energy on this matter as the other “have” provinces could also benefit.