How equalization distorts tax policy in recipient provinces
Author: Kenneth J. Boessenkool
In this the third paper in AIMS' Equalization Series, author Kenneth J. Boessenkool discusses how equalization, although noble in intent, actually creates incentives for less-developed provinces to raise taxes and overtax their citizens. "Taxing Incentives: How equalization distorts tax policy in recipient provinces" examines and compares the burden of various taxes of both recipient and non-recipient provinces. The striking empirical evidence illustrates not only that equalization encourages poorer provinces to overtax their population, but also that the bigger the province the stronger the incentive to do so.
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