With the 2007 Federal Budget, the Government of Canada launched a new equalization formula; the trouble is that it perpetuates the same old problem. Equalization receiving provinces are getting more than their fair share.

This Commentary by AIMS Senior Policy Analyst Bobby O’Keefe, Still More Equal than Others: Capped equalization still too much, examines how Ottawa overpays equalization receiving provinces.

The latest version of the equalization program continues to assume, wrongly, that the cost of essential public services is the same from province to province. Still More Equal than Others demonstrates that, when you adjust for the fact that a dollar does not buy the same amount of goods in Ontario that it does in Nova Scotia or Alberta, equalization results in unequal access to public services. Unequal access that favours equalization-receiving provinces.

“The equalization formula does not take into account the cost of providing public services in the various provinces and territories,” says Commentary author Bobby O’Keefe. “This results in some provinces having a lot more money to put into offering programs and services to residents. The best way to ensure reasonably comparable levels of service at reasonably comparable rates of taxation would be to include the cost of services in the formula.”

Still More Equal than Others takes an in-depth look at the new equalization formula and demonstrates that Ontario is taking it on the chin. Canada’s most populous province ends up with the least amount of money to pay for vital public services after equalization, once the cost of services is taken into account.

Still More Equal than Others is the latest in the AIMS Special Commentary Series on Equalization.

To read the complete Commentary, click here.

To read others in the Special Commentary Series, click here.