The Old Shell Game,
or The Mystery of the Missing Fiscal Imbalance
Brian Lee Crowley and Bruce Winchester
The case has been made by a number of commentators and provincial governments that there exists a “fiscal imbalance” between Ottawa and the provinces, by which I think they mean that there is a mismatch between what the two levels of government are called to do under the constitution, and the fiscal resources which they currently enjoy to carry out those responsibilities. In other words, Ottawa has too much cash relative to its responsibilities, and the provinces too little, and that the excess of cash at the federal level is the cause of fiscal shortfalls at the provincial level.
But before we rush to find solutions to this problem, it is important to determine whether the premises that define this “problem” are in fact correct. I intend to make the case that these premises are in fact faulty, that the provinces have adequate resources at their disposal (including room to raise taxes), that Ottawa’s surpluses are the proper reward to the federal government of its fiscal virtue, and that Ottawa’s improved fiscal position is in no way at the expense of the provinces. And while it is certainly the case that Ottawa taxes us too heavily, that is not an argument for Ottawa to transfer its excess tax take to the provinces, but rather for Ottawa to stop taking so much money from taxpayers. If provinces want more money from taxpayers, they should have to raise it through taxation and be democratically accountable for that decision.
The Old Shell Game, or The Mystery of the Missing Fiscal Imbalance is a presentation made by AIMS president Brian Lee Crowley to the Subcommittee on Fiscal Imbalance of the Standing Committee on Finance during hearings in Halifax in February.