Southern Alberta Council on Public Affairs (SACPA)

Each year, in mid-December, the federal government releases its calculation for what each province is entitled to receive as equalization. The numbers show Alberta’s recession lowered its ability to raise revenues. They show Ontario has graduated to “have” status, but (interestingly) will still receive equalization payments. They also set the stage for the upcoming Federal-Provincial-Territorial discussions over the soon-to-expire formula. And on top of all this, budget challenges in oil rich provinces of Alberta, Saskatchewan, and Newfoundland and Labrador put equalization payments front and centre in provincial political debates, where misleading claims are unfortunately all too common. Equalization is complicated, but the basics are fairly straightforward. Equalization is a federal program that transfers federal funds to provinces with below average capacities to raise revenues. Provinces with stronger economies, and with high income households and businesses, raise more revenue for any given tax rate tha