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Canadians have long been committed to the principle that, as part of a vast and diverse federation, people across the country should have access to reasonably comparable public services, and they should pay for those services with reasonably comparable tax levels.
In practical terms, it means that if people live in Newfoundland and Labrador or British Columbia, Montréal or Medicine Hat, their children should have reasonably similar opportunities to get a good education. They should have access to reasonably comparable health care, social services, and justice systems. And people in one part of the country shouldn’t pay substantially higher taxes to support those services compared with their fellow Canadians in other parts of the country.
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| Equalization reflects a distinctly Canadian commitment to fairness. It has been described as the glue that holds our federation together. |
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This important national purpose is at the heart of Canada’s federation. It is enshrined in Canada’s Constitution and it provides the basis for the federal government program called Equalization. Under the Equalization program, the federal government provides financial support to provinces that are less wealthy and less able than other provinces to provide public services
without charging unacceptably high levels of taxes.
In many ways, Equalization reflects a distinctly Canadian commitment to
fairness. It has been described as the glue that holds our federation together.
In recent years, however, questions have been raised about whether the glue is as strong as it was in the past, whether it’s being spread too thinly or too thickly in some provinces, and whether the Equalization program is, in fact, achieving the national purpose it was intended to fulfill.
On top of those questions, it’s fair to say that the program may be simple in theory and principle, but that’s where the simplicity ends. The saying ‘the devil is in the details’ certainly rings true for Equalization. In spite of the fact that the federal government will spend well over $11 billion on Equalization in 2006–07, Equalization has been largely ignored by the vast majority of Canadians and it is understood by only a select few academics, experts, and finance officials across the country.
Questions about Equalization demand answers. They demand a thorough review of Canada’s Equalization program—how it is designed and implemented and how it might be improved. Furthermore, Canadians deserve to know that their tax dollars are being used effectively to achieve an essential national purpose.
In March 2005, the Expert Panel was established by the federal Minister of Finance to address key questions about the future of Canada’s Equalization program. Based on extensive consultations with provinces, experts, and
academics, reviews of a wide range of options and ideas, and a thorough technical analysis, the Panel has prepared a comprehensive package of
recommendations designed to put Equalization back on track.
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