Balanced arguments

The Canadian Centre for Policy Alternatives offers an oft-neglected view on federal/provincial relations:

(The CCPA report) proposes that provinces relieve their cash crunch by actually ceding some powers to Ottawa.

Among other things, the report suggests Ottawa take over responsibility, and pay, for a national pharmacare program, social assistance and labour market training...

Lee contends the imbalance in Canada, one of the most decentralized federations in the world, is less than that of many countries.

He notes the provinces have access to all the same sources of tax revenue as the federal government, plus exclusive access to natural resource royalties and profits from lotteries, gaming and liquor. If they need more money, they could simply raise taxes, but instead provinces have cut taxes by an estimated $30 billion.

"To the extent that provincial finances are in bad shape, provincial governments deserve much of the blame due to tax cuts over the past decade," he wrote...

Lee argues that giving the provinces tax room "in the name of fixing a phoney fiscal imbalance would actually worsen regional inequalities." He points out that poorer provinces would have to raise their taxes much higher than rich provinces to generate the same amount of revenues.

Moreover, oil-rich Alberta might choose not to raise its taxes at all, putting pressure on other provinces to keep their tax rates competitive, even if it means shortchanging social programs.

Now, I wouldn't want to see the federal government starting up new programs as recommended by Lee without a large degree of provincial agreement. And it seems likely that with few exceptions (possibly including the drug-purchasing aspect of a pharmacare program), the provinces would prefer to see federal funding for provincially-controlled initiatives than new programs administered solely by the federal government.

That said, it's worth noting the degree to which provincial tax-cutting policies have exacerbating funding problems...and the strong likelihood that a tax-point transfer would do nothing but continue a vicious cycle. And Canada will be much better off in the long run to pursue an agreement which leads to direct federal funding for national priorities, rather than another round of passing the bucks without a purpose.