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Sunday, June 25, 2017
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Issues in Equalization: A Discussion
Description:

The Five-Province Standard, Representative Tax System for Equalization was fraught with difficulties and could only be held together through a series of arbitrary patches and stitches. The inequity of the impact of these “fixes” could not be denied and, soon enough, the failure of the system was obvious to even the most cursory of observers.

While the RTS Five-Province system may have died in October 2004, it would be unwise to observe its passing without examining its weaknesses and its strengths. It would also be unwise to develop new approaches to Equalization without ensuring that they are free of the fundamental design flaws that ultimately undermined the credibility of the Five-Province Standard. The most effective way to do this would be to compare any proposed system to the previous Five-Province system.

This paper will discuss seven issues with the Equalization program. Since it is not enough to identify problems without proposing solutions, this paper will examine two alternate approaches to Equalization to see if they can offer some help in resolving the true problems with the program while respecting its principles and preserving its integrity. These options for reform will be compared to the effectiveness of the Five-Province Standard approach to Equalization, the last functioning formulaic approach, and will be assessed for their potential to allow Equalization to fulfill its constitutional mandate “to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation”.

Author(s)

Jim Marshall


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