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Fiscal Federalism In Canada

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Fiscal Federalism: Power of the Provinces versus Equitable Programs
Fiscal Federalism and Equalization in Canada thoroughly catalogues the dynamics of Canada’s federal government and the provinces in relation to equalization payments and the equitable distribution of public services. The book examines the unequal distribution of services in Canada and attempts to offer solutions drawing on foreign federations with equalization payments and comparing the differences. However, as Canada is unique in the amount of autonomy the provinces individually hold, the relationship that the provinces have towards the federal government severely impacts the applicability of foreign systems to address the equity of services. In addition, the inequity of the …show more content…

In the case of the Canada Social Transfer, the requirement is simply not to apply residency requirements to citizens to qualify as the Canada Health Transfer only requires the province to minimally comply with the Canada Health Act of 1984 (8-9). They introduce two terms such as the vertical fiscal gap and the horizontal fiscals gap. The vertical fiscal gap is the gap between the ratio of the federal government’s tax revenue and expenditure versus the provincial governments’ tax revenues and expenditures. This gap has enabled the provinces to continually increase the amount of federal funding that they receive, or in the case of lack of funding, to create an antagonist against the unavailability to perform certain provincial social responsibilities due to the lack of funding, thus weakening the political power of the federal government in negotiating equalization payments in favour of the provinces. The horizontal fiscal gap refers to the provinces’ own differences in ability to raise revenue such as the natural resources in provinces like Alberta or impressive industry and citizens of provinces such as Ontario. The …show more content…

There is also the individual wants of the constituents themselves varying between households with certain provinces offering differing programs, there is an incentive for the household to migrate to the area that is offering services and incentive for the province to attract the families that the province needs by offering relative services (54-55). This is called Fiscally Induced Migration, where people migrate to achieve a higher wage or better public services. In the case of better public services, under a decentralized equalization system there are certain to have areas where a public service will be of a better quality than another area in Canada. When this area attracts migration from the lower quality service area, the stress on the higher quality service area goes up, potentially decreasing the quality of that service. While in Fiscal Federalism it can be considered a negative thing, and by all accounts it does decrease from the most good available, it promotes equity in the service by lowering the quality of the higher quality service area and simultaneously decreasing the stress on the lower quality service area which would promote its raise so that the two areas become closer to the mean. What the equalization payments enable is that in the case of inefficient migration where the

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To begin with, it bases the evaluation of each region’s entitlement largely on objective variables, thus avoiding excessive bargaining by the regional governments. Thus it increases fairness of the distribution outcome. Next, if properly designed it can eliminate the disincentive inherent in many discretionary systems that encourage low tax efforts and overspending of the sub-national governments. Above all, among other things, a formula based transfer system creates equity among the regional governments and provides an effective means to address regional disparity. Despite all these benefits the development and implementation of the formula is never an easy task.

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Newfoundland made the right decision in joining Canada in 1949 because in return they were given the promise of prosperity and security due to family allowance, higher standards of living and relief of debt. When Newfoundland joined Confederation, it was by far the the poorest province. Billions of dollars of equalization payments later and investments into the province by the Federal Government, now means Newfoundland is richer than the average Canadian province and has not qualified for equalization payments since 2008. The first reason why Newfoundland made the right decision in joining Canadian Confederation was because Canada relieved Newfoundland of the financial debt burdening it.

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Perhaps the most unsettle period in Canadian political history, the Quebec Referendum of 1980 and a vote to the remain part of Canada, led Ottawa to initiate a balancing program to promote Charter Rights, while protecting Quebec’s language and culture. The Meech Lake and the Charlottetown Accord were developed to address this situation. However, through a compare and contrast it can be deduced that the Charlottetown Accord provided the best balance for Charter Rights and Quebec’s need for a distinct society clause. During the 1960’s Quebec began to argue that it was a distinct society due to their language, culture and history.

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The first thing that separated CAP from past social welfare programs relates to the dominant place that the norms of program administrators occupied in its development (Dyck, 1979). Program administrators of CAP were positioned to work in collaboration with one another and maintain frequent communication with one another on a nearly daily basis. A second thing that separated CAP from previous social welfare programs was its initiatives, which stemmed largely from the provinces, rather than from the federal government (Dyck 1979). That is to say, the provinces were largely responsible for making decisions about which services to provide and what levels of financial assistance to allow as part of the program. A third feature of CAP’s development was the attitude of federal officials towards the provinces (Dyck 1979).

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Interactions amid the provinces and the federal government, from constitutional issues to the most irresistible topics bang up-to-date in the country, are indemnified beneath the umbrella of “Federalism”. Authorities are shared so that on some matters, the state governments are decision-holders, whereas on the other matters, national government grasps the autonomy. In last twenty-five years, the upsurge of federal fiats on both governments, local and state, has shifted the power amongst state and national governments. Now, the national government is beginning to have more governance over the state’s engagements.

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