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Debunked: Alberta doesn’t send the most money to Ottawa

The idea that Alberta has contributed more than any other province is a complete myth. Alberta, as a government, has never contributed to the equalization programme.

There’s a new group called Fairness Alberta making the media rounds recently. They claim that Alberta has been getting the economic shaft from the rest of Canada, particularly regarding the equalization programme. They’re spreading the same right-wing misinformation I see others spreading, so I thought I’d set the record straight on the issue.

Equalization is a federal transfer payment program designed to reduce differences in revenue-generating capacity between provinces.

By compensating poorer provinces for their relatively weak tax bases or resource endowments—such as smaller or poor populations and few natural resources—equalization ensures that all provinces can provide a reasonably similar level of services at reasonably similar levels of taxation, regardless of which province they call home.

Without it, some provinces would have to charge much higher tax rates than others just to provide the same level of government services.

The programme is financed exclusively through federal revenues, such as personal income tax, corporate income tax, and GST. Provincial governments do not pay anything into the equalization programme.

The idea that Alberta has contributed more than any other province is a complete myth. Alberta, as a government, has never contributed to the equalization programme.

All Canadian individuals and corporations pay taxes—theoretically speaking—and that’s where the money for the programme comes from. Income tax rates and GST rates are the same across the country; no one pays a higher rate just because of where they live.

GST for Canadians living in Alberta is 5%, but it’s also 5% for Canadians living in Québec. And PEI, and Saskatchewan, and everywhere else.

Likewise, income tax rates are the same, regardless of where you live. If you make $45,000 a year living in Alberta, you pay 15% in federal income tax, but you pay 15% if you make $45,000 in Québec. If you make $500,000 a year living in Alberta, you pay 33% in federal income tax, but you pay 33% if you make $500,000 in Québec, too.

Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province. Take a look at this graph, which shows federal revenues and expenditures by province for 2017.

Clearly, Canada doesn’t receive more revenue from any other area of the country than it does from persons and corporations within Alberta.

That being said, Canada gets roughly 15% of its revenue from people and corporations within Alberta. People and corporations in all the other provinces collectively contribute nearly 85% of Canada‘s revenue. So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province, they’re not keeping the programme afloat on their own.

Now let’s look at where that money comes from.

More than half of the federal revenue that comes from within Alberta is personal income tax. Corporate income tax makes up roughly 16% of the federal revenue collected. GST and “other revenue” each make up around 11%, and contributions to social insurance plans make up about 5.5%.

Now, keep in mind that the numbers in the first chart are per capita amounts. That means that Canada isn’t receiving more money from persons and corporations within Alberta because their population is the highest in Canada. We also know that it’s not because Canada charges Alberta persons and corporations higher tax rates.

So why the higher per capita amount then?

Well, if the population isn’t higher and the tax rates are the same as they are everywhere else, then the only explanation is that those paying the taxes are making or spending more than others.

For example, someone making $250,000 a year, will theoretically pay $61,403.56 in personal income tax. Someone who makes $500,000, however, will pay $143,903.56 in personal income tax. Even though both are taxed at 33%, the person paying the most is also making the most.

Likewise, someone buying a $10,000 car will pay $500 in GST, while someone buying a $100,000 car will pay $5,000 in GST. Even though both are taxed at 5%, the person paying the most is also spending the most.

In 2017, Canada collected—on average—$6,636 per person in income tax from people living in Alberta. That’s higher than the per-person rate in any other province. That means, on average, people in Alberta had higher incomes in 2017.

Alberta corporations paid the most in income tax, too, at $1,826 per capita. The next highest was Ontario, with $1,493 per capita. And since corporations are taxed the same rate across the country, Alberta corporations must have higher taxable incomes than corporations elsewhere in the country.

Same goes for GST. Canada collected $1,333 per capita in GST from within Alberta than it did from within any other province, which meant that Alberta persons and corporations spent $26,660 per person on taxable purchases in 2017. BC was the next highest at $24,540 per person.

So, why does Alberta “send more money to Ottawa” than any other province?

  1. People in Alberta have higher salaries.
  2. Corporations in Alberta have higher revenues.
  3. People and corporations in Alberta spend more money on taxable goods and services.

Remember that those higher salaries are an average. It doesn’t mean that you or I necessarily are making more than any particular person in Québec or Ontario. For example, in 2017, Alberta’s median income was $41,500, the highest in the country. Median income is the income where half of the group makes more than that income and half makes less than it.

If Alberta wants to lower how much they send to Ottawa, there’s a pretty easy solution: maybe they should lower corporate profits. Or reduce the wages of the wealthy.

And increasing worker wages is one way to accomplish both of those things.

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By Kim Siever

Kim Siever is an independent journalist based in Lethbridge, Alberta. He writes daily news stories, focusing on municipal, provincial, and federal politics, specializing in investigative journalism and critical analysis from a leftist political lens. He also writes regular editorials on general politics and social issues.

9 replies on “Debunked: Alberta doesn’t send the most money to Ottawa”

hi
i found it interesting that the last person to assess the fairness of equalization was in fact Jason Kenney under the Harper administration and it did get an all a-okay in the realm.
My response to the “we send $ more lets quit” argument is: now may be the wrong time as with the cons continuing we Albertans may soon need it

Mr. Siever’s column contains a serious error. He confuses PER CAPITA and TOTAL revenues and expenditures.
Mr. Siever subsequently corrects this error, but too late. A needlessly confusing presentation.

“Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province. Take a look at this graph, which shows federal revenues and expenditures by province for 2017.
“Clearly, Canada doesn’t receive more revenue from any other area of the country than it does from persons and corporations within Alberta.”

Mr. Siever omits the graph title, clearly indicated on the Federal Govt’s website: “Figure 2 ‒ Federal Revenues and Expenditures by Province, 2017 (in dollars per capita)”
PER CAPITA!
Per capita revenues and expenditures is not the same thing as TOTAL revenues and expenditures.

Siever: “That being said, Canada gets roughly 15% of its revenue from people and corporations within Alberta. People and corporations in all the other provinces collectively contribute nearly 85% of Canada‘s revenue.”
Correct.

Sievers: “So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province, they’re not keeping the programme afloat on their own.”
Incorrect. Again, the confusion between per capita and total.

Sievers corrects himself several paragraphs later, but far too late. The damage is done.
Sievers: “Now, keep in mind that the numbers in the first chart are per capita amounts.”

Albertans pay more federal taxes per capita because they have the highest per capita (i.e., average) income.
With the highest average income among provinces, AB taxpayers contribute the most per capita to federal coffers, but only 14% in total.
In 2019-20 AB taxpayers contributed 14% of federal revenues = 14% of funds for equalization. 14 cents on the equalization dollar.
Ontario and Quebec taxpayers contribute 60% of federal revenues, which fund equalization. Ontario taxpayers alone contribute c 41% of federal revenues. BC taxpayers 14%.
*
The biggest GROSS and NET contributors to federal revenues and to equalization are wealthy taxpayers and profitable companies — wherever they reside. Some live in AB; most do not.
Every millionaire in Ontario, Quebec, and elsewhere is a net contributor. And more millionaires and profitable corporations reside in Ontario and Quebec than in AB.
Most wealthy Canadians live outside AB. Most GDP and income is generated outside AB. Most tax dollars flow from outside AB. Most of the funds for equalization derive outside AB.
*
No one denies that Albertans have the highest average income. No one denies Alberta taxpayers contribute more per capita. Average, not total. Not the issue. The question is who contributes the most to federal revenues and equalization in total. UCP supporters cannot tell these two claims apart.
*
A hypothetical province of a dozen billionaires would pay more per capita in federal taxes than they get back in federal programs and transfers, just like taxpayers in Alberta. Even so, the bulk of federal revenues, which fund equalization, flow from the more numerous wealthy taxpayers in the rest of the country.

There is an error in this otherwise good article. It is not as Mr.Pounder was suggesting, I was able to follow all of that in the original article. However, the description of median is wildly incorrect. MEDIAN is NOT the halfway point between the highest and lowest income, if it was the highest income possible would only be 82000. I suspect Sievers just stated it badly. Median is defined as the middle number in and ordered data set. More simply put 50% of incomes fall below the median (a lot of part time workers) 50% fall above the median. Median does nothing to describe the RANGE, which is the difference between the highest and lowest income. What Sievers describe would be akin to some sort of hi-low average, this is not in anyway the median. Median is a common term that a lot of people confuse with Average (mean). Income is almost always reported as the median because of the skew high incomes put on the mean.

Another thing that could have helped this article would be a concise description of the Equalization Formula for which I will direct people to Wikipedia, but suffice to say if Alberta taxed its citizens at the average rate that other provinces do we would not have a revenue problem and we would not need Equalization. The equalization formula is based on potential revenue a province can generate not actual revenue. That was put into place to prevent a province from eliminating taxation they saying to Ottawa “Look we’re poor”. Alberta has never taxed at a rate close to other provinces because we have never had a provincial sales tax. So Mr. Kenney and the United Clown Party are claiming we don’t get a fair deal when they are sitting on a potential pot of gold and claiming poverty. This of course is just part of their disingenuous playbook. All their claims that the public sector is overpaid is part of the same campaign, they always neglect to mention the private sector is paid more here as well. I will grant that such a tax should have been implemented (or some other less regressive tax) long ago, probably in the Getty years.

Title: Alberta doesn’t send the most money to Ottawa

Article:

Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province.
So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province

Kim, why do you do this? Why do you have to play mental gymnastics?

Serious error in the article, most likely an intentional one. The true difference is how much total Federal tax collected and sent to Ottawa vs how much Ottawa returns in transfers. In Alberta’s case Ottawa nets about 21 to $28 billion yearly from Alberta. Compare this to Quebec which receives most of it’s tax sent to Ottawa back in various transfers PLUS $13 billion in Equalization transfers yearly. Thus being a negative contributor to Canada. Your semantics and math are very deceiving and manipulated. Sad piece of propaganda. Shameful you’re from Alberta.

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