Fiscal Federalism In Canada

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

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

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