Sunday, May 07, 2006

Fiscal Imbalance?

I am trying to understand Ontario's complaint about the fiscal imbalance. As I understand it, Ontario sends 23Billion more in taxes to Ottawa than it receives in services from Ottawa.

I am not sure if giving more money to Ontario is the right way to correct this.

In my mind, the right thing to do is to have the federal government concentrate on areas of its jurisdiction, determine how much revenue it needs to do the things it is supposed to, set the tax rates and duties accordingly and then deliver the federal services we need. If some of those services go to other provinces, then we have to trust our federal representatives that this is the most effective way to deliver the federal obligations.

The problem with defining the benefits of federalism as "dollars in (to the federal govt) from province A vs dollars out (from the federales) to province A" is that it would suggest that the federal requirements of each province are identical.

I do understand the Ontario government's concern when put in the context of federal intrusions into provincial jurisdictions. Then you can make an argument for more money since the feds are spending money on these areas outside their jurisdiction and if it is not just for getting votes, then everyone should get the same amount (per person). However, if I was making this argument to the current government, I would be very careful, because I am tempted to beleive the Mr. Harper's response will be more along the lines of "you are right, the feds shouldn't even be funding this or that" and pull out all together, leaving everyone scrambling for alternatives.

The real politic being what it is, this is unlikely to happen. My guess is that an agreement for more money and less federal intrusion will be the result of the meeting in the fall with one caveat, and Ontario will get more, but still be short-changed. And when Mr. McGuinty cries foul, the response will simply be "See, the rest of Canada, Ontario is never satisfied, it is never enough."


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