Ending the Alberta transfer gravy train would add new dimension to pipeline wars

The debate over pipelines has surfaced some ugly Alberta bashing in recent years, but a new counterpoint is getting increasing traction in the province — no pipelines, no Alberta gravy train to fund federal programs in the rest of the country.

Alberta opposition politicians like Brian Jean are all over this, and if members of his Wildrose Party and of the Progressive Conservatives vote to support a union July 22 to create the United Conservative Party, increasing their chances of unseating the NDP in the next provincial election, expect an escalation of demands to end what is seen as an unfair transfer of wealth from Alberta to the rest of the federation, particularly Quebec, without receiving corresponding benefits along with plenty of blame for oil and gas related environmental impacts.

Jean is seeking a meeting to discuss “equalization fairness” with Prime Minister Justin Trudeau during a visit to Calgary Saturday for the Stampede. He said in a statement the program has been “ripping off Albertans for years” and needs to be redone.

Indeed, because it is based on a formula that uses a three-year average that begins with a two-year lag to assess a province’s fiscal capacity, Alberta is continuing to ship billions to Ottawa despite struggling with low oil prices, high unemployment and mounting provincial deficits.

Meanwhile, provinces like Quebec and British Columbia remain adamantly opposed to pipelines from Alberta, claiming the risks to them outweigh the benefits.

In a new study made public Thursday, the Fraser Institute’s Steve Lafleur, Ben Eisen and Milagros Palacios take stock of Alberta’s outsized contribution to federal revenue, GDP growth, job creation and business capital formation relative to its population.

Albertans have been contributing disproportionately to federal revenue because of their higher income levels

Indeed, they say the extent to which a single province of 4.4 million people is contributing to Canada’s strong fiscal performance is not widely appreciated, and much of it has to do with its energy sector.

Between 2007 and 2015, Albertans paid $188.6 billions more in federal taxes than they received in transfers and federal programs and if Canada Pension Plan contributions and payments are also taken into account, Alberta’s net contribution during that period was $221.4 billion, the authors say. Without such contributions, the federal government would have run much larger deficits during and after the 2008/2009 recession and since then would not have come close to balancing its budget, the authors say.

Between 2004 and 2014, 32 per cent of all gross fixed capital formation in Canada occurred in Alberta, the study says.

Over the same period, Alberta’s economy created a greater proportion of Canadian private sector jobs (32.5 per cent) than did any other province, despite having just over a quarter of Ontario’s population and half of Quebec’s population.

“There is a popular narrative that says that Canada survived the 2008/2009 recession better, and thrived in the post-recession years to a greater extent than the United States,” the authors say. “This story is only accurate thanks to Alberta’s strong performance.”

Albertans have been contributing disproportionately to federal revenue because of their higher income levels — in 2015 for example, Albertans paid about 63 per cent more in federal tax dollars than did other Canadians.

Meanwhile, Alberta has not qualified for equalization payments from Ottawa since the 1950s.

The transfer of wealth has benefitted provinces like P.E.I., which received $3.5 billion between 2008/2009 and 2017/2018; Ontario, which received $18 billion over the same period; Quebec, which cashed in the biggest with $87.9 billion in transfers over the same period, the study says.

The authors argue that it would be in the self-interest of other governments not to pursue policy choices that limit Alberta’s growth prospects, including pipeline obstructionism or further increases of federal taxes which would disproportionately hit Albertans and further undermine Alberta’s tax competitiveness. They also call for a re-examination of the system of federal transfers, which is due for a review by 2019.

With unrest over transfer payments also brewing in Saskatchewan, where Premier Brad Wall has slammed opponents of the proposed Energy East oil pipeline, arguing the project would get approved quickly in Central Canada if equalization payments flowed through it — the pipeline debate looks poised to enter a new phase.

So far, pipeline holdouts had little to lose, and could even count on richer federal government and corporate handouts by continuing to say no, as we have seen in British Columbia with the Trans Mountain pipeline expansion. A reduction in transfer payments would hit them in their pocketbooks and spread the costs of pipeline obstructionism across the federation.



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