Jack Mintz: Canadians have taken Alberta for granted. That’s dangerous for us all

No other province has contributed so much wealth to the rest of Canada

Premier Rachel Notley mandated a cut to oil production of 325,000 barrels per day in a bid to reduce a glut in storage and ease a massive price differential for western Canadian oil.Larry Wong/Postmedia

Six-hundred and eleven billion dollars and counting. That is how much Albertans have paid to the rest of Canada in net federal fiscal transfers from 1961 to 2017 — that is, federal taxes paid by Albertans net of federal spending in Alberta (all numbers in 2017 dollars).

In a presentation last week in Calgary, Tim Hearn and Robert Mansell of the University of Calgary’s School of Public Policy also noted that in just the past eight years alone, since 2010, Albertans have paid $180 billion in net fiscal transfers, more than any other province.

Just think about that. In 57 years, Albertans have paid almost as much in transfers to the rest of the country as the total of our entire federal debt today. It’s a transfer averaging $3,674 per Albertan every year. Over 57 years, it totals $209,418 per Albertan.

No other province has contributed so much to the rest of Canada via federal taxes and spending. Ontario has a population three-and-half times larger than Alberta, but it only transferred $45 billion to the rest of the country since 2010, just a quarter of Alberta’s handover. (Going back to 1961, Ontarians contributed the largest amount, $722 billion in the 57 years up to 2017, but not the largest per capita).

So who gained the most from Albertans’ money? Quebec got the largest chunk, obviously, with $476 billion dollars in net federal fiscal transfers or $1,172 per Quebecer since 1961. It takes the lion’s share of transfers from all the provinces.

But a host of other, much smaller, provinces have also been raking in big money transfers from Confederation since 1961: Nova Scotia, $306 billion, or an average of $6,034 in extra money per resident per year; New Brunswick, $203 billion or an average extra $4,909 per year, per resident; Manitoba, $175 billion, or $2,712 per resident bonus every year; Newfoundland, $172 billion, or $5,501 per resident per year.

But on a per capita basis, the biggest winner has been Prince Edward Island. With a population barely even half that of Regina, P.E.I. has over 57 years collected an average of $8,478 for every Islander, furnished by other provinces. A good chunk of it, of course, from Alberta.

Now, Albertans know they have been graced with natural resources that have contributed to their wealth. And Canadians outside Alberta routinely use that fact to rationalize why they think it’s only fair, therefore, that Alberta should be made to share its wealth. But that’s not the whole story. And Albertans know it.

Plenty of jurisdictions around the world have rich oil and gas deposits but have done a poor job growing their economies. Just look at the slow-motion trainwreck of human misery unfolding right now in Venezuela. Oil-rich Nigeria continues to disappoint. There are no shortage of places blessed with oil; it takes more than that to build wealth.

… because of Alberta’s skills, efforts and ingenuity, other parts of Canada have done better as well.

Albertans aren’t accidental oil barons, like the Beverly Hillbillies. They’re first-class entrepreneurs. They have extracted oil from muck and from rock. The economy has also become much more diversified in the past four decades with strong agriculture, forest and service sectors. Albertans have a good track record of managing a strong economy, scoring highest amongst provinces on the human development index in 2015. They have had growth-oriented governments to keep taxes low and attract investment to all sectors of the economy. They have also run one of the best school systems in Canada, until recently earning top rankings internationally.

And because of Alberta’s skills, efforts and ingenuity, other parts of Canada have done better as well. Albertans have always accepted that Confederation requires them to contribute more to the rest of the country, and they have generally been good-natured about it. However, things dramatically changed after the commodity bust in late 2014. Per capita incomes in the province have fallen a staggering seven per cent. A province that once attracted workers from other provinces and abroad has, since 2014, suffered a net outflow of 31,000 people (about a fifth of P.E.I.’s total population). A province that was once a magnet for capital has seen non-residential investment dry up by 39 per cent since 2014.

What Albertans haven’t seen since 2014 is much support from the rest of the country that benefited so long and so richly from Alberta’s work and money over the decades. B.C. and Quebec are doing whatever they can to block pipelines that Alberta badly needs for exports, thus deliberately working to landlock Alberta’s energy sector. The Alberta government recently had to forcibly order cutbacks in production because of the growing glut of unmovable oil. This, even though a majority of Canadians support more pipeline infrastructure.

The federal government, meanwhile, has provided a federal takeover of the so-far moribund Trans Mountain pipeline expansion, but that only addresses current capacity, not future needs. At the same time, however, it is bearing down on the sector with a new regulatory regime, carbon policies and tanker bans that could scare off future pipelines and hamper Alberta’s competitiveness.

Ottawa also seems entirely unresponsive to suggestions of improving the federal transfer system so that beleaguered Alberta might be taken from a little bit less. Just recently, in fact, the federal government quietly renewed the old, out-of-date equalization program, which will now pour another $1.4 billion into Quebec from federal coffers next year. Again, financed disproportionately by Albertans.

Ottawa seems entirely unresponsive to suggestions of improving the federal transfer system

And yet, as Hearn and Mansell pointed out, what Albertans don’t realize is that their share of federal equalization costs are just a minor part of their contribution to the rest of Canada. Equalization and stabilization transfers account for only seven per cent of all the net federal fiscal transfers Alberta sends to the rest of the country. The biggest source of transfers is simply the federal personal income taxes collected from Alberta that fund federal revenues to spend all over the country, both inside and outside of the equalization program. For the period 2007–16, that accounts for one-third of the money taken from Albertans and sprinkled across the country.

That’s not entirely surprising: Canada’s progressive income tax system comes with higher marginal tax rates (higher rates are charged on dollars earned beyond higher thresholds). Albertans tend to have higher incomes than elsewhere, so they pay more per capita federal tax than other Canadians. But, think about this: Who chooses how progressive the tax system should be? Not Albertans, who — as provincial policies show — tend to vote for flatter taxes to encourage growth and attract skilled labour. (The Alberta NDP, who are expected to lose the next election, raised taxes on higher income Albertans in 2015, but it’s still below most other provinces.) Instead, it is other parts of Canada out-voting Alberta for more redistribution, resulting in more Alberta transfers to the rest of Canada.

Other larger components of Alberta’s transfers include the net outflow of money in federal corporate income tax (about one-sixth of Alberta’s net transfers) and CPP contributions, net of benefits. Albertans also pay a larger share of the country’s GST and employment insurance, while getting less government spending than other provinces, on average, for federal defence and non-defence contracts.

Over the years, Alberta’s fiscal transfers have provided much of the glue that bound a wobbly Canada together. But Albertans can’t be blamed for noticing that it seems today that the rest of the country doesn’t value helping Alberta nearly as much as Alberta has valued helping Canada. Canadian federalism is hurting and the cure is not going to be more suffering for Alberta, but finding new ways to help it. Now that’s an issue to fight an election over.

Jack Mintz is the president’s fellow at the University of Calgary’s School of Public Policy.

Source: https://business.financialpost.com/opinion/jack-mintz-canadians-have-taken-alberta-for-granted-thats-dangerous-for-us-all?fbclid=IwAR3wUwUBBlrtfh-E5oS7cLvEY-91WKVEx0XFEtsMzP-0kWK08pj2TUXFWeA

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