Within the realm of Canadian federalism, one of the core principles is the idea of equality between the provinces, particularly when it comes to social programs and services. As a Canadian, there are certain things we all hold dear, many of which are social programs like universal health care, and a social safety net. However, as good as this might sound in practice, the nature of the Canadian federation, which is comprised of ten provinces and three territories, makes it hard to provide equal access to these programs when the different units of the federation have different fiscal circumstances. For this reason, equalization payments have long been used as a tool by the federal government to rectify the fiscal imbalance that exists between the different units of the federation (the provinces and territories). This program is meant to address the "horizontal fiscal imbalance" that exists between the provinces (the territories do not fall under the scope of the equalization program, but are dealt with using the Territorial Formula Financing program).
[...] Wilson. The 2006 Federal Budget. Montreal & Kington: McGill- Queen's University Press. Gorbet, F. (2007). Fiscal Imbalance and Equalization: Possible End Games. In. C. M. Beach, M. Smart., T.A. Wilson. The 2006 Federal Budget. [...]
[...] Education and social assistance are two of the primary categories that this equalization program applies to. It is a way for citizens in these provinces to get the minimum level of social services, without being disproportionately taxed in relation to others in Canada. When examining the issue, there are said to be two ways in which fiscal imbalances can arise within the Canadian federation. (McCready, 1984). The vertical imbalance is important because it refers to the fiscal imbalance that exists between the various levels of government, in Canada's case this refers to the imbalance between the federal and provincial governments. [...]
[...] In response, the federal government, in cooperation with Nova Scotia and Newfoundland and Labrador entered into a new agreement which provided for a cap on the level of equalization payments if their oil industry reached a predetermined level. (Alain, 2007). Clearly the issue of equalization payments is not a simple one, as it will always involve competing interests. However, to abolish the system altogether would not be feasible as it would risk a dramatic change to the social fabric that Canadians hold so dear, and the social fabric that is arguably the essence of Canada and to some extent its culture. [...]
[...] The issue of how the payments should be calculated directly relates to its performance, legitimacy and effectiveness, and has been a point of contention since the equalization program was officially introduced in 1957. In 1982, the federal government decided to remove the provinces that skewed the calculations, so it removed Alberta and the provinces from the calculation of the provincial average. It then became based on the average taxing abilities of those provinces that receive a middle-level of tax, including: British Columbia, Ontario, Saskatchewan, Manitoba and Quebec. [...]
[...] As far as the performance, effectiveness and legitimacy of these programs are concerned, it can be said, after the examination in this paper, that equalization payments in Canada are effective and legitimate. They are effective because they set out to do what they are intended to do, that is level the playing field when it comes to the provision of social services across the various provinces that make up Canada's federal system. They are also legitimate because the essence of Canada is very much based on the social services and programs that are thought of and considered as a right in this country, and to be Canadian is to be Canadian regardless of whether that means living in Nova Scotia or Calgary. [...]
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