Debunking the Myth of Quebec and Equalization Payments

Debunking the Myth of Quebec and Equalization Payments

by Lucky James

Which way does the money really flow?

Which way does the money really flow?

I was talking with a friend lately about equalization payments and I realized that people still believe Quebec is basically taking money from the west for itself. In fact, I decided to Google it and apparently, publications like the National Post, the Toronto Sun, the Globe and Mail and the Montreal Gazette, still perpetuate the myth that Quebec’s social services are financed by other provinces. In fact, I see people claiming that “Quebec should not complain about Alberta’s tar sands politics because it’s those politics which allow Quebec to have its social services.”

This could not be further from the truth, and I’ll explain why through three points.

First of all, equalization payments only represent part of the federal transfers each province receives. Every province receives money from the federal government (yes, even you Alberta), and equalization payments are only part of it. If you look at federal transfers as a whole and consider how much they contribute to each province and territory’s total budget, Quebec is barely above average. It’s middle of the road. Federal transfers account for 25% of Quebec’s budget, but they account for 22% of Ontario’s, as an example. Yes, federal funds contribute comparatively less to Alberta (where they represent only 15% of the provincial budget), but we’re already a far cry from the “Prairies are giving their money to Quebec” story we’re constantly told by eager pundits.

Second of all, you have to understand that equalization payments don’t simply take money from one place and put it somewhere else. That’s absurd. What happens is each province and each territory sends money, which is then redistributed according to which place needs money. If you take into account how much money each province contributes to equalization payments, you’ll find out that Quebec breaks even. What it receives from equalization payments is basically its contribution to them. This also means that yes, despite being painted as a “receiving” province, Ontario is actually a “giving” one, as it receives far less than it contributes. The truly “receiving” places are the three territories, Manitoba, Nova Scotia, Prince Edward Island and New Brunswick. Quebec is a “break even” province and has been since equalization payments first appeared.

Finally, equalization payments represent only a fraction of Quebec’s budget. If Quebec relied on handouts from Alberta’s tar sands to finance its social services, it would collapse after about a week. The reason Quebec has more social services isn’t because of federal government handouts, but because the provincial government collects more taxes. We have higher taxes on income. We have a provincial sales tax. We have a bunch of things like that which in turn allow us to have more social services.

In conclusion, equalization payments are a political scarecrow which people who love Quebec bashing will put up to scare people. It’s also a great example of how you can manipulate numbers to make things appear different than what they are. If you want to read a bit more, Claude Picher explained this very well in these two articles:

These are in French, as it is difficult to obtain a proper analysis of the question from English publications. However, for further reading in the English language, I recommend visiting this blog, which also explores other old Canadian political myths. In the end, what you must remember is that though Quebec has its financial and economic woes, they are not as dramatic as some might think, and the myth that the province is both sucking the rest of the country dry with equalization payments and entirely reliant on them for its budget does not resist careful scrutiny.

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By Lucky James, contributor

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Other articles:
Anglos Away: The Myth of Tolerance
Stealth Snowmobiles Can’t Defend the North – And Should Be Expected To
Money Talks – Immigration through Québec’s Investor Program

Categories: Opinion

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