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  • 2019 Federal Budget Analysis February 27, 2019
    Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis  Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Organizational Responses Canadian Centre for Policy […]
    Canadian Centre for Policy Alternatives
  • Boots Riley in Winnipeg May 11 February 22, 2019
    Founder of the political Hip-Hop group The Coup, Boots Riley is a musician, rapper, writer and activist, whose feature film directorial and screenwriting debut — 2018’s celebrated Sorry to Bother You — received the award for Best First Feature at the 2019 Independent Spirit Awards (amongst several other accolades and recognitions). "[A] reflection of the […]
    Canadian Centre for Policy Alternatives
  • CCPA-BC welcomes Emira Mears as new Associate Director February 11, 2019
    This week the Canadian Centre for Policy Alternatives – BC Office is pleased to welcome Emira Mears to our staff team as our newly appointed Associate Director. Emira is an accomplished communications professional, digital strategist and entrepreneur. Through her former company Raised Eyebrow, she has had the opportunity to work with many organizations in the […]
    Canadian Centre for Policy Alternatives
  • Study explores media coverage of pipeline controversies December 14, 2018
    Supporters of fossil fuel infrastructure projects position themselves as friends of working people, framing climate action as antithetical to the more immediately pressing need to protect oil and gas workers’ livelihoods. And as the latest report from the CCPA-BC and Corporate Mapping Project confirms, this framing has become dominant across the media landscape. Focusing on pipeline […]
    Canadian Centre for Policy Alternatives
  • Study highlights ‘uncomfortable truth’ about racism in the job market December 12, 2018
    "Racialized workers in Ontario are significantly more likely to be concentrated in low-wage jobs and face persistent unemployment and earnings gaps compared to white employees — pointing to the “uncomfortable truth” about racism in the job market, according to a new study." Read the Toronto Star's coverage of our updated colour-coded labour market report, released […]
    Canadian Centre for Policy Alternatives
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The Progressive Economics Forum

Ontario Budget: Federal-Provincial Relations

My post on the night after Ontario’s budget hit the key features. However, the budget had a couple of other interesting aspects from a federal-provincial perspective.

Childcare Funding

Some progressive voices trumpeted the provincial budget’s allocation of $63.5 million annually to replace discontinued federal funding for childcare spaces. While the Ontario government finally made the right decision on this file, it got way too much credit.

First, $63.5 million is only 0.05% of annual provincial expenditures. This funding hardly represents a major commitment to public childcare.

Second, provincial income taxes apply to the tax base defined by the federal government. Because the last federal budget slightly broadened this base by closing some tax loopholes, Ontario’s government will automatically collect an additional $81 million annually. (See Table 3 on page 167 of the provincial budget.)

Taken together, these two federal policies reduced provincial transfer revenue by $63.5 million but increased provincial tax revenue by $81 million. Should we really applaud Queen’s Park for using three-quarters of its windfall tax revenue to replace the lost transfer revenue?

Equalization

Only a couple of years ago, Premier McGuinty was obnoxiously demanding that Equalization be abolished. But his government’s recent budget confirms that Ontario will actually receive a billion dollars of Equalization transfers this fiscal year. So, had the federal government followed McGuinty’s advice, Ontario’s deficit would now be a billion dollars larger.

McGuinty’s likely retort would be that Ontario stills pays more into Equalization than it gets out. The federal government spends $14 billion annually on Equalization and collects about 40% of its revenue in Ontario. In that sense, the province pays $5.6 billion into Equalization.

However, none of that money comes from the Government of Ontario. The province’s only “contribution” is that residents pay the same federal tax rates as all other Canadians.

In theory, if the federal government eliminated Equalization and cut federal taxes by a corresponding amount (e.g. another two points off the GST), the Ontario government could increase provincial revenues by occupying the tax room. But Ottawa has already slashed its taxes by more than that amount and Ontario has not occupied the tax room.

Since Queen’s Park is unwilling to raise provincial taxes, the only effect of scrapping Equalization would be to reduce Ontario’s provincial revenues by a billion dollars. Fortunately, the federal government ignored McGuinty’s recent demand to do that.

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