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  • Budget 2018: The Most Disappointing Budget Ever March 14, 2018
    Premier Pallister’s Trump-esque statement that budget 2018 was going to be the “best budget ever” has fallen a bit flat. Instead of a bold plan to deal with climate change, poverty and our crumbling infrastructure, we are presented with two alarmist scenarios to justify further tax cuts and a lack of decisive action: the recent […]
    Canadian Centre for Policy Alternatives
  • 2018 Federal Budget Analysis February 14, 2018
    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 Some baby steps for dad and big steps forward for women, by Kate McInturff (CCPA) An ambition constrained budget, by David Macdonald (CCPA) Five things […]
    Canadian Centre for Policy Alternatives
  • CED in Manitoba - The Video January 29, 2018
    Community Economic Development in Manitoba - nudging capitalism out of the way?
    Canadian Centre for Policy Alternatives
  • With regional management BC’s iconic forest industry can benefit British Columbians rather than multinational corporations January 17, 2018
    Forests are one of the iconic symbols of British Columbia, and successive governments and companies operating here have largely focussed on the cheap, commodity lumber business that benefits industry. Former provincial forestry minister Bob Williams, who has been involved with the industry for five decades, proposes regional management of this valuable natural resource to benefit […]
    Canadian Centre for Policy Alternatives
  • Community Economic Development in Manitoba - a new film January 16, 2018
    Cinameteque, Jan 23.  7:00 pm - Free event Film Trailer CCEDNET-MB, CCPA-MB, The Manitoba Research Alliance and Rebel Sky Media presents: The Inclusive Economy:  Stories of Community Economic Development in Manitoba
    Canadian Centre for Policy Alternatives
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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?


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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