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  • CCPA's National Office has moved! May 11, 2018
      The week of May 1st, the Canadian Centre for Policy Alternatives' National Office moved to 141 Laurier Ave W, Suite 1000, Ottawa ON, K1P 5J2. Please note that our phone, fax and general e-mail will remain the same: Telephone: 613-563-1341 | Fax: 613-233-1458 | Email: ccpa@policyalternatives.ca  
    Canadian Centre for Policy Alternatives
  • What are Canada’s energy options in a carbon-constrained world? May 1, 2018
    Canada faces some very difficult choices in maintaining energy security while meeting emissions reduction targets.  A new study by veteran earth scientist David Hughes—published through the Corporate Mapping Project, the Canadian Centre for Policy Alternatives and the Parkland Institute—is a comprehensive assessment of Canada’s energy systems in light of the need to maintain energy security and […]
    Canadian Centre for Policy Alternatives
  • The 2018 Living Wage for Metro Vancouver April 25, 2018
    The cost of raising a family in British Columbia increased slightly from 2017 to 2018. A $20.91 hourly wage is needed to cover the costs of raising a family in Metro Vancouver, up from $20.61 per hour in 2017 due to soaring housing costs. This is the hourly wage that two working parents with two young children […]
    Canadian Centre for Policy Alternatives
  • Mobility pricing must be fair and equitable for all April 12, 2018
    As Metro Vancouver’s population has grown, so have its traffic congestion problems. Whether it’s a long wait to cross a bridge or get on a bus, everyone can relate to the additional time and stress caused by a transportation system under strain. Mobility pricing is seen as a solution to Metro Vancouver’s transportation challenges with […]
    Canadian Centre for Policy Alternatives
  • 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
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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?

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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