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  • CCPA in Europe for CETA speaking tour October 17, 2017
    On September 21, Canada and the European Union announced that the Comprehensive Economic and Trade Agreement (CETA), a controversial NAFTA-plus free trade deal initiated by the Harper government and signed by Prime Minister Trudeau in 2016, was now provisionally in force. In Europe, however, more than 20 countries have yet to officially ratify the deal, […]
    Canadian Centre for Policy Alternatives
  • Twelve year study of an inner-city neighbourhood October 12, 2017
    What does twelve years of community organizing look like for a North End Winnipeg neighbourhood?  Jessica Leigh survey's those years with the Dufferin community from a community development lens.  Read full report.
    Canadian Centre for Policy Alternatives
  • Losing your ID - even harder to recover when you have limited resources! October 10, 2017
    Ellen Smirl researched the barriers experienced by low-income Manitobans when faced with trying to replace lost, stolen, or never aquired idenfication forms. Read full report here.  
    Canadian Centre for Policy Alternatives
  • CCPA recommendations for a better North American trade model October 6, 2017
    The all-party House of Commons trade committee is consulting Canadians on their priorities for bilateral and trilateral North American trade in light of the current renegotiation of NAFTA. In the CCPA’s submission to this process, Scott Sinclair, Stuart Trew, and Hadrian Mertins-Kirkwood argue for a different kind of trading relationship that is inclusive, transformative, and […]
    Canadian Centre for Policy Alternatives
  • Ontario’s fair wage policy needs to be refreshed September 28, 2017
    The Ontario government is consulting on ways to modernize the province’s fair wage policy, which sets standards for wages and working conditions for government contract workers such as building cleaners, security guards, building trades and construction workers. The fair wage policy hasn’t been updated since 1995, but the labour market has changed dramatically since then. […]
    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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