I recently spoke about how people perpetuate this myth that Alberta sends too much money to Ottawa.
In response, I had a few people comment saying that I was misunderstanding, that the real issue is that Alberta doesn’t get enough back. This is particularly the case if you compare how much revenue the federal government generates within Alberta and how much it spends in Alberta.
And it’s true.
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At $6,642 per person, Alberta did receive less per capita from the federal government in 2017 than any other province. That amount was $1,766 less per person than the national average.
So the counter argument to the idea that Alberta gets too little from the feds shouldn’t be, “No, it doesn’t.” The counter argument should be why it gets so little.
Federal expenditures in the provinces fall under 5 main categories:
- Net expenditures on goods and services
- Transfers to persons
- Transfers to provincial governments
- Debt servicing
Debt servicing costs, on a per capita basis, is the same for every province, so I won’t address that in this post. “Other” expenses include business subsidies, transfers to non‑residents, and certain payments to local governments; however, they make up less than 5% of the federal expense budget, so I won’t address that either.
Which leaves the other three.
Net expenditures on goods and services
First, the federal government does indeed spend less per capita on goods and services in Alberta than it does in any other province.
These goods and services generally include such things as:
- Public servant salaries
- Day-to-day operation of government departments
- Military installations and operations
- Purchasing of supplies and materials for all these endeavours
So the reason that the federal government spends less per capita on goods and services in Alberta is that it operates fewer federal institutions per capita in Alberta. Or it pays workers in those institutions less. But the latter seems unlikely, since Alberta has the highest median income in the country.
And with the Fair Deal Panel report recommending advocating for more federal services in Alberta, this number potentially could rise. That being said, if the UCP succeeds in replacing some federal services with provincial ones (firearms office, CPP, provincial police, provincial tax agency, etc), it may drop this number even more.
Transfers to persons
Second, Alberta is also lowest per capita in federal transfers to persons, which includes things such as Employment Insurance, Canada Pension Plan, and Old Age Security.
As I mentioned, Alberta has the highest median income in the country. That means there will be fewer people claiming EI compared to other provinces. It also has the lowest median age, so fewer people will be receiving CPP and OAS payments.
Transfers to provincial governments
The third expense category is the federal transfer programmes, which includes equalization payments, federal health transfers, and federal social transfers.
Alberta isn’t the lowest per capita in this area. BC and Ontario are actually both lower than Alberta. Granted, Alberta is still below the national average. Obviously, Alberta doesn’t get equalization payments, so that will reduce the amount they receive in this area.
In 2017, Alberta had the highest GDP per capita, as well as the highest incomes. That means they should have the fiscal capacity to generate enough revenue through personal and corporate income taxes, and through other taxation—such as a sales tax—to cover provincial expenditures without needing to be subsidized through federal equalization payments. And that’s not even including royalty revenue as compared to other provinces.
So, there you have it.
Alberta receives so little from the federal government than other provinces because we have fewer federal services in Alberta, we have higher incomes, we have a younger population, and we have the fiscal capacity to generate sufficient provincial revenue.