There’s a new group called Fairness Alberta making the media rounds recently. They claim that Alberta has been getting the economic shaft from the rest of Canada, particularly regarding the equalization programme. They’re spreading the same right-wing misinformation I see others spreading, so I thought I’d set the record straight on the issue.
Equalization is a federal transfer payment program designed to reduce differences in revenue-generating capacity between provinces.
By compensating poorer provinces for their relatively weak tax bases or resource endowments—such as smaller or poor populations and few natural resources—equalization ensures that all provinces can provide a reasonably similar level of services at reasonably similar levels of taxation, regardless of which province they call home.
Without it, some provinces would have to charge much higher tax rates than others just to provide the same level of government services.
The programme is financed exclusively through federal revenues, such as personal income tax, corporate income tax, and GST. Provincial governments do not pay anything into the equalization programme.
The idea that Alberta has contributed more than any other province is a complete myth. Alberta, as a government, has never contributed to the equalization programme.
All Canadian individuals and corporations pay taxes—theoretically speaking—and that’s where the money for the programme comes from. Income tax rates and GST rates are the same across the country; no one pays a higher rate just because of where they live.
GST for Canadians living in Alberta is 5%, but it’s also 5% for Canadians living in Québec. And PEI, and Saskatchewan, and everywhere else.
Likewise, income tax rates are the same, regardless of where you live. If you make $45,000 a year living in Alberta, you pay 15% in federal income tax, but you pay 15% if you make $45,000 in Québec. If you make $500,000 a year living in Alberta, you pay 33% in federal income tax, but you pay 33% if you make $500,000 in Québec, too.
Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province. Take a look at this graph, which shows federal revenues and expenditures by province for 2017.
Clearly, Canada doesn’t receive more revenue from any other area of the country than it does from persons and corporations within Alberta.
That being said, Canada gets roughly 15% of its revenue from people and corporations within Alberta. People and corporations in all the other provinces collectively contribute nearly 85% of Canada‘s revenue. So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province, they’re not keeping the programme afloat on their own.
Now let’s look at where that money comes from.
More than half of the federal revenue that comes from within Alberta is personal income tax. Corporate income tax makes up roughly 16% of the federal revenue collected. GST and “other revenue” each make up around 11%, and contributions to social insurance plans make up about 5.5%.
Now, keep in mind that the numbers in the first chart are per capita amounts. That means that Canada isn’t receiving more money from persons and corporations within Alberta because their population is the highest in Canada. We also know that it’s not because Canada charges Alberta persons and corporations higher tax rates.
So why the higher per capita amount then?
Well, if the population isn’t higher and the tax rates are the same as they are everywhere else, then the only explanation is that those paying the taxes are making or spending more than others.
For example, someone making $250,000 a year, will theoretically pay $61,403.56 in personal income tax. Someone who makes $500,000, however, will pay $143,903.56 in personal income tax. Even though both are taxed at 33%, the person paying the most is also making the most.
Likewise, someone buying a $10,000 car will pay $500 in GST, while someone buying a $100,000 car will pay $5,000 in GST. Even though both are taxed at 5%, the person paying the most is also spending the most.
In 2017, Canada collected—on average—$6,636 per person in income tax from people living in Alberta. That’s higher than the per-person rate in any other province. That means, on average, people in Alberta had higher incomes in 2017.
Alberta corporations paid the most in income tax, too, at $1,826 per capita. The next highest was Ontario, with $1,493 per capita. And since corporations are taxed the same rate across the country, Alberta corporations must have higher taxable incomes than corporations elsewhere in the country.
Same goes for GST. Canada collected $1,333 per capita in GST from within Alberta than it did from within any other province, which meant that Alberta persons and corporations spent $26,660 per person on taxable purchases in 2017. BC was the next highest at $24,540 per person.
So, why does Alberta “send more money to Ottawa” than any other province?
- People in Alberta have higher salaries.
- Corporations in Alberta have higher revenues.
- People and corporations in Alberta spend more money on taxable goods and services.
Remember that those higher salaries are an average. It doesn’t mean that you or I necessarily are making more than any particular person in Québec or Ontario. For example, in 2017, Alberta’s median income was $41,500, the highest in the country. Median income is the income where half of the group makes more than that income and half makes less than it.
If Alberta wants to lower how much they send to Ottawa, there’s a pretty easy solution: maybe they should lower corporate profits. Or reduce the wages of the wealthy.
And increasing worker wages is one way to accomplish both of those things.
31 replies on “Debunked: Alberta doesn’t send the most money to Ottawa”
hi
i found it interesting that the last person to assess the fairness of equalization was in fact Jason Kenney under the Harper administration and it did get an all a-okay in the realm.
My response to the “we send $ more lets quit” argument is: now may be the wrong time as with the cons continuing we Albertans may soon need it
The last thing Alberta needs is no transfer payments from the feds.
[…] the value of the things that are taxed are higher or there are more of them to tax. In other words, Alberta pays more because incomes are higher, corporate revenues are higher, and sales are higher (either in price, quantity, or […]
Mr. Siever’s column contains a serious error. He confuses PER CAPITA and TOTAL revenues and expenditures.
Mr. Siever subsequently corrects this error, but too late. A needlessly confusing presentation.
“Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province. Take a look at this graph, which shows federal revenues and expenditures by province for 2017.
“Clearly, Canada doesn’t receive more revenue from any other area of the country than it does from persons and corporations within Alberta.”
Mr. Siever omits the graph title, clearly indicated on the Federal Govt’s website: “Figure 2 ‒ Federal Revenues and Expenditures by Province, 2017 (in dollars per capita)”
PER CAPITA!
Per capita revenues and expenditures is not the same thing as TOTAL revenues and expenditures.
Siever: “That being said, Canada gets roughly 15% of its revenue from people and corporations within Alberta. People and corporations in all the other provinces collectively contribute nearly 85% of Canada‘s revenue.”
Correct.
Sievers: “So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province, they’re not keeping the programme afloat on their own.”
Incorrect. Again, the confusion between per capita and total.
Sievers corrects himself several paragraphs later, but far too late. The damage is done.
Sievers: “Now, keep in mind that the numbers in the first chart are per capita amounts.”
Albertans pay more federal taxes per capita because they have the highest per capita (i.e., average) income.
With the highest average income among provinces, AB taxpayers contribute the most per capita to federal coffers, but only 14% in total.
In 2019-20 AB taxpayers contributed 14% of federal revenues = 14% of funds for equalization. 14 cents on the equalization dollar.
Ontario and Quebec taxpayers contribute 60% of federal revenues, which fund equalization. Ontario taxpayers alone contribute c 41% of federal revenues. BC taxpayers 14%.
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The biggest GROSS and NET contributors to federal revenues and to equalization are wealthy taxpayers and profitable companies — wherever they reside. Some live in AB; most do not.
Every millionaire in Ontario, Quebec, and elsewhere is a net contributor. And more millionaires and profitable corporations reside in Ontario and Quebec than in AB.
Most wealthy Canadians live outside AB. Most GDP and income is generated outside AB. Most tax dollars flow from outside AB. Most of the funds for equalization derive outside AB.
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No one denies that Albertans have the highest average income. No one denies Alberta taxpayers contribute more per capita. Average, not total. Not the issue. The question is who contributes the most to federal revenues and equalization in total. UCP supporters cannot tell these two claims apart.
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A hypothetical province of a dozen billionaires would pay more per capita in federal taxes than they get back in federal programs and transfers, just like taxpayers in Alberta. Even so, the bulk of federal revenues, which fund equalization, flow from the more numerous wealthy taxpayers in the rest of the country.
There is an error in this otherwise good article. It is not as Mr.Pounder was suggesting, I was able to follow all of that in the original article. However, the description of median is wildly incorrect. MEDIAN is NOT the halfway point between the highest and lowest income, if it was the highest income possible would only be 82000. I suspect Sievers just stated it badly. Median is defined as the middle number in and ordered data set. More simply put 50% of incomes fall below the median (a lot of part time workers) 50% fall above the median. Median does nothing to describe the RANGE, which is the difference between the highest and lowest income. What Sievers describe would be akin to some sort of hi-low average, this is not in anyway the median. Median is a common term that a lot of people confuse with Average (mean). Income is almost always reported as the median because of the skew high incomes put on the mean.
Another thing that could have helped this article would be a concise description of the Equalization Formula for which I will direct people to Wikipedia, but suffice to say if Alberta taxed its citizens at the average rate that other provinces do we would not have a revenue problem and we would not need Equalization. The equalization formula is based on potential revenue a province can generate not actual revenue. That was put into place to prevent a province from eliminating taxation they saying to Ottawa “Look we’re poor”. Alberta has never taxed at a rate close to other provinces because we have never had a provincial sales tax. So Mr. Kenney and the United Clown Party are claiming we don’t get a fair deal when they are sitting on a potential pot of gold and claiming poverty. This of course is just part of their disingenuous playbook. All their claims that the public sector is overpaid is part of the same campaign, they always neglect to mention the private sector is paid more here as well. I will grant that such a tax should have been implemented (or some other less regressive tax) long ago, probably in the Getty years.
Title: Alberta doesn’t send the most money to Ottawa
Article:
Now, it’s true that Canada receives more income from people and corporations in Alberta than from any other single province.
So, while it’s sort of true that Alberta—or rather people and corporations within Alberta—pay more than any other province
Kim, why do you do this? Why do you have to play mental gymnastics?
It’s not me who does the mental gymnastics. It’s Alberta politicians. And right-wing media.
No pal, it’s incredibly obtuse and semantic.
Of course it’s semantic. Words mean something.
You’ve got a bunch of things wrong in here… but for starters…
Look up Alberta Tax Advantage
https://www.alberta.ca/alberta-tax-advantage
Albertans generally pay lower overall taxes than residents of
any other province.
https://open.alberta.ca/dataset/fe2a75b5-571b-4b44-8b04-66a6d81aaba4/resource/7f532f18-4416-4b40-b387-e7d03b43d6dd/download/budget-2023-fiscal-plan-2023-26.pdf#page=121
https://turbotax.intuit.ca/tips/alberta-tax-rates-and-the-most-popular-credits-deductions-programs-and-rebates-551
I’m not sure what these links are correcting. Can you clarify?
Serious error in the article, most likely an intentional one. The true difference is how much total Federal tax collected and sent to Ottawa vs how much Ottawa returns in transfers. In Alberta’s case Ottawa nets about 21 to $28 billion yearly from Alberta. Compare this to Quebec which receives most of it’s tax sent to Ottawa back in various transfers PLUS $13 billion in Equalization transfers yearly. Thus being a negative contributor to Canada. Your semantics and math are very deceiving and manipulated. Sad piece of propaganda. Shameful you’re from Alberta.
What’s the error?
[…] I mean, okay, but 85% of the revenue the federal government generates comes from outside Alberta. […]
[…] continues, Alberta may get its wish about not wanting to send so much to Ottawa, given that the money Ottawa gets from the provinces is based on wages and […]
Average wage for paying taxes for each province is not an accurate way of calculating contribution by a province unless you calculate where those wages are earned. Oil wealth pays wages across Canada, not just in Alberta. Figure out how much is earned for Canada by province, no matter where the wages are paid. How many of the highest wages in Ontario are actually created by Alberta resources? Same with Agriculture and other sectors of the economy.
What a great solution. If you don’t want to be a net contributor just make less money. Do you not see the issue with this statement? Part of the issue is a net receiver “Quebec” for instance has no real incentive to fully invest in resources and be more productive as a province. If they do they would lose some of their equalization payments. It is not much difference from what the cerb payments created. People didn’t have an incentive to find a job unless it covered more than they were already receiving. Another misused piece of legislation.
This is wildly incorrect now, can’t say if it was correct when written BUT, BC, Alta and the NWT pay the highest taxes. Possibly, even Quebec. BC and Alta haven’t received equalization payments in 15 yrs. The main focus is how much is made from resources. Quebec receives the most in payments yet they refuse to use their resources. It’s not that they don’t have either. It makes very little sense to me that if they’d could be a separate country and simply refuse to contribute to the rest of Canada via resources, That’s not right. The government is try to get rid of oil & gas in Alberta & until then cap their production. They also stopped Nova Scotia from off shore drilling stating that area was the governments. Nova Scotia now requires payments. The right thing to do is to be sure provinces are using their natural resources and then go from there.
BC, Alberta, and Northwest Territories pay the highest taxes? Doesn’t everyone have the same tax rate, regardless of where they live?
Be more specific to avoid confusion.
FEDERAL income tax is the same across all provinces
PROVINCIAL income tax is different across provinces
Of course. The article is specifically about federal taxes.
Good article. Everyone pays the same federal tax rate no matter what province they live in. Largely because Alberta has a massive supply of oil, their GDP and income per capita is the highest in Canada. Because of this, Alberta pays the most federal taxes per capita. Why is this unfair?
The federal government collects taxes at the same rate from every province and spends the money to meet the needs and priorities determined by the elected Government and Parliament. One of these priorities is to redistribute some of this revenue to provinces so that each can have somewhat comparable public services at somewhat similar tax rates and a somewhat similar standard of living. Why is this unfair?
I keep hearing the constant whining from the right in Alberta about how unfair they are being treated by the rest of Canada. I am from Ontario which has 16 million residents, represents 40% of the country’s GDP, and pays at least 40% of all federal taxes in total dollars. For most of confederation, Ontario has been the economic engine of Canada and has shared its wealth through federal taxes with other provinces including Alberta before its oil wealth was developed. And during my lifetime of almost 80 years, I have never once heard anyone I knew from Ontario complain about how we were being treated unfairly.
We should be proud that we live in a country that is willing to try to help our citizens have somewhat similar services and living standards no matter where they live. I certainly am.
Let’s keep things simple, why do you think AB has highest GDP per capita? You said it, O&G. Therefore higher average wage, more FEDERAL taxes collected. Still in agree? Good. Now tell me, what happens when you restrict the development of natural resources? Less investments? Less jobs? Layoffs? Reduced tax base?
This is where the issue starts with folks here. When the federal goverment wants to overstep its boundaries and control a provinces resources set by a mandate of eastern voters, that gets the folks aggravated here.
It’s not that we’re not wanting to share the wealth for the benefit of the country, but when ideology tactics are set in place to harm a province’s ability to prosper, than ya, expect an up roar.
Eric nailed it.
Robert- what is the ideology- “drill baby drill”, pollute, contaminate, ignore, repeat for another 100 years? Not progressive, sustainable, or logical. Uproar if you want, but maybe it’s Alberta that needs a new ideology.
Why transfer payments are failing Canada. Transfer payments in Canada were designed to promote equity across provinces, ensuring that all Canadians have access to similar levels of public services, regardless of where they live. But in practice, this system is failing the country as a whole. By constantly redistributing money from high performing provinces to those that are less dynamic, we risk incentivizing inefficiency, encouraging political complacency, and undermining national economic growth.
Penalizing success. When you consistently take money from a successful, productive economy like Alberta’s and send it to regions that have not developed the same level of economic dynamism, you’re not just redistributing wealth. You’re creating dependency. What starts out looking like generosity or national solidarity eventually erodes the incentive to innovate, reform, or grow. In effect, the nation takes a step backwards.
Transfer payments have become a tool for lazy, corrupt, or incompetent politicians to avoid making the hard decisions needed to improve their provinces. Rather than rewarding fiscal responsibility and growth, we are subsidizing stagnation. That’s not fairness it’s failure.
The problem with CPP. The CPP is another form of transfer that often flies under the radar. Provinces like Alberta, with higher incomes and costs of living, pay far more into the CPP than they get back. Meanwhile, provinces with lower wages and fewer contributors benefit disproportionately. Why should Albertans, who contribute more and face higher living costs, subsidize retirees elsewhere?
A matter of ideology. At its core, this debate is ideological. Do we believe the country is made stronger by helping underperforming regions through redistribution? Or do we believe it is made stronger when provinces are allowed to keep the wealth they generate and reinvest it locally?
Canadians are not trapped in their provinces mobility is a choice. Those seeking opportunity can move to where the economy is growing. That’s the beauty of a free country. But punishing provinces that succeed by redistributing their wealth weakens the whole nation.
The way forward…It’s time to rethink federal transfer payments. Every province that sends money to the federal government should receive back exactly what it paid in. Let’s stop supporting failure and start rewarding success. Let’s keep the money flowing where it’s made where it’s needed most to sustain growth, innovation, and prosperity.
Canada needs a system that encourages all provinces to grow, not one that props up the status quo. Ending transfer payments and reforming the CPP would be bold steps toward a stronger, more self reliant, and united Canada.
I think you are mistaking transfer payments for equalization payments. These are two different programmes.
Equalization (EQ) payments are a type of transfer payment.
EQ is one of the three main federal transfers to provincial governments.
The other two are the Canada Health Transfer (CHT) and the Canada Social Transfer (CST).
Not a complete list. There are others.
No, no, and no.
RA wrote: “By constantly redistributing money from high performing provinces to those that are less dynamic, we risk incentivizing inefficiency … ”
A misconception. Equalization does not redistribute money from high-performing provinces. Provinces do not pay federal tax. Tax dollars flow not from provinces per se, but from taxpayers and corporations. Wealthy taxpayers and profitable corporations contribute the bulk of federal revenues. Crucial difference.
Most wealthy taxpayers and profitable corporations reside outside Alberta.
Canada’s progressive tax system redistributes wealth from wealthy taxpayers and profitable corporations to less affluent households. Recipient governments in “have-not” provinces spend equalization dollars on programs and services that benefit the entire population.
Wealth redistribution from wealthy taxpayers to those less well-off is the fundamental feature of our progressive taxation system. No surprise that there is a net outflow from wealthy taxpayers and “have” provinces to modest-income households and “have not” provinces. A feature, not a bug.
Alberta taxpayers contribute a modest fraction of total federal revenues.
Most of Canada’s wealth, GDP, income, and federal tax revenues is generated outside Alberta.
Alberta accounts for 14%-15% of Canada’s GDP, income, and federal tax revenues. The other 86% comes from outside Alberta.
Per capita, Alberta taxpayers are wealthier on average (higher per capita income) than taxpayers in other provinces. But they don’t generate more wealth in total absolute terms — or contribute more than their fair share to federal coffers.
Numerically, Alberta taxpayers do not outnumber, outweigh, out-earn, or out-contribute other wealthy Canadians residing elsewhere. The vast bulk of the wealth — and the vast majority of tax dollars — that fuel Canada’s economy and governments are generated outside Alberta.
It’s not Team Alberta that props up Confederation, but Team Canada Top-10%. Most of whom do not live in Alberta. Albertans account for 15% of Team Canada Top-10%.
A slightly smaller group, Team Canada Top-10% accounts for over half of federal revenues. Four times as much as all Alberta taxpayers.
All of Team Canada Top-10% pay far more in taxes than Ottawa returns to them. All of them are net contributors.
2) The fact that Alberta sits on top of oilsands is a geological accident. Much as Premier Smith would like to take credit for Albertans.
Alberta righties are wedded to the strange notion that Ottawa should return revenues to each province in the exact amount or proportion in which they were provided. Further, that there should be no wealth redistribution between provinces — or between rich and poor. Absurd.
Self-sufficiency within each province is an impossible ideal. Consider a province with 10 billionaires and 1 million poor people. The billionaires pays lots of tax, but they cannot be expected to provide for their low-income fellow citizens.
Without equalization, smaller provinces with few resources would become unviable. Or the federal govt would be forced to take over their basic services like health and education. Either way, affluent Canadians and profitable corporations across the country pay for Confederation.
Without equalization, the nation would suffer from gross economic disparity — regions of great affluence due to accidents of geography (e.g., oilsands in Alberta) contrasted with regions of dire poverty and despair. A weaker nation.
What would stop people from flooding from poor regions into affluent ones? People would just abandon poor provinces. Everybody would move to Ontario, Alberta, and B.C.
It is a geological accident that Alberta sits on top of bitumen deposits — the third largest oil reserve on Earth. If the oilsands were in Nova Scotia, Alberta might well be a have-not province instead.
To mitigate that poverty, reduce inequalities, and prevent social division, we employ a progressive tax system. Wealth flows from regions and individuals of affluence to regions and individuals less well-off. Within provinces as well as between provinces. By design.
The alternative is class conflict, civil strife, crime, despair, and social breakdown.
A vision of a nation most of us would not want to live in.
Wealth redistribution from affluent regions to poorer regions is a prime characteristic of federated nations. By design, the progressive tax system transfers wealth from rich to poor. The goal is to ensure a degree of regional equality and provide essential services to all citizens, regardless of their location.
Alberta righties take this as an affront. As if the fact that they sit on top of the oilsands is somehow a credit to them.
RA wrote: “Provinces like Alberta, with higher incomes and costs of living, pay far more into the CPP than they get back. Meanwhile, provinces with lower wages and fewer contributors benefit disproportionately. Why should Albertans, who contribute more and face higher living costs, subsidize retirees elsewhere?”
Same misconception. Provinces do not pay a cent into CPP.
Canadians pay CPP contributions on their income. CPP rates are the same from coast to coast.
CPP benefits are doled out according to your contributions.
In aggregate, younger CPP contributors with high incomes pay high CPP contributions and get nothing back until they start collecting CPP. When they are old enough to collect CPP, they will get every cent that is coming to them, no matter where they live.
If a province has a lot of younger CPP contributors with high incomes, for now that population will pay more into CPP than it receives. That should be obvious. In no way do they subsidize other CPP recipients in other provinces. Their turn will come when they age out.