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Natural resources, equalization, and the so-called fiscal imbalance

CBC is reporting that an "expert panel" is recommending that 50% of non-renewable natural resources revenues be included in the national equalization program. I don't get why any of it shouldn't be.

The purpose of equalization is to put all provinces on a relatively even fiscal keel. It has a hint of communist idealism at its root: from each (province) according to its ability, to each (province) according to its necessity.

Why, therefore, is natural resource revenue, even if from non-renewable resources, even a question?

Revenue is revenue. It boosts the affected local economies, and as long as it does, it should be included in any formula based on those economies. It makes no sense that just because a province has a temporary financial high (though the oil-based resources are not exactly expected to dry up next spring, so how temporary is it, anyway?) thanks to natural resources that it should be declared superfluous.

How would those same governments react if I told them that this year I made an extra hundred thousand dollars, and next year I expect to, too, but eventually I will retire, and because I won't make that kind of money forever, I should not have to pay taxes on it? My bet is there would be a "notice of reassesment" in my mailbox telling me that I owe tax on that difference within a couple of weeks.

Why should additional provincial revenues be any different? Equalisation seems to, in essence, be income tax for provinces, where provinces get a tax refund based on their income and outgo at the end of the fiscal year.

I believe that there is indeed a fiscal imbalance, but that it is between have and have-not provinces, not between the provinces and the federal government.

Posted at 18:32 on June 05, 2006

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