We pay Quebec’s welfare

For anyone who has paid attention to the student protests/riots in Quebec and knows anything about the vast sums of money transferred between governments in this country, there has been no shortage of ridiculous demands from the Quebec students who are “on strike.”

For anyone who has paid attention to the student protests/riots in Quebec and knows anything about the vast sums of money transferred between governments in this country, there has been no shortage of ridiculous demands from the Quebec students who are “on strike.”

Demands include free tuition and an end to functioning free markets. But their silliness — not shared by most students nor by all Quebecers — has been compounded by myth-making from Quebec politicians about who foots the bill for so much of Quebec’s existing poor economic policy.

Exhibit A is Quebec Minister Raymond Bachand. He recently claimed that Quebec’s lavish social welfare model — think $7 a day day-care (even for millionaires who can afford the full freight), the cheapest tuition rates in the country, under-priced electricity from Quebec Hydro, and a plethora of other goodies for Quebec voters — is explained by Quebec’s high taxes.

He rejects the notion that the $7.4 billion Quebec receives in equalization payments supports Quebec’s over-the-top, expensive and badly designed social welfare model.

Bachand is wrong. Taxes only explain part of Quebec’s ability to finance a lavish social welfare state.

Equalization is one part of $61-billion in annual transfers of federal tax dollars to the provinces. At $7.4 billion, Quebec receives the lion’s share of the $14.8 billion in annual equalization payments. Other provinces that receive equalization (Manitoba, Ontario, New Brunswick, Nova Scotia and Prince Edward Island) take the rest.

Some have defended the Quebec finance minister by noting that equalization payments originate in the federal treasury. Given that taxpayers in every province pay federal taxes, so the reasoning goes, even Quebecois taxpayers pay for the $7.4 billion equalization transfer.

That’s mathematically ridiculous and in error. It is akin to arguing that when 10 players put money on the poker table, and six take home winnings (and four do not), that because everyone initially contributed to the poker/equalization pot, no one player/province actually benefits more than another.

The question is about who benefits when the chips are cashed in. In the case of equalization, it is Quebec and five other provinces.

In contrast, taxpayers in four provinces ultimately fund equalization through their federal taxes.

The Bachand argument is undercut and disproven by this calculation: If the equalization program ended, and all the provinces simply kept their portion of federal taxes paid into the program, Quebec would have to raise taxes by $74.billion, or borrow more money, or pare back its lavish social programs, or some combination of the three.

More generally, let’s look beyond equalization to all federal transfer programs, i.e., the other $46-billion in federal transfers to the provinces and also to items such as employment insurance payments.

A net calculation there reveals that Ontario, despite receiving equalization, is a net loser in this federal transfer poker game. Ontario’s provincial government points out that it contributes 39 per cent of federal taxes, but ends up with 34 per cent of federal monies deposited back into the province.

Governments in British Columbia and Alberta make similar points.

In other words, when all federal transfers are accounted for, it is taxpayers in Ontario, Alberta and British Columbia who pay more into federal coffers than their provincial governments or citizens receive back, either in transfers from Ottawa, or in direct federal spending in their respective provinces.

Of course, there will always be some net difference in federal flows from and into the provinces, either in government transfers or in direct payments from Ottawa.

Think of Employment Insurance. If unemployment rates in one province are high (Alberta in 1980s or the Atlantic provinces now), less money will be put into the federal treasury from taxpayers in such places than is received back in EI payments.

But that reality doesn’t justify the current weird system of federal transfers or the design of equalization, nor does it support the false claims made about equalization by the Quebec finance minister.

Mark Milke is a Senior Fellow at the Fraser Institute.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Glen Carritt organized a United We Roll Canada convoy around May 2019 that travelled in 2019. An independent review said he breached council code of conduct rules multiple times. (File photo by Advocate staff)
Former Innisfail town councillor breached code of conduct many times, says review

Consultants say 29 of 36 alleged breaches by Glen Carritt had merit

Members of the Red Deer RCMP downtown patrol monitor for drug activity and property crimes. (Advocate file photo).
Two peace officers are training to join Red Deer’s downtown police patrol unit

This “integrated” unit will be the first in Alberta

Students and staff at Gateway Christian School wore pink Wednesday in support of Pink Shirt Day, a worldwide anti-bullying initiative that was started in 2007. (Photo courtesy of Red Deer Public Schools)
Students, central Alberta community celebrate Pink Shirt Day

Mayor of Sylvan Lake Sean McIntyre supports anti-bullying cause

City of Red Deer has nearly doubled its active COVID-19 case count since Feb. 10 and has 75.6 per cent of the Central zone’s active cases. (File photo)
Another new high: Red Deer hits 574 active COVID-19 cases

Province reports 13 new COVID-19 deaths, 430 new cases

A homeless shelter was promised Red Deer to help the city deal with downtown issues. The city and province finally released a signed agreement on what the facility will offer, a year after a $7 million commitment was made for the project by the province. (Advocate file photo).
City and province take next step in bringing a 24/7 shelter to Red Deer

It will include a detox and counselling services

Meteor spotted over Edmonton, Alta., on Feb. 22, 2021 by several, who took to social media to share their surveillance camera captures. (@KixxAxe/Twitter)
VIDEO: Fireball meteor streaks across sky, spotted by early-morning risers in Alberta, B.C.

Videos of the quick streak of light flashing across the sky before 6:30 a.m. MST

Calgary Flames goaltender David Rittich (33) makes a save on Toronto Maple Leafs left wing Jimmy Vesey (26) as Flames' Christopher Tanev (8) and Joakim Nordstrom (20) defend during first-period NHL action in Toronto on Wednesday, February 24, 2021. THE CANADIAN PRESS/Frank Gunn
‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

Team Canada skip Kerri Einarson yells to her sweepers at the Scotties Tournament of Hearts in Calgary, Alta., Friday, Feb. 19, 2021.THE CANADIAN PRESS/Jeff McIntosh
Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

A crane is used to lift a vehicle following a rollover accident involving golfer Tiger Woods, Tuesday, Feb. 23, 2021, in Rancho Palos Verdes, Calif., a suburb of Los Angeles. Woods suffered leg injuries in the one-car accident and was undergoing surgery, authorities and his manager said. (AP Photo/Mark J. Terrill)
Golf without Woods? Battered leg brings it closer to reality

Golf without Woods? Battered leg brings it closer to reality

Montreal Canadiens head coach Claude Julien looks towards the ice as his team takes on the Ottawa Senators during second period NHL action in Ottawa on Tuesday, Feb. 23, 2021. The Canadiens have fired head coach Julien and associate coach Kirk Muller. THE CANADIAN PRESS/Sean Kilpatrick
Montreal Canadiens fire head coach Claude Julien, associate coach Kirk Muller

Montreal Canadiens fire head coach Claude Julien, associate coach Kirk Muller

Canada midfielder Sophie Schmidt (13) attempts a shot on goal during the first half of a SheBelieves Cup women's soccer match against Argentina, Sunday, Feb. 21, 2021, in Orlando, Fla. THE CANADIAN PRESS/AP-Phelan M. Ebenhack
Canadian women exit SheBelieves Cup on losing note, blanked 2-0 by Brazil

Canadian women exit SheBelieves Cup on losing note, blanked 2-0 by Brazil

Supporters pray outside court in Stony Plain, Alta., on Wednesday, Feb. 24, 2021, as a trial date was set for Pastor James Coates of GraceLife Church. He is charged with holding Sunday services in violation of Alberta's COVID-19 rules and with breaking conditions of his bail release. THE CANADIAN PRESS/Jason Franson
Trial date for jailed Alberta pastor charged with breaking COVID-19 health orders

Trial date for jailed Alberta pastor charged with breaking COVID-19 health orders

Alberta Premier Jason Kenney shakes hands with Jason Nixon, government house leader and environment minister, after Nixon is sworn into office in Edmonton on April 30, 2019. THE CANADIAN PRESS/Jason Franson
Alberta eyes recall legislation, focuses on COVID-19 aid in spring sitting

Alberta eyes recall legislation, focuses on COVID-19 aid in spring sitting

CFL commissioner Randy Ambrosie attends a a news conference in Surrey, B.C., on Thursday, February 28, 2019. The CFL faces more challenges in its 2021 return than it did last year when it was forced to cancel its season due to the COVID-19 pandemic. THE CANADIAN PRESS/Darryl Dyck
CFL will have to appease more levels of government to get 2021 protocols approved

CFL will have to appease more levels of government to get 2021 protocols approved

Most Read