Equalization and CPP
I'm going to try hard very not to make this emotional, so much as well considered.
But, there is one thing which seems to be a thorn in the side of those from Alberta and one which seems to be a proposed threat they can leverage. Neither are as I think they appear.
Firstly, the thorn; equalization. This is talked about like somehow A) Alberta is directly financing Quebec and other "have-not" Provinces, and that B) without equalization, Alberta would not be running a deficit.
Both are wrong. Equalization payments come from the federal government. And the only way they get money is through taxation. People in Alberta are subject to the same tax laws as the rest of the country. And two people making roughly the same in any two Provinces, pay roughly the same into the Federal coffers.
People in Alberta DO tend to pay more. But, that is because people in Alberta also tend to make more. In fact, the Provincial average is more than 15% higher than the average as the second most prosperous Province, and in excess of 20% greater than some of the lowest income earning Provinces.
Pretty much every other Province is within spitting distance of each other on average income.
And, since the money comes from Federal tax dollars and NOT from Provincial tax dollars, it wouldn't actually have any positive effect on the Alberta Provincial deficit if equalization payments did not exist.
Furthermore, given what equalization payments represent, there is simply no justifiable way to divert money into Alberta. Nor is it likely that enough of the Provinces would vote in favor of scrapping equalization. It is a constitutional obligation. And as such, the Federal government alone does not have the power to remove it.
I certainly doubt it is an exciting topic. But, Alberta's government is running a deficit because they have the lowest rate of taxation outside of the Territories in all of Canada. They are the only Province without a Provincial component to their sales tax. In addition to the aforementioned highest wages in the country, they also have a lower than average priced housing market, and a lower cost of living compared to the next wealthiest Provinces.
I'm not from Alberta. I'm not going to pretend that the numbers tell the whole story. I don't know what it is like to live there. And so I'm not going to say that they should suck it and demand PST if they want to return to a balanced Provincial budget.
I'm simply going to say that they have a deficit because they don't raise enough in taxes. And this is should in no way be controversial given their unique status as the only Province without PST.
If you mention Alberta's debt and Equalization together, all you've done is put your ignorance on display.
Outside of the thorn of equalization, there is the threat of withdrawing from CPP. I'll agree, this is something Alberta, technically, can do. But it would be fairly short sighted as well. And, people floating the idea are ignoring a lot of the logistical faults in it.
For example, while it is true that Albertans pay more in, and that at present, fewer are withdrawing. This neglects 2 things. Alberta's primary industry is shedding jobs, making it a less attractive place to move to.
Like the rest of Canada, Alberta does not boast a self sustaining population. According to their census data, the average family is just 3 people. Which means that without substantial immigration numbers, the young population they have today, will age. And their increased donations to CPP are actually a direct result of their increased wages. Which in turn means that as that population ages, each will be eligible for larger withdrawls.
Another problem is the management of the funds. Moving that money into a smaller entity provides less strength for diversification of assets. And, if politics influences decisions, like say towards the oil and gas industry, and those industries falter, that money can quickly disappear. A national CPP will always have more funds to work, is more likely to boast a broader portfolio and be better able to recover from market fluctuations.
It also neglects the fact that the damage to CPP is only temporary. While they remove a large amount of money today and a large chunk of ongoing contributions. Their removal also significantly lowers the average amount retirees are eligible for and a one time infusion of tax money could used to buffer the losses at minimal cost to finance that debt. In fact, with any luck, a debt incurred and then well invested might very well pay itself off, leaving the rest of Canada and CPP in some respects better off.
I said, I don't want to make this rooted in emotion. I know that the federal government has not been making the concessions it needs to make. So, I'm not surprised that people in Alberta have dug in their heels.
For everyone involved, the best outcome will be for the Federal government to show some support to the West AND for the West to accept it.
I do fear that the current Alberta government will not, however, act in good faith. And may continue to try and stoke anti-Liberal sentiment even should they actually make reasonable concessions. And likewise, I don't actually expect the Liberal government to do enough either. But, I do hope that it doesn't result in an out of control situation leading to secession. That would be the most short-sighted option on the table.
But, there is one thing which seems to be a thorn in the side of those from Alberta and one which seems to be a proposed threat they can leverage. Neither are as I think they appear.
Firstly, the thorn; equalization. This is talked about like somehow A) Alberta is directly financing Quebec and other "have-not" Provinces, and that B) without equalization, Alberta would not be running a deficit.
Both are wrong. Equalization payments come from the federal government. And the only way they get money is through taxation. People in Alberta are subject to the same tax laws as the rest of the country. And two people making roughly the same in any two Provinces, pay roughly the same into the Federal coffers.
People in Alberta DO tend to pay more. But, that is because people in Alberta also tend to make more. In fact, the Provincial average is more than 15% higher than the average as the second most prosperous Province, and in excess of 20% greater than some of the lowest income earning Provinces.
Pretty much every other Province is within spitting distance of each other on average income.
And, since the money comes from Federal tax dollars and NOT from Provincial tax dollars, it wouldn't actually have any positive effect on the Alberta Provincial deficit if equalization payments did not exist.
Furthermore, given what equalization payments represent, there is simply no justifiable way to divert money into Alberta. Nor is it likely that enough of the Provinces would vote in favor of scrapping equalization. It is a constitutional obligation. And as such, the Federal government alone does not have the power to remove it.
I certainly doubt it is an exciting topic. But, Alberta's government is running a deficit because they have the lowest rate of taxation outside of the Territories in all of Canada. They are the only Province without a Provincial component to their sales tax. In addition to the aforementioned highest wages in the country, they also have a lower than average priced housing market, and a lower cost of living compared to the next wealthiest Provinces.
I'm not from Alberta. I'm not going to pretend that the numbers tell the whole story. I don't know what it is like to live there. And so I'm not going to say that they should suck it and demand PST if they want to return to a balanced Provincial budget.
I'm simply going to say that they have a deficit because they don't raise enough in taxes. And this is should in no way be controversial given their unique status as the only Province without PST.
If you mention Alberta's debt and Equalization together, all you've done is put your ignorance on display.
Outside of the thorn of equalization, there is the threat of withdrawing from CPP. I'll agree, this is something Alberta, technically, can do. But it would be fairly short sighted as well. And, people floating the idea are ignoring a lot of the logistical faults in it.
For example, while it is true that Albertans pay more in, and that at present, fewer are withdrawing. This neglects 2 things. Alberta's primary industry is shedding jobs, making it a less attractive place to move to.
Like the rest of Canada, Alberta does not boast a self sustaining population. According to their census data, the average family is just 3 people. Which means that without substantial immigration numbers, the young population they have today, will age. And their increased donations to CPP are actually a direct result of their increased wages. Which in turn means that as that population ages, each will be eligible for larger withdrawls.
Another problem is the management of the funds. Moving that money into a smaller entity provides less strength for diversification of assets. And, if politics influences decisions, like say towards the oil and gas industry, and those industries falter, that money can quickly disappear. A national CPP will always have more funds to work, is more likely to boast a broader portfolio and be better able to recover from market fluctuations.
It also neglects the fact that the damage to CPP is only temporary. While they remove a large amount of money today and a large chunk of ongoing contributions. Their removal also significantly lowers the average amount retirees are eligible for and a one time infusion of tax money could used to buffer the losses at minimal cost to finance that debt. In fact, with any luck, a debt incurred and then well invested might very well pay itself off, leaving the rest of Canada and CPP in some respects better off.
I said, I don't want to make this rooted in emotion. I know that the federal government has not been making the concessions it needs to make. So, I'm not surprised that people in Alberta have dug in their heels.
For everyone involved, the best outcome will be for the Federal government to show some support to the West AND for the West to accept it.
I do fear that the current Alberta government will not, however, act in good faith. And may continue to try and stoke anti-Liberal sentiment even should they actually make reasonable concessions. And likewise, I don't actually expect the Liberal government to do enough either. But, I do hope that it doesn't result in an out of control situation leading to secession. That would be the most short-sighted option on the table.
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