The (un)constitutionality of equalization payments

August 26, 2005 by  

On Friday, August 26, 2005, the Globe and Mail ran an editorial about Ontario possibly falling into “have not” status among the provinces in coming years, and the role that federal equalization payments might be playing. It concluded:

“Do the current program and other federal transfer mechanisms need reform, accountability and an accurate means of measuring their impact on all provinces? Absolutely. Should the rich provinces get back all the dollars their taxpayers send to Ottawa, thereby eliminating the so-called fiscal imbalance? Absolutely not, because that would reduce federalism to nothing more than a financial balance sheet and effectively turn the central government into a non-profit collection agency for the wealthier provinces.”

To my knowledge, Ontario has not proposed that it receive “all” of the money its taxpaying residents pay to the federal government. Ontarians and their government recognize that, as Canadians, they must contribute to exclusively federal matters like the military, for example. However, Ontario is indeed losing under the current equalization scheme, and it is losing unjustly.

In a free and democratic country, a government may spend only what the country’s constitution gives it authority to spend. Canada’s constitution gives the federal government only the authority to pay out the amounts set out in the Constitution Act, 1907, which is still in force and binding. The Constitution does not give the federal government authority to redistribute wealth via the current federal equalization payments. If the federal government wants to engage in such spending, it should be seeking a constitutional amendment.

Because the federal equalization payments are unconstitutional, Premier McGuinty is wrong to ask for federal money . However, Ontario would be in the right to demand an end to equalization payments, and a corresponding reduction in federal taxation. This it could rightly do in the name of freedom and the rule of law.


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