Equalization is broken?

In 15 of the last 25 years, one or more provinces with higher living standards received equalization while a province with lower living standards did not, according to a new Fraser Institute study.

Canada’s multi-billion-dollar equalization program - sold to taxpayers as a noble way to help “have-not” provinces punch at the same weight - is fundamentally broken. That’s not rhetoric. That’s the conclusion from hard data released today by the Fraser Institute.

In a new study, analysts Tegan Hill and Joel Emes examined 44 years of equalization payments against provincial GDP per person, the most straightforward measure of economic living standards. Their verdict is damning: in 15 of the last 25 years, one or more provinces with higher GDP per person received equalization payments while a province with lower living standards received nothing.

The program is supposed to work like this: richer provinces pay in, poorer ones get help to provide comparable public services without crushing their residents with taxes. In practice, it’s a political slush fund that frequently rewards the wrong provinces and punishes others.

The most glaring example is from 2009 to 2018. Ontario collected equalization payments every single year - totaling 19.0 billion dollars - even though the province enjoyed a higher GDP per person than British Columbia in each of those 10 years. BC got zero. On average, Ontario’s GDP per person sat 3.2 percent higher than BC’s during that stretch.

Let that sink in. A larger, more populous province with a stronger economy on paper was treated as a “have-not” while British Columbians - dealing with crushing housing costs, resource sector battles, and their own fiscal pressures - got stiffed.

This wasn’t a one-off anomaly. The Fraser Institute found discrepancies in all but three years between 1981 and 2024. Among recipient provinces, richer ones by GDP per person routinely received larger per-capita payments than poorer ones. Newfoundland and Labrador, riding an oil boom, had higher GDP per person than multiple provinces in the 2000s - sometimes as many as four other provinces - yet still pulled in bigger equalization cheques.

These aren’t random glitches. The research points to ongoing, structural issues baked into the equalization formula. The way Ottawa measures fiscal capacity, includes or excludes certain revenues, and applies the program creates perverse outcomes year after year.

Equalization has become untethered from its original purpose. Instead of a transparent, needs-based transfer, it functions as a political tool that keeps certain provinces dependent and others resentful.

For resource-producing provinces in the West, this is particularly galling. British Columbia and Alberta generate enormous wealth through forestry, mining, energy, and ports, yet the system often treats their success as a reason to extract more while handing cheques to jurisdictions with weaker economic performance.

The Western Provinces are tired of being treated as reliable ATMs for Confederation while fighting their own battles - exploding housing prices, strained health care, crumbling infrastructure, and endless regulatory war on the industries that actually pay the bills. Every dollar funneled into a flawed equalization system is a dollar not available for BC priorities or tax relief.

This latest evidence should be required reading for every MLA in Victoria and every MP in Ottawa. The current formula fails the basic test of fairness and economic reality. Provinces with higher living standards shouldn’t be on the dole while others with genuine challenges get shortchanged.

The Fraser Institute has done the numbers. Now it’s time for politicians who actually represent working British Columbians and Western Canada to demand real reform - or better yet, a complete overhaul. Equalization as currently structured isn’t equalizing opportunity. It’s entrenching mediocrity at everyone else’s expense.

The data is clear. The program is broken. Pretending otherwise is just more Ottawa gaslighting.