Mandryk: Time for equalization to revisit its hydroelectric exemption

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If equalization is essentially a wealth tax for provinces, shouldn’t all provinces be taxed on all their wealth?

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Saskatchewan Premier Scott Moe is right about one thing: equalization is not working as intended.

It was supposed to a balance the natural inequities between regions, making all Canadians more equal.

Essentially, that means it was designed to make us all feel more Canadian — something we desperately need these days as we face a very real external threat from the U.S. To some extent, equalization does still somewhat work as intended.

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It’s worth noting that in Moe’s social media post earlier this year, essentially suggesting equalization is unfair to “have” Western provinces, he actually demonstrated that the biggest per capita beneficiaries of the program under its current formula are the perennial “have-not” Atlantic provinces of Nova Scotia, New Brunswick and Prince Edward Island.

But where Moe’s complaint seems legitimate is that it’s absolutely bizarre that Ontario, with all its white-collar jobs and lucrative blue-collar industries, is now considered a “have-not” province.

Arguably even more bizarre is the annual reality that Quebec and Manitoba, with their hydroelectric wealth, are again massive have-nots — ostensibly because hydroelectric revenue remains exempt from the equalization formula.

Notwithstanding the well-established and sometimes politically motivated Saskatchewan/Western Canada gripes that equalization is an Eastern plot to punish oil- and natural resource-rich economies, one gets the principle that it should treat all forms of provincial revenue equally.

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The truth about former prime minister Stephen Harper’s 2006 election promise to remove all natural resource revenue from the equalization formula is that this policy quite likely would have rendered the equalization formula useless.

It would have provided Saskatchewan with $800 million in equalization, annually, while making Saskatchewan and Alberta permanent “have-nots.”

However, Quebec and the Atlantic provinces would have received proportionally less, which would have quickly become a massive source of disunity. And this can’t be stressed enough: Right now, we need national unity more than ever.

But if equalization is essentially a wealth tax for provinces, shouldn’t all provinces be taxed on all their wealth? Shouldn’t that include hydroelectric? Aren’t we already being punished for our oil and mining wealth through the carbon tax?

This week, the Saskatchewan government sought intervenor status in the government of Newfoundland and Labrador’s claim that equalization is unfair.

“Though equalization was meant to ensure reasonably comparable access to public services across the provinces, the formula unfairly affects Saskatchewan and other provinces due to the inclusion of resource revenues,” the Saskatchewan Party government said in a news release.

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“The formula also fails to take into account the structural costs of delivering public services and overcompensates recipient provinces by distributing surplus payments to them.”

Later, Moe stated the obvious — that the equalization formula is “flawed.”

Of course, there remains reason to be suspicious that this is just more political posturing from Moe and his Sask. Party government, aimed at the beleaguered federal Liberal administration of Justin Trudeau.

To simply reignite Harper’s 2006 position that the equalization formula is flawed because it includes natural resources revenue would also be the height of hypocrisy. The courts might even observe that former Sask. Party premier Brad Wall withdrew from the last court challenge 15 years ago, conceding that exempting natural resources made little sense. (Or so Harper also concluded after his 2006 election win.)

But it is interesting that Saskatchewan is joining the case of Newfoundland and Labrador — a province that is not only a fellow oil-producing province, but one that’s getting far less from equalization than hydro-rich Manitoba or Quebec.

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It’s also interesting that Moe’s comment comes at the time of this tariff fight with U.S. President Donald Trump, in which the Saskatchewan premier suggested broad tariffs (read: retaliating by targeting oil) would “rip this country apart.”

We need unity. We don’t need ripping.

So shouldn’t that begin with that most Canadian of all programs, the 68-year-old equalization formula designed to help all Canadians in a fair-minded manner?

When Canadians need more than ever to come together, isn’t now the time to explore what’s fair to all Canadians and what isn’t?

Mandryk is the political columnist for the Regina Leader-Post and the Saskatoon StarPhoenix.

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Our websites are your destination for up-to-the-minute Saskatchewan news, so make sure to bookmark thestarphoenix.com and leaderpost.com. For Regina Leader-Post newsletters click here; for Saskatoon StarPhoenix newsletters click here

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