Balancing the riches: equalization is one of four major federal transfer programs. The others are the Canada Health Transfer, the Canada Social Transfer, and the Territorial Formula Financing (the main source of revenue for territorial governments). Today, the total amount of the equalization program is around 10 billion dollars a year.(REGIONALISM--EQUALIZATION)

Publication: Canada and the World Backgrounder

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The purpose of Canada's equalization program is to allow provinces to provide "comparable levels of service at comparable levels of taxation." The federal government does that by transferring cash payments to less wealthy provinces, so their citizens don't have to pay unreasonably high taxes to receive the same level of social services--such as education and social assistance--as Canadians in richer provinces.

Started in 1957, the scheme is intended to help out the poorer provinces, with payments coming from federal tax revenue. Unlike conditional transfer payments such as the Canada Health and Social Transfer, provinces can spend equalization payments in any way they choose. The payments are distributed to the provinces quarterly and the program is renewed every five years.

Figuring out who gets what and who pays what isn't easy. The federal government calculates the payments according to the revenue-raising ability of each province based on 33 different tax sources. These include personal income tax, corporate tax, property tax, and sales tax.

Ottawa establishes a standard level of tax revenue based on the average of the five middle-income provinces: British Columbia, Saskatchewan, Manitoba, Ontario, and Quebec. For 2004-05, for example, the average was $6,126 per person and any province falling below that received payments to make up the difference. (Alberta's energy revenues are so high that the federal government has removed the province's tax revenue from any calculations it makes for the national standard.)

Between 1999 and 2004, $50 billion was transferred to the provinces in equalization payments.

Ontario and Alberta are the only provinces that do not receive the payments; Ontario is the only province that has never received them. Alberta was a recipient from 1957 to 1964, while its oil and gas industries grew. The rising price of oil and other commodities (potash, and...

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