Equalization

Saskatchewan’s equalization entitlement is the difference The program does not require between: provinces to offer equivalent a) the revenues the Saskatchewan government would have levels of public service but raised if it possessed an average tax base over all 34 tax bases and had levied the average tax rate on each tax base; and attempts to enable provinces to b) the revenues the Saskatchewan go. [...] This has led to a number of resources may improve the provincial temporary changes in the program, from reducing government’s fiscal situation before the amount of resource revenues that are counted equalization is netted out, but it also serves to in the average, to excluding Ontario from being a raise the standard and thereby frustrate the recipient, and other measures. [...] Under the current system, excluded from the calculation of Alberta’s provincial tax bases and rates are excluded from the calculation of the Canadian average. [...] A recent change was the revision of If a recipient province improves its economy the tax base for Crown leases, a change that and the province’s tax base, a significant implicitly assumes Saskatchewan’s resources portion of the increase in potential revenues generate the same surplus revenues per unit of will be lost through the reduction (or clawback) production as do resources in other provinces. [...] There are more general problems with the a) In the most recent year, the effective equalization program, mostly based on the clawback of Saskatchewan’s energy revenues potential for provinces to engage in strategic was 108%; and behaviour—i.e., to design tax systems to maximize equalization payments rather than on b) In 2001/02, the per capita equalization the usual criteria of efficiency and equi.