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August 30, 2016

Equalization Payments Policy

This topic is a very important one and it is part of the 1982 Constitution which is our primary target to be attacked and changed.  We are promoting this, not as a dream to be fulfilled in our next life-time, but as a project that needs to be worked on RIGHT NOW!! 

Prof. John Robson's film documentary will be our Christmas event, scheduled for November 13th at the Kars Community Association Hall.  Details to come as we work on the program.  Prof. Robson will be showing us the film documentary & answering any questions posed on the topic.

The topic in focus right now is not new - it has been raised several times but NO government has had the guts to do anything about it.  Quebec, the main beneficiary, will NEVER allow a change that will reduce their over-generous receipt of 56% of all payments.  Brad Wall of Saskatchewan has raised concerns about it but the Federal Liberal Party would never take these concerns seriously - not when their support base is Quebec!!  Still, it does not mean that the other provinces should stay silent on the issue!!!

The 2nd item of interest is a letter to Kathleen Wynne from Kevin O'Leary - that's worth a read too.  Ontario is in so much financial duress that I don't know why she's still getting support.  Where is that support coming from, I wonder!! ?

President (CLF)

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http://business.financialpost.com/fp-comment/joe-oliver-why-equalization-no-longer-works

Joe Oliver: Why equalization no longer works Joe Oliver, Special to Financial Post | February 10, 2016 11:30 AM ET

Joe Oliver: The total amount the federal government transfers to the provinces, almost $18 billion, is based on a three-year moving average of nominal GDP growth. It operates both as a ceiling and a floor. But if disparities are small, which seems to be where we are heading, the result would put us in unchartered territory.

Equalization is about to loom large in federal-provincial relations and will make the prime minister’s promise to meet with his provincial counterparts increasingly uncomfortable. The significant regional restructuring of economic fortunes, resulting from the precipitous decline in resource-based revenue, will reallocate billions of dollars in transfer payments — some from previously “have not” to “have” provinces. Several of these adjustments will be counter-intuitive and will likely engender embittered political reaction from provinces that perceive themselves as losing out. A reordering of transfers will also raise the larger issue of whether the program should be fundamentally revamped.

The public policy rationale for equalization is to ensure that all Canadians in every province receive reasonably comparable provincial services at reasonably comparable rates of taxation. The federal government achieves this by making up the difference for provinces with less revenue capacity than the average (note that the formula is based on capacity, not taxes actually raised). The formula calculates what each province could collect, on a per capita basis, in personal, consumption, property and business taxes, if they all imposed the same rates.

Recipients can use the funds any way they wish, so, the objective of the program may not be achieved if a recipient province uses the money for priorities other than public services. On the other hand, Quebec will receive 56 per cent of equalization payments next year, while enjoying a publicly funded daycare program that is unavailable in “have” provinces.

The total amount the federal government transfers to the provinces, almost $18 billion, is based on a three-year moving average of nominal GDP growth. It operates both as a ceiling and a floor. But if disparities are small, which seems to be where we are heading, the result would put us in unchartered territory. Since recipients cannot end up in a better position than the average of non-recipients, part of the large balance might have to be distributed to all the provinces on some yet-to-be-determined basis.

Should provinces be penalized for not pursuing revenue opportunities, like resource development?

Another predictable oddity is that, in 2017, Ontario could shake off its status as a “have not” province for the first time since 2009, losing almost $3 billion in equalization payments. This is not because Ontario is doing well fiscally. Rather, the resource economies of Alberta, Newfoundland and Labrador and Saskatchewan are reeling.

At the same time, these resource-based provinces will likely be aggrieved that the three-year weighted average calculation of fiscal capacity does not fully take account of their current financial pain, as Saskatchewan Premier Brad Wall has already pointed out. Meanwhile, lowering the average fiscal capacity may reduce the amount Quebec receives.

Another counterintuitive element of equalization is that fiscal capacity excludes either all of a province’s natural resource revenues or half of them, depending on which provides the largest per capita transfer payment.

Related

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This brings us to the highly contentiousness issue of whether a province that could generate resource revenue, but decides not to, should see transfers reduced accordingly. Several provinces have imposed a moratorium on fracking of oil and gas, even though fracking has been safely utilized for over 40 years in Western Canada and fracking has made the U.S. the largest producer of oil in the world. Certain provinces and municipalities also oppose new export pipelines. Apparently, they believe it perfectly acceptable to receive transfers derived from resource development in other provinces, and yet improper to develop their own resources or even permit development elsewhere.

Opposition to resource development, unrelated to legitimate environmental concerns, is a self-indulgence we cannot afford in a period of slow growth, large deficits and escalating health-care costs. The public may not be fully aware of the financial and social implications of its choices. A reduction in equalization payments would be a wake-up call.

It is time to ask whether this massive government program meets its original goal, still achieves a legitimate public purpose objective and is recognized as equitable. Other questions need to be answered: Should recipient provinces be required to use the funds for provincial services, the rationale for the program? Should a province that imposes relatively high taxes, potentially driving away jobs, have the actual tax it collects counted?

Why exclude certain resource revenue when revenue from other industries is not? Should “have not” provinces be penalized for the decision not to pursue revenue opportunities, like resource development? Does the formula adapt quickly enough to dramatic changes in financial fortunes? If the disparity between recipient and non-recipient provinces narrows appreciably, is there a justification for massive transfer payments?

Then there’s the big, philosophical question: Is equalization creating a welfare trap that subsidizes inefficiencies, discourages employment and undermines economic growth?

These questions will doubtless set some premiers’ hair on fire. However, our current economic challenges and shifting fortunes cry out for a major overhaul of a decades-old equalization program that is past its best-before date.

Joe Oliver is the former Canadian Minister of Finance.

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http://www.huffingtonpost.ca/kevin-oleary/open-letter-to-ontario-pr_b_11759978.html

Open letter to Ontario Premier Kathleen Wynne, Part 2

Posted: 08/29/2016 9:10 am EDT Updated: 08/29/2016 9:59 am EDT

Hi Premier Wynne,

I'm worried.

I asked you to keep me informed about the $1.9 billion you are extracting out of the Ontario economy in new carbon taxes. I was excited when you promised lots of new jobs and reductions in carbon emissions. Then I saw the July jobs report. Wow, 36,100 Ontario jobs lost in a single month, the worst decline since the recession, and you still haven't told me any good news about carbon emission reductions. I guess your new plan is not working.

Maybe it would have been better to leave that $1.9 billion in the hands of the Ontario businesses that were using it to hire employees before you taxed it away from them.

However, I hear it's not all bad news on the Ontario job front. While the private sector is losing jobs by the tens of thousands under your new tax policies, you have been busy creating some really interesting opportunities for your staff. I don't know how I missed this, but apparently you lost $70 million setting up and then cancelling the Ontario Retirement Pension Plan (ORPP) in June. While in operation only six months, you hired some really special people that walked away with millions of taxpayers' dollars for apparently doing nothing. It sounds so ridiculous that I am assuming I must have it wrong, and that's why I'm putting pen to paper.

So here goes, true or false?

  • Did you spend $8 million marketing the ORPP even though it didn't exist? That sounds so crazy it can't be true.
  • Did you give Neala Barton, the plan's senior vice-president of communications, $316,819? She started in March. Just exactly what was she communicating for 90 days?
  • Did you pay Anne Slivinskas -- the pension plan's general counsel -- $341,418 for working there just three weeks? That's $2,845.15/hr. You don't fool around with taxpayers' money; You hire the best lawyers!
  • Did you pay a tech guy named Brian Gill -- the pensions plan's CTO -- $414,050 to work for two months! (Note to self: Send Premier Wynne my comp committee's North American average salary report. Her laptop must have been hacked.)
  • Jennifer Brown -- your choice for senior vice-president of the plan's operations -- was a lifer. She started March 21 and lasted until the end of June. So, with that kind of long-term commitment, no one should complain about the $445,019 you gave her.
  • Did you really pay ORPP CEO Mary Anne Palangio $465,938 for 90 days' work? Who says you can't get a great job in Ontario.
  • This one is my favourite, it's so out there! Did you give $485,000 to Saad Rafi when his job running the Pan Am Games ended and then hire him again to run the ORPP even though he has never had an investment mandate before? And then did you pay him an additional $827,925 to walk away a few months later? If this is true, I bet some taxpayers are unhappy about it.

Maybe it would help if you spin this as an inspirational story. You search the province for a seasoned financial money manager to be the fiduciary of the new ORRP but in the last minute hire someone who has fallen on hard times and is out of work, even though they never managed money before. It's so Rocky-esque!

Rafi could have been great as a pension plan manager but we will never know. Giving him the $827Gs for taking this bold new step in his career is the least we taxpayers can do. After all, it's hard to live off a measly $485,000 severance when taxes are so high in Ontario, but I know you are not spending any time worrying about that.

These must be very special people! No one in the private sector could ever get a deal like this: Thank goodness they know you. Some Ontarians might see this and assume you don't give a damn about their hard-earned money. Is that true? Frankly, if I gave away $2.8 million to employees that did nothing in my businesses, I would go bankrupt. Come to think of it, your government has a long history of starting projects, spending millions and then cancelling them -- you know, like gas plants, "green" projects and now pension plans. That's why Ontario is $308 billion in debt, so you are kind of bankrupting us, in your own special way.

Still I get it, perhaps from your point of view, why should anybody give a damn about the $70 million you just wasted, it's just a rounding error.

Well, maybe the voters do. Have you seen the latest polls? Perhaps at this point in your mandate you may want to think about delivering a little more transparency and performance instead of dreaming up new ways to tax people and businesses and then spending it this way.

I'm just trying to help.

Anyway, I don't want to be negative so I hope you are having a great summer. I know the 36,100 people in Ontario who just lost their jobs in July are feeling a little down but I'm sure they will go from sad to glad when you tell them about all the carbon emissions you have reduced. Best you get that good news out soon. In the meantime, next time you are paying people on your staff to do nothing for $827,000, maybe you could show a little compassion and hire one of your 36,100 constituents who just lost their job.

There will be an election soon and when that's over and you start your new career, I'm going to bet it won't be one where you manage money.

Yours respectfully,

Kevin O'Leary

Ontario taxpayer, voter and your employer, for now.

Follow Kevin O'Leary on Twitter: www.twitter.com/kevinolearytv

More:

Kevin O'Leary From the Desk of Mr. Wonderful Shark Tank Canadian Politics Liberal Party of Canada Conservative Party Kathleen Wynne

 



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