Alberta referendum breakdown
Albertans will vote this fall in a referendum asking whether equalization – the federal program designed to level the tax game between provinces – should be removed from the Constitution.
The referendum was a key election promise by the ruling United Conservative Party and was endorsed by the province’s “Just Deal” panel, which was formed to examine Alberta’s relations with the rest of Canada. . The perception that Equalization unfairly benefits other parts of the country, at the expense of Alberta, is a long-standing source of resentment in the province which has only grown after years of economic decline in the oil sector. .
Here’s what you need to know about the referendum, how the province got here, and what the government hopes to achieve.
What will Albertans vote for?
The referendum, to be held in conjunction with the October municipal elections, will ask Albertans a ‘yes or no’ question: “If subsection 36 (2) of the Constitution Act, 1982 – Commitment by Parliament and the Government of Canada towards the principle equalization payments – be removed from the Constitution? There will also be a referendum question on the permanent switch to summer time.
What is subsection 36 (2) and what is equalization?
The section of the Constitution that deals with Equalization is a single sentence: “The Parliament and the Government of Canada undertake to respect the principle of equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services to reasonably comparable levels. of taxation.
The program is designed to ensure that provinces can provide similar levels of service despite their different tax situations, and more specifically their ability to raise funds through taxes. This means that a province like Nova Scotia, where incomes are comparatively lower than much of the rest of Canada, will not have to choose between drastically cutting services or imposing extremely high taxes.
“The basics are really simple,” said Trevor Tombe, an economist at the University of Calgary. “This is a federal program that provides support to provinces with weaker than average economies. They generate less income than higher income regions like Alberta, British Columbia or Ontario. It is more difficult for them to generate income without having to resort to unusually high taxes.
How does the program work?
While equalization is constitutionally enshrined, the actual details are determined by the equalization formula. The last major overhaul took place in 2007 under the Conservative government of then Prime Minister Stephen Harper.
The formula begins by assessing each province’s fiscal capacity, or its ability to raise funds.
“It’s basically asking, ‘How much would a tax point increase in, say, PEI? compared to the national average? “Said Dr Tombe.
The average household income in Prince Edward Island is less than $ 70,000, compared to nearly $ 100,000 in Alberta, he noted. So even if the two provinces had the same provincial tax rates, the government of Prince Edward Island would bring in much less money.
In reality, taxes in Prince Edward Island are higher than in Alberta, yet provincial incomes are considerably lower, per capita, than in Alberta.
The formula takes into account other forms of income, including consumption and sales taxes and property tax. It also takes into account revenues from natural resources, either entirely excluding revenues from natural resources or excluding 50% of those revenues, whichever would benefit a province more.
It doesn’t matter whether the provinces actually take this notional amount of money through taxes, just that they could. Dr Tombe said Alberta’s finances would be in much better shape if taxed at the same level as other provinces, but the government chose not to.
Dr Tombe also said it’s virtually impossible for changes to the formula to send equalization money to Alberta as long as incomes remain much higher than in the rest of Canada.
A myth about equalization is that the provinces somehow send money to the federal government or to other provinces to cover the payments. But the program is funded by the federal budget, the revenues of which are largely made up of income and other taxes.
Why does Alberta want to kill the program?
It’s not clear that ending equalization is really the government’s end goal, but Premier Jason Kenney argues that a yes in a referendum would give the province leverage to force the federal government to negotiate a new formula, a constitutional change or some other concession.
And Mr. Kenney’s main complaints don’t even relate specifically to the equalization program. The Prime Minister rose up against other provinces, including British Columbia and Quebec, who opposed and tried to block pipelines designed to transport crude from Alberta. He also accused the federal government of attacking his province’s oil industry with environmental legislation, such as Bill C-69, which overhauled the environmental assessment process.
The original 2019 election promise only called for a referendum if concerns about pipelines and environmental regulations were not met.
Premier says Albertans have been happy to help the rest of Canada when times are good, but says the federal government and other provinces should not take advantage of the wealth of Alberta’s oil sector while struggling actively against him.
The referendum follows a long-standing grievance in Alberta that the province is being treated unfairly by the rest of Canada. Mr. Kenney and his United Conservative Party government are aiming for Equalization because it has become a powerful symbol in the province, although most people may not understand the details, said Daniel Béland, professor at the McGill University and expert in fiscal federalism.
“For many people in Alberta, equalization means injustice,” he said. “It’s a pretty complex agenda and politicians talk about it in a pretty deceptive way too – sometimes intentionally, sometimes because they don’t understand it themselves.”
What is the legal power of a referendum?
In short, none. Under provincial law, such a referendum is binding on the Government of Alberta, which must take reasonable steps to implement the result, but legal experts say a yes vote would have no legal power to force the federal government to do anything.
Kenney says a landmark 1998 Supreme Court of Canada case over Quebec’s secession set a precedent for the federal government to negotiate potential constitutional changes with a province holding a referendum with a clear question and a clear result.
Eric Adams, a law professor at the University of Alberta, said the Constitution already gives a province the right to propose changes and that the federal government and other provinces have an obligation to “recognize and deal with ” the problem. A province does not need to hold a referendum to do so, although Alberta has made no such proposal.
“[Mr. Kenney] could send a letter, he could ask that this issue be on the agenda of the next prime ministers and he would have the right and the capacity to do so, ”he said.
And even then, it is not clear what the federal government and the other provinces are required to do other than listen, he said, or what recourse a province would have if its government believed its concerns were not. not taken seriously.
The passage from the 1998 Supreme Court decision that Mr Kenney frequently quotes, which refers to an “obligation to negotiate,” appears to be limited to referendums on separation, Dr Adams said.
“If Kenney’s thesis is correct, it means that every time a province holds a referendum on a constitutional question, the result of that referendum at the provincial level then forces all the rest of Canada to start negotiating the amendment of the Constitution. the Constitution. ,” he said.
“That’s a lot of power to give to the good people of Prince Edward Island.
Even Mr. Kenney admitted that a yes to the referendum would not bring about immediate change.
“I have always said that a yes to the principle of equalization does not automatically change equalization; that does not remove it from the Constitution, ”he said. “What he’s doing is elevating Alberta’s struggle for equity to the top of the national agenda.
Are there any downsides to a referendum?
Critics of the government, including the NDP opposition, have dismissed the referendum as a political theater designed to distract from the province’s very real economic problems – none of which they say would be helped by a vote on equalization.
Politically, there is a risk that a referendum will backfire on Mr Kenney if there is an overwhelming yes with nothing to show, said Donna Kennedy-Glans, a former Progressive Conservative cabinet minister who was a member of the panel. “fair deal”. .
Ms Kennedy-Glans said she was personally opposed to a referendum, but the panel recommended it because it reflected what Albertans were saying. She said she feared the referendum might do more to stoke grievances in Alberta than to address them.
“Even if we all said, ‘Yes, we would like this clause to be removed from the Constitution’ or ‘We would like to renegotiate it’, that is no guarantee of anything,” Kennedy-Glans said. .
“We set expectations that cannot be met. “
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