Has equalization outlived its original purpose of helping all provinces provide roughly the same level of services to their citizens? According to Alberta’s Minister of Finance, Ted Morton, it has: “If Ontario’s not happy with it, if it doesn’t do any good for Saskatchewan, B.C. or Alberta, it seems to me there’s room for productive discussion.”1
In Canada, the public has expressed similar sentiments. A poll commissioned by the Association for Canadian Studies asked respondents whether, regarding “money and other considerations,” their province or territory “puts more into Confederation than it takes out.” In Alberta, 78 per cent said they give more than they take—more than 20 percentage points higher than in B.C. (55 per cent), Ontario (50 per cent) and the national average (46 per cent).2
The reality, as will be noted in this brief review of equalization, is that Canada and Australia harm the productive provinces and states by sending tax money from productive regions to under-performing regions. By comparing equalization systems in Canada and Australia, this paper explores whether equalization really serves its intended purpose, and it provides alternatives to the current system.