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Fiscal Imbalance in a Nutshell
11/07/2006

Andrew Potter has pointed out an article in Macleans on a recent report that seems to be simply perfect on the issue of the so-called fiscal imbalance…

  • The provinces' fiscal problems began when they cut taxes deeply in the 1990s
  • You can't entirely blame the provinces for these tax cuts as they are competing with each other
  • This is why the provinces need to complain about a federal "fiscal imbalance" instead of simply raising taxes to meet their needs
  • And it's why a freeing-up of tax room by Ottawa wouldn't be accompanied by the provinces stepping in to fill the void... (see any provinces raise their sales tax 1% this past July 1?)
  • The provinces, however, insulated themselves somewhat from their fiscal problems by downloading onto the municipalities. This is a real fiscal imbalance as the municipalities don't have the fiscal tools to pay these costs
  • As the provincial fiscal crunches have eased, they've haven't done much to reverse the municipal fiscal imbalance

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