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Contrary to popular belief, it does not redistribute wealth from richer provinces to poorer ones, since money for equalization payments comes from general federal government funds. Rather, as with every federal program, it is paid for most by the individual Canadian taxpayers who pay the most taxes, whatever their province of residence. Ontario and Alberta are the only provinces that do not receive equalization payments, but as discussed, the money for equalization payments to the other provinces is not somehow taken from their treasuries.
Some economists have suggested that Saskatchewan and British Columbia will join the ranks of the "have" provinces (i.e., those provinces that do not receive equalization payments) in 2005.
Unlike conditional transfer payments such as the Canada Health and Social Transfer, the money the provinces receive through equalization can be spent in any way the provincial government desires. The payments help guarantee equal levels of health care, education, and welfare in all the provinces.
Today the total amount of the program is around 10 billion Canadian dollars per year.
The basics of equalization payments has been around since Canadian Confederation when the federal government had most of the taxation powers. The federal government would make transfer payments to the provinces to cover their needs. There was no obligation that these transfer payments had to reflect the amount collected in each province and thus wealth was always redistributed.
A formal system of equalization payments was first introduced in 1957. The idea was based on the proposals of American economist James BuchananFor the economist of this name, see James M. James Buchanan ( April 23, 1791 June 1, 1868) was the 15th ( 1857- 1861) President of the United States. He was the only bachelor President, and the only citizen of Pennsylvania to hold that office. He has been and they were introduced mainly to help the struggling Atlantic provinces who were seeing low rates of growth and high rate of emigration to central Canada.
The original program had the goal of giving each province the same per capita revenue as wealthy Ontario. Five years later this goal was reduced to ensuring each province had revenue that equaled the national per capita average. In 1967Events January January 4 British motorboat racer Donald Campbell dies while attempting a water speed record in Coniston Lake. January 4 Algerian revolutionary Mohammed Khider is shot in Madrid. January 6 Vietnam War: USMC and ARVN troops launch " Operatio the system was redesigned to work with every government revenue scheme with the exception of energy, this gave Canada by far the world's most generous system of equalization payments.
In the 1982 Constitution ActCanada Act 1982 is an Act of Parliament passed by the British Parliament that severed virtually all remaining constitutional and legislative ties between the United Kingdom and Canada. History Canada's road to political self government came with the Briti creating a new constitution included the rights of the poorer provinces to equalization payments and it is extremely unlikely that this provision will be amended.
In 2004, the federal government and the provinces agreed to a new formula for equalization payments that increased the funding given to "have not" provinces. Some "have not" provinces accepted the deal reluctantly however, complaining of insufficient money and a new per capita formula to be introduced in 2005-06 that will award cash based on population size.