The following letter was written by Gordon Campbell, premier of British Columbia. It was published in the Vancouver Sun and Globe and Mail. Normally such letters written by politicians can be safely ignored since they have been completely sanitized of information. Not this letter – it is so brilliant that that I will just quote it entirely in this post, with bolded parts emphasized by me:
Canada’s premiers are meeting once again to discuss ideas for strengthening Confederation. Central to that endeavour is the need to ensure that all governments have the revenue they need to provide the services for which they are responsible, within taxpayers’ ability to pay.
Canadians contribute about half-a-trillion dollars annually to their governments at all levels. That should be more than enough revenue to pay for all of the programs and services that governments provide. The question is: how can we better use that money to benefit taxpayers across Canada? How can we better ensure that all levels of government in every province have the fiscal capacity to deliver reasonably comparable levels of service at reasonably comparable levels of taxation?
Premiers have often called on Ottawa to assist in funding all sorts of worthy national priorities, from health care or skills training and post secondary education to transportation, infrastructure and a national pharmaceutical strategy. These represent billions of dollars in potential new investment, to say nothing of our common commitment to close the gaps for Aboriginal Canadians in health, education, housing and economic opportunity.
These are all vitally important national needs that should be supported within governments’ means. But there is a limit to what provinces can expect or should demand from the federal government, because taxpayers also deserve a break.
There is only one taxpayer in Canada – you. The biggest fiscal “imbalance” is not the so-called “vertical imbalance,” which suggests that the federal government has relatively more revenue than the provinces to pay for its responsibilities. Nor is it the “horizontal imbalance” that relates to the provinces’ differing abilities to generate revenues. Rather, it is the growing imbalance between governments’ insatiable appetite to spend and taxpayers’ ability to pay.
Simply put, governments at all levels are taking too much out of taxpayers’ pockets for too little marginal benefit, leaving working families too little to make ends meet and get ahead. If the federal government has more money than it needs to fulfill its responsibilities, its first priority should be to reduce the tax burden on all Canadians with a significant tax cut. This should take precedence over any increases in equalization or massive new increases in federal transfer payments to other governments.
Governments striving to increase revenue should focus on economic growth and wealth creation. While we look at modernizing fiscal federalism, we should also be driving a national competitiveness agenda, with competitive tax rates at the top of the list.
To compete and prosper in today’s economy, we must step up our commitment to train, attract and retain skilled workers. We do need new investments in post secondary education, skills training and apprenticeships. We also need to dramatically expand our efforts to recruit skilled immigrants, with flexible and pragmatic new immigration policies and national strategies for credentialing in areas of skills shortages. And we need to face up to the challenges of our aging population and consider alternatives to mandatory retirement.
Let’s create wealth by closing the social and economic gap with Aboriginal Canadians, the fastest growing segment of our population. The sooner we close the Aboriginal skills training gap, the faster we will address skills shortages and improve the quality of life for Aboriginal Canadians. Moreover, the sooner we negotiate contemporary solutions to the age-old problems that have made Aboriginal Canadians Canada’s third solitude, the faster we can all benefit from new partnerships across the economic and social spectrum.
Working together, Canada’s governments can generate economic growth by expanding targeted investments in infrastructure and transportation. We need to open up Canada’s Pacific Gateway and establish a Pacific corridor into the heart of the country and the continent with strategic investments in our ports, airports, roads, bridges and border crossings.
Economic growth can also be generated by getting accountability for spending tax dollars closer to the level of government delivering the service. For example, we could transfer 80 per cent of federal fuel taxes back to the provinces, along with the responsibility for funding provincial transportation priorities and the cost of the “New Deal” with municipalities, which is funded from fuel taxes. The federal government could then retain 20 per cent of that funding to pay for strategic transportation investments that are vital to our national competitiveness.
We should foster greater mobility of labour, investment and truly free trade within Canada. British Columbia and Alberta are leading the way in this regard through a new landmark agreement that establishes the second largest economic union in Canada, after Ontario. This is something that all provinces could do on their own, without a penny of new federal funding.
These are all far more urgent priorities, in my view, than a wholesale renewal of the equalization program. At a minimum, any change in equalization must not create new barriers to competitiveness through policies that tilt the scales against taxpayers in provinces that foot the bill.
Provinces that receive equalization should not have a higher fiscal capacity than non-recipient provinces. Provinces that benefit from equalization should not have higher per capita program expenditures than the average of provinces that foot the bill. And equalization subsidies should not grow faster than the average rate of inflation or the average rate of economic growth for Canada.
We should not make the equalization formula even more unfair and complicated by counting assessed property values as a measure of fiscal capacity when, in fact, these property values are not a measure of taxpayers’ ability to pay.
In the new fiscal federalism, commitments made should be commitments kept. And all governments should respect the hard work it takes for every taxpayer in every province to generate the revenues that we are entrusted with.
As we meet in Newfoundland, the premiers should be considering how we can strengthen Canada’s competitiveness through lower taxes, strategic national investments, co-ordinated planning, new relationships with Aboriginal Canadians and fair transfer payments. That is the roadmap to prosperity for all Canadians that British Columbia is committed to pursuing.
Efficient government, not more money thrown at issues is the way forward. I’m glad that our premier understands this.