Final and Unalterable - But Up for Negotiation: Federal-Provincial Transfers in Canada

Final and Unalterable - But Up for Negotiation: Federal-Provincial Transfers in Canada

Abstract

Federal transfers are a central but ever-changing feature of Canada’s federation. Despite early hopes that transfer arrangements were ‘a final and unalterable settlement’ of provincial demands, complex economic and political pressures forced successive governments to negotiate. To explore this history and Canada’s various transfer programs, I compile uniquely detailed data from Confederation to today. Explicit transfers to provincial governments are large, but more equally distributed today than throughout most of Canada’s history. I also propose a uniform methodology to quantify and analyze both explicit and implicit fiscal transfers. Overall, federal tax and spending activities redistribute just under 2 per cent of Canada’s GDP across provinces; but this too is less than any point in the past six decades. This data, analysis and brief historical review reveal why today’s transfer programs are designed as they are, what pressures they must withstand, and what future reforms might consider.

Publication
Canadian Tax Journal
Date
Avatar
Trevor Tombe
Associate Professor of Economics