March 30, 2001 Halifax Herald

Forget Landry; equalization Canada's biggest threat

Is it fair? This is the question that's posed by the provincial government's intent to take money from the so-called rich municipalities to make equalization payments to poorer ones. The answer is “no,” because property taxes are raised from the residents of a municipality to provide services to its own residents, not to provide services to residents of other municipalities. Equalization payments must be made from income tax revenues, which spreads the burden around evenly. But this forces us to face the fact that this province - for that matter, the country - can't afford the level of services we now have.

Which brings us to the root of Nova Scotia's problem. Instead of dealing constructively with the fact that the province is still living way beyond its means, successive provincial governments have been trying to do the impossible and milk a cow that's gone dry - the taxpayer. Canada is doing the same. Both must come to grips with the fact that public expenditures must match revenues and that revenues have reached their limit.

Let’s examine the concept of equalization payments. In a nutshell, such was instigated to assure that financial resources were available to enable all provinces to have ESSENTIAL public services that were fairly compatible across the country. The concept was great and worked well for awhile. Then it began to encourage irresponsible fiscal management in have-not provinces - i.e., roads to nowhere were built and paved, and expensive public services were set up in small, rural hamlets that couldn't dream of affording and supporting them. Once given, these luxuries are very hard to take away. Thus, we have dependence.

How much longer can the country go on before the dominos set up by dependence begin to fall. Bernard Landry's assertion that he is the most dangerous phantom for Canada's existence is laughable. The thing that most threatens the country's existence in not a man, but man's creation: equalization payments.

To find out why, let’s start at the top. The federal government will shortly be at the point, again, where it cannot maintain a balanced budget without further cuts. Cut where? The armed service is gutted to the point where many are calling them irrelevant. The only way to get more funds from this source is to eliminate it and ask the Americans to guarantee our freedom. The federal public service offers little hope either, because it’s been slashed to the point where it takes a very determined effort to communicate with the government. This leaves cutting equalization payments, and that will hit the have-not provinces like a sledgehammer.

Then there's Ontario's population growth lurking in the background. Within a couple of decades, that province will probably hold half of Canada's population - or if Quebec leaves, approximately two-thirds. What happens if Ontario taxpayers say they’ve had enough?

Now for examples of tax misuse. Instead of having the pothole-filled trails we today call roads, we would have well maintained highways and streets throughout this land if gasoline taxes were used for what they were originally intended. But they've been shoved into general revenue and improperly used to fund everything. Ditto for other sales taxes that were originally imposed to fund other specific programs.

The end result of these games is that the taxpayer is taxed to the limit. Therefore, increasing direct taxation is an option that governments are trying to avoid by coming up with new schemes. The alternative this province has chosen is property tax. If this comes to pass, many of the poorer rate payers, especially those who can barely afford to keep their homes now, will be losing them because these taxes will eventually increase bigtime. And you can bet your boots on this: As with sales tax revenues, money from this source will one day be used to fund other things besides municipal services.

Another reason why such a proposal is unfair is that in many cases, it amounts to robbing the poor to pay other poor. A great many poor people living in the so-called rich municipalities are struggling to pay property taxes now. Why should they be forced to give to municipalities where some very wealthy people reside? Cape Breton, for example, has more than its fair share of these.

As stated, income tax is the only fair method of taxation. Thus, funds for provincial equalization payments must come from this source. That will assure that those who can afford it will pay an equal share, and the poor won't be overburdened. Or as an alternative, begin to sharply shave non-essential expenses - for starters the pay checks and size of the legislature, councils, etc.

Nova Scotia is poor; its revenues are over committed. Governments can't perform miracles and we, the citizens, have to stop expecting such. And, if anyone thinks that a different government will change things, they’re in for a big surprise. The province is broke and whether the next government is Tory, Liberal or NDP, it will have to deal with that fact and make future cuts!

The present Tory government isn't responsible for the province's financial crunch - we are. Sooner or later, hopefully sooner, the fact that we can't afford a Cadillac and must get used to a Chev will be faced. Our own initiative, the best resource we have, has become rusty from lack of use. Let’s oil it up and find a way out of our fiscal mess, instead of looking for bandage handout solutions.

Daniel N. Paul


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