Alberta still keeps federal finances afloat
Alberta’s major contributions to federal finances during the recent energy boom are well known, though the magnitude may not quite be understood. For example, during the 2014/15 fiscal year, Albertans paid more than $27 billion more in federal taxes than they received back in transfers and services. That year the federal budget was very nearly balanced, almost entirely due to that large net contribution from Alberta.
But with the recent downturn in Alberta’s economy, one might assume those large net transfers are a thing of the past. But as the chart below shows, Albertans still made a net contribution of more than $20 billion in 2017/18—smaller than in 2014/15, but still a very large net transfer.
To put that in context, it’s nearly twice as large as the net contribution Ontario made that year—and Ontario has three times Alberta’s population. In short, Alberta still makes an outsized contribution to Canada’s federal finances. In fact, over the last four fiscal years Albertans contributed around $92 billion (net) to federal finances. In other words, Alberta’s net contribution helped avoid nearly $100 billion of accumulated deficits.
To be clear, there’s nothing inherently wrong with Albertans paying more and receiving less from Ottawa. This trend is largely driven by higher wages and lower ages. People earning higher salaries tend to pay higher income tax rates, and a younger population tends to receive less in terms of social spending. Moreover, as the wealthiest province in the country, Alberta doesn’t qualify for equalization payments.
But understanding the magnitude of Alberta’s contributions to Canada’s finances is crucial when weighing policy decisions that impact economic activity in Alberta. Canadians across the country benefit when Albertans make outsized contributions to the federal budget, and they benefit from having greater job prospects when the Alberta economy is firing on all cylinders.
Alberta’s economic opportunities aren’t just opportunities for Albertans. They are opportunities for Canadians across the country and help keep our fiscal ship afloat. We’re fortunate to have a golden goose, and all Canadians should hope it keeps laying golden eggs.
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