Thursday, October 29, 2009

Exiting the Transfer Payment Game

Almost a 100% of Ontario 25 billion dollar defiit is due to transfer payments -is it time for a change ? PR

In Brief:

There are many ways in which one could design a scheme of easing Ottawa out of the inter-regional transfer and redistribution game.

Ottawa could transfer the GST to the provinces and set the rate within their borders in exchange for an end to Ottawa’s transfers in many areas of social policy.

A debt-for-equalization swap would see Ottawa take over some part of the provincial debt to clean up government balance sheets in provinces with weaker economies, reducing interest payments, and giving them much more room to finance their own activities out of their own revenues.

These reforms would create a situation where one of the major friction points between Ottawa and Quebec—Ottawa’s interference in social policy—would have been largely eliminated, and the incentives for every part of the country to put in place better policies that promote investment, growth, and productivity would have been vastly improved.

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