During the 2019 federal election, Conservatives spoke in hushed tones about “the Doug Ford factor” in the campaign. Was the unpopular Ontario premier dragging the federal party down with him?

After the election, the chatter got louder and polling all but verified that Ford had a noticeable negative effect on Conservative chances in a province that was vital to the party’s electoral hopes.

The same poll showed that Alberta Premier Jason Kenney, riding high from an election win, was a strong factor in encouraging people to vote for Andrew Scheer’s federal Conservatives.

In fact, Scheer and Kenney held boisterous joint events, including one at a Calgary baseball diamond where they spoke together from the snow-covered bed of Kenney’s blue pickup truck.

To say things have changed in the last two years would be an almighty understatement.

In the wake of the COVID-19 pandemic, Kenney’s approval rating has cut in half, with even Ford polling ahead of him. Scheer has been replaced as Conservative leader by Erin O’Toole and the party has struggled to introduce the new leader to Canadians while the pandemic dominates the news cycle.

The attacks started early on O’Toole and they have ramped up as an election draws near. A recent advertisement by Unifor described O’Toole as another “out of touch politician we can’t afford.”

In a parody of pickup truck commercials, the gravelly-voiced narrator describes O’Toole as “driven to cut health care and public services, just like Jason Kenney.”

If the Unifor ad is anything to go by, Justin Trudeau’s Liberals may be planning to cast Kenney as the next Doug Ford, attacking him as a stand-in for the little-known O’Toole.

Kenney say it’s nothing new for him.

“I’ve already been in that situation, (Trudeau) ran explicitly against me and Alberta in the last election, saying in Quebec in the last week, in French, that we need a prime minister who will stand up to Jason Kenney and the big Alberta oil companies,” said Kenney, in an exclusive interview with The Hub.

“So I certainly hope he doesn’t do that, because I think the role of the prime minister is to strengthen national unity and not drive regional wedges. But he did it before in desperation, I wouldn’t be surprised if he does it again,” said Kenney.

The federal-provincial relationship is, by nature, fractious. The federation always has at least one province that feels hard done by and often it has many.

Along with criticizing the federal equalization program, Kenney has argued that Alberta makes an outsized contribution to the federal budget, compared to what it receives in federal spending. That recurring criticism from provinces actually pre-dates Confederation, with Upper Canadian politicians grousing about their contributions as far back as 1865.

In Alberta, it’s almost a rite of passage for a conservative premier to square off with Ottawa. Former Alberta Premier Ralph Klein spent his provincial career battling the federal government and Peter Lougheed, who presided over the province when Pierre Trudeau brought in the National Energy Program, believed that strong, assertive provinces make for a stronger federation. Kenney appears to agree.

Kenney said Trudeau’s policy criticisms are fair game and expects to see a lot of that during an election campaign.

“I make the case against his government’s re-election, he has every right to attack my policies, but by running against Alberta’s resource sector, he’s really running against the Canadian national economy,” said Kenney.

“It is obvious to the vast majority of Albertans that this is one of the most hostile federal governments we’ve ever had,” he said.

The campaign may have already started. During a federal announcement in July about funding for Calgary’s Green Line LRT project, Mayor Naheed Nenshi ripped the UCP government for demanding a review of the project, causing delays.

“Trudeau just took it all in with that Cheshire grin,” wrote Calgary Herald columnist Don Braid.

And although there are obvious policy and ideological differences, the phenomenon may simply be driven by the political opportunity created by Kenney’s plummeting approval ratings.

The Liberals will be hoping to pick up one or two seats in Edmonton and may be dreaming of snagging a seat in Calgary.

Mount Royal University political scientist Duane Bratt said the anti-Kenney message could even resonate in one or two urban Calgary ridings.

“They’re gearing up for battle. The difference this time is that the Liberals have chances inside Alberta, which they didn’t in 2019,” said Bratt.

In a June poll, the Angus Reid Institute found that only 31 percent of Albertans approved of Kenney’s job as premier, compared to more than 60 percent after his party won the spring 2019 election.

Politicians at various levels of government are taking notice and scoring easy points by criticizing the Alberta premier. In Calgary, a procession of municipal politicians hoping to succeed Mayor Naheed Nenshi took turns taking shots at Kenney’s government.

In 2019, when Trudeau was targeting Ford, the Ontario premier stayed out of the headlines for the duration of the campaign. Bratt said he doesn’t expect Kenney to hide, in part because it’s personal.

“There has been a pattern of behavior of bad relations on both sides between conservative premiers and Trudeau,” said Bratt. “I think there is a personal animosity between them and it has played out on so many different files over time.”

“Today our country is facing a national unity crisis,” said Conservative Party of Canada leader Erin O’Toole during an early July speech in Alberta. “It’s time for the unfairness to end. Since 1967, Albertans have contributed more than $600 billion to the rest of Canada … [and] even as your economy suffered with massive reductions in resource revenues, you as Albertans continued to pay more than your fair share.” 

Provincial leaders in Alberta couldn’t agree more. “Alberta has been the engine of Canada’s prosperity in recent decades,” said Alberta’s Premier Jason Kenney in a July 15 press conference. “We have contributed through our federal taxes over $600 billion to the rest of Canada… but what we find very frustrating is a system that finds us contributing on average $20 billion a year net through our federal taxes to other provinces even while we have been living through a prolonged recession.” 

As Canada moves towards a likely federal election soon, and Alberta towards an October referendum on equalization, we’re going to hear these figures frequently. But what do they mean? Where do they come from? And are they a sign of unfairness? These are important questions beyond just Alberta and worth exploring in depth.

Using a new interactive data tool from Finances of the Nation, I’ll try to explain.

Alberta’s $600 Billion Contribution?

First, just to be clear: the more than $600 billion net contribution since the 1960s cited by both Kenney and O’Toole is true. But the full context is often missing from political speeches.

Luckily, it is fairly simple.

The federal government raises revenue from several sources — taxes on incomes, wages, profits, consumption, imports, and so on. The same tax rates and schedules apply to all of us, but since some Canadians have different incomes, different consumption habits, and so on, we each pay different amounts. And since high-income people disproportionately live in some provinces over others, more is raised from those provinces than others.

At the same time, federal spending affects each of us differently. Older Canadians receive more transfers than younger (through CPP, OAS, and GIS) and parents more than singles. It might also depend on where you live. Halifax residents, for example, benefit significantly from high military spending. Some spending is spread perfectly evenly (such as health and social transfers), and therefore is not redistributive, but these programs are the exception. 

Combined, it’s differences in federal revenue and spending across provinces that redistribute funds. If the federal government raises more per person from some province than elsewhere, that’s an outflow; if it spends more per person then elsewhere, that’s an inflow; and so on. 

These flows can be very large.

Consider Alberta. The federal government raises more revenues from taxpayers residing there than elsewhere and also spends less. I plot this below. The gap for 2019 is nearly $20 billion — just as was cited by Premier Kenney

Between 1961 and 2019, this data suggests Alberta’s “net contribution” was $622 billion — roughly five percent of its economic activity over the period, equivalent to $3,344 annually per person in today’s dollars. Meanwhile, the net contribution by Ontario averaged about 4 percent of its economy ($992 billion or $1,671 per person) and the net inflow to Prince Edward Island averaged nearly 30 percent (!) of its economy.

(Un)Fairness in the Federation?

Whether this is fair or not depends on the cause. This is where the new tool really helps. 

Let’s start with Ontario.

Since a large share of federal activities are in Ottawa, Ontario residents and businesses tend to receive more in federal spending than elsewhere. That’s a negative contribution. Not all spending is high in Ontario, though. Its strong economy means that it doesn’t typically qualify for equalization payments and when it does, such as for the decade following the financial crisis, payments are relatively small. That’s a positive contribution.

On the revenue side, many high-earners live in Ontario, as do many profitable corporations. Federal taxes paid are therefore higher than average. On balance, Ontario is a net “contributor” to federal finances of roughly $18 billion in 2019.

Alberta is a more interesting case. Since 2007, over $328 billion was implicitly redistributed out of the province, that is, over half the total transfer since 1961 took place in just the past dozen years and most of this — fully 55 percent — is due to taxes on income, profits and consumption. And 18 percent of the net contribution is due to fewer payments to elderly individuals through CPP, OAS, and GIS. This is not because benefit amounts differ but because Alberta is a young province compared to others.

What about equalization? Redistribution through that program is about as significant as the federal GST.

And Alberta’s recession? Alberta’s economy contracted more than 20 percent from 2014 to 2016 and its net contributions fell by nearly 40 percent. Net contributions through taxes on income, profits, and consumption fell by more than half. But importantly, despite its recession average income among Albertans remains higher than any other province — and therefore net contributions continue.

So… is this fair? That’s not for me to say. But the same 5 percent GST applies in Alberta as elsewhere, as does the same 15 percent corporate income tax rate and the same income tax schedule for individuals. Identical treatment still results in redistribution because more high income individuals just happen to live in Alberta, and therefore pay more dollars than average. It’s not “Alberta” but high-income Albertans that account for this.

Of course, some prefer lower and flatter federal taxes while others prefer the reverse. Some prefer federal spending be allocated evenly across the country, others prefer it be allocated efficiently and at the least cost. Either way, one thing is clear, if one is concerned with federal redistribution then a focus on equalization is only a small part of the story. And, importantly, provincial governments do not themselves transfer anything to the federal government or to other provinces.

A Staple of Canadian Politics

Concerns around federal redistribution are neither new nor unique to Alberta conservatives. 

Ontario’s Liberal Premier Dalton McGuinty would regularly bang a similar drum — citing a $23 billion per year contribution to Canada, and saying it “compromises our ability to invest in Ontario’s future prosperity” and demanded “Ontario be treated fairly.” 

Grievances like these even pre-date Canada and are an interesting factor behind its very formation. George Brown, an influential politician behind Confederation, declared to fellow legislators in 1865: “We in Upper Canada have complained that though we paid into the public treasury more than three-fourths of the whole revenue, we had less control over the system of taxation and the expenditure of the public moneys than the people of Lower Canada. Well, sir, the scheme in your hand [Confederation] remedies that.”

One of his primary grievances was Canada West (i.e. Ontario) being a “net contributor,” and separation from Canada East (Québec) and forming a federation was the solution.

So concerns around redistribution and fairness are here to stay, making it important to be informed. Cutting through the sometimes oversimplified language of politics is never easy. Hopefully this explanation and new data helps make some sense of it.