Originally Posted by Acajack
People really need to learn the difference between equalization and transfer payments.
There are two big flaws in the way most people think about transfers. The first is that people don't realize that equalization is only one part of the federal-provincial transfer system, and that there are other bigger parts that go to every province.
Equalization will be $18B out of $72B of transfers in 2017-2018
. Canada's GDP is about $2 trillion.
The other big misunderstanding is that people don't realize that all federal taxpayers in all provinces and territories pay in to the system, because the transfers simply come out of the federal budget. They're not transfers from some provinces to other provinces. So even when a province collects equalization, its net benefit from the program is less than the dollar amount it collects. The net impact of equalization works out to maybe 0.5% of the size of the overall Canadian economy.
Another thing people probably don't know is that territorial funding is, on a per capita basis, huge compared to equalization. The territories get as much from their territorial transfers as Atlantic Canada gets in equalization. Atlantic Canada's population is more than 20 times larger. Meanwhile Quebec gets less per capita than, say, Manitoba. I rarely see rants about Manitoba or the Yukon sucking at the federal teat.