Is equalization really unfair to Alberta?

While we're all still exercised about Alberta separatism - hopefully that will fade soon, now we know that Albertans don't actually want to separate from Canada - let's look at one of the main irritants that the separatists bring up time and time again: equalization payments, and specifically how unfair Albertans think they are.

Many provinces have complained about equalization payments at one time or another - Newfoundland, Ontario, even Quebec - but there is nothing inherently unfair about the idea of equalization payments, and only the most churlish or egocentric Albertan would claim that (were they to even think about it, that is - many separatists that use unfair equalization payments as an arguing point are just repeating the claims of separatist agitators without even understanding what they are or how they work).

Equalization was brought into the Canadian federal system in the 1950s, although its formulation has been changed a few times over the years (the current formula was designed by by an Albertan head of an expert panel under an Albertan Prime Minister, Stephen Harper). It was enshrined in the Canadian Constitution in 1982. 

It aims to ensure that all Canadian provinces can provide reasonably comparable public services at reasonably comparable tax rates, based on each province's "fiscal capacity" (it's ability to raise its own revenues). So, money is taken from the richer provinces and reallocated to the poorer ones. We are, after all, just one country, and not all parts of it were blessed with natural resources and useful geography. 

Thus, mainly by virtue of their vast mineral wealth and booming economies, British Columbia, Alberta and Saskatchewan (the "have provinces") are net contributors; the other ("have-not") provinces are net recipients, to greater or lesser degrees (a little to Ontario and Newfoundland, a lot to Quebec, Manitoba, Nova Scotia, New Brunswick and PEI). Just as an aside, contributing provinces like Alberta don't "pay into" the equalization program as such, even if many separatists like to give that impression; it's a federal program funded by federal taxes on individuals and corporations.

Alberta's economy is the strongest in Canada; it doesn't need extra help. Using a complicated but consistent formula based on notional average tax rates, Alberta could raise over $17,000 per person, $4,000 than BC, $7,000 more than Quebec, and $10,000 more than PEI. The system is not perfect: it can be argued that it might encourage provinces to keep their taxes high, under-invest in resources, or undercharge for its electricity (a major bugbear of separatist Albertans). Butprovinces can still have their own distinctive economic policies, even if other provinces object to them, like Quebec's cheap electricity rates and its fracking ban, or Alberta's decision not to impose a sales tax like every other province.

Alberta may not like some elements of the equalization program, but the fact that there are regional winners and losers does not in itself make the program unfair to Alberta. That's just life, the way it is. Even with an equalization program, Alberta is still by far the richest province in Canada.