Equalization Myths vs Facts: Canada and the World | Dwight Heck

Dwight Heck on how equalization works in Canada, Give A Heck Podcast with Dwight Heck

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How does equalization work in Canada, and who really pays for it? In this solo episode, Dwight Heck explains the formula, tests four common myths with the real numbers, and compares Canada with Germany, Switzerland, Australia and the United States.

 

📌 Corrections and Source Notes

These figures were spoken a little differently in the audio. The numbers below are the officially printed ones, and each source is linked in the Sources section further down.

• Alberta Heritage Savings Trust Fund. In the episode, Dwight says deposits stopped in 1987. Deposits of resource revenue stopped in 1987, but the Government of Alberta did put money into the fund this past year, $2.8 billion in 2025 to 2026.

• Equalization per resident. The episode gives rounded figures. The printed figures are Quebec $1,568, Manitoba $3,448, Nova Scotia $3,336, New Brunswick $4,004 and Prince Edward Island $4,128.

• National average federal revenue per resident. The episode says $11,825. The Library of Parliament prints $11,796, and its published method includes the Canada Pension Plan, which the episode leaves out.

• Bavaria. The episode says 11.7 billion euros near the start and 11.6 billion in the Germany section. The printed figure is about 11.7 billion euros.

• Zug. The episode says 529.9 million Swiss francs. The printed figure is 529 million Swiss francs net, about 4,001 Swiss francs per resident.

• Norway’s fund. Norges Bank Investment Management prints the value in kroner, 22,683 billion kroner at June 30, 2026. The US dollar figure of about 2.39 trillion, and about $425,000 per Norwegian, is an estimate that depends on the exchange rate.

 

🎤 Give A Heck Podcast

Real conversations and solo episodes about purpose, financial stewardship, mindset, leadership, and intentional living.

🔍 Episode Overview

Almost everyone in Canada has an opinion on equalization, and very few people have looked at how it works. In this solo episode, Dwight Heck starts with two surprising facts: the Government of Alberta has never written an equalization cheque to Quebec, and Bavaria, one of Germany’s 16 states, gave up about 11.7 billion euros of its own tax revenue last year. If you have ever said Alberta pays Quebec’s bills, the system you are describing does exist. It is just in Germany.

From there, Dwight explains what equalization is, how fiscal capacity works, who pays for it, and where the money goes in 2026 to 2027. He tests four myths one at a time: that Alberta writes a cheque to Quebec, that Alberta gets nothing back, that scrapping equalization would give Alberta its money back, and that equalization rewards bad management. He shows what Albertans and British Columbians really pay in federal tax per resident, what federal spending comes back, and what that looks like for a family of four.

Dwight then compares Canada with Germany, Switzerland, Australia and the United States, and turns the camera around for a harder question about Alberta’s own resource revenue and fiscal choices. He closes with three takeaways: go to the source, separate the feeling from the formula, and bring it home to your own numbers.

📚 What You Will Learn in This Episode

  • What equalization is, what the Constitution says about it, and why provincial governments pay nothing into it
  • How fiscal capacity, the five areas of revenue and the resource rule decide who receives equalization
  • Which seven provinces receive it in 2026 to 2027, and what Alberta and British Columbia receive instead
  • What Albertans and British Columbians pay in federal tax per resident, and what federal spending comes back
  • Four myths about equalization, tested with the real numbers
  • How Germany, Switzerland, Australia and the United States handle the same problem
  • Three takeaways for separating the feeling from the formula and knowing your own numbers

📵 Chapter Summaries

[00:00] Teaser and Show Introduction

Dwight opens with a reminder that frustrated and accurate is hard to ignore, then the standard Give A Heck introduction.

[01:20] Welcome and What You Will Get Today

Every country with richer and poorer regions has to decide how to share the wealth. Dwight opens with two surprising facts, that Alberta has never written an equalization cheque to Quebec and that Bavaria gave up about 11.7 billion euros last year, and lays out the plan for the episode.

[03:31] Why Dwight Pulled the Real Numbers

Most of what Dwight hears about equalization is half right at best. His promise: show how it works, show where every number comes from, and let you decide how you feel about it.

[05:09] What Equalization Is and What the Constitution Says

A federal program that started in 1957 and was written into the Constitution in 1982, and what section 36(2) does and does not promise.

[06:15] Who Actually Pays for It

Provincial governments contribute nothing. The money comes out of federal taxes paid by Canadians in every province.

[06:46] Fiscal Capacity Explained

Two neighbours on the same street, one in the oil patch and one in retail, show why a province cannot get more equalization by spending more or by cutting its own taxes.

[07:48] The Formula: Five Areas, the Resource Rule and the Cap

The five areas of fiscal capacity, the special treatment of natural resources, the cap, the comparison with the average of all ten provinces, and the three year smoothing rule.

[08:53] How Big the Pie Is and Adjustment Payments

Since 2009 the total has grown with the economy, not with need. Ottawa sets the size of the pie first, then the formula slices it, and any leftover becomes adjustment payments.

[09:57] This Year’s Numbers by Province

Total equalization for 2026 to 2027, how it compares with all major federal transfers, which seven provinces receive it, and what Alberta and British Columbia receive through the Canada Health Transfer and Canada Social Transfer.

[11:34] Equalization Per Person, Ontario and Newfoundland and Labrador

Quebec gets the most dollars because it has the most people, but per resident it is not close to the top. Ontario and Newfoundland and Labrador have come and gone from the list.

[12:37] The History Books and Myth One: Alberta Writes a Cheque to Quebec

Every province has received equalization at some point, Alberta included. The Government of Alberta sends nothing to Ottawa for equalization.

[13:52] What Albertans and British Columbians Really Pay in Federal Tax

Income tax paid per taxpayer, then the fairer yardstick of all federal revenue per resident, with the Alberta and British Columbia breakdowns.

[17:00] Myth Two: Alberta Gets Nothing Back

Federal spending per resident in Alberta and British Columbia, what goes straight to people, what goes to the provincial governments, and the plain comparison of what each province sends and gets back.

[19:20] A Family of Four: What Goes Out and What Comes Back

Two working parents and two kids, the federal income tax they might pay, and the main federal programs that flow back to households, most of them tied to income.

[23:42] Myth Three: Kill Equalization and Alberta Gets Its Money Back

The difference between equalization and the net fiscal contribution, an estimate of how much of Alberta’s and British Columbia’s share is equalization, and why Alberta would still pay in more than comes back.

[26:01] Myth Four: Equalization Rewards Bad Management

What is true, what is not, and the fair points critics make about the formula, with renewal due before 2029.

[27:46] Germany

States fund each other directly through adjustments to the national sales tax, about 20 billion euros a year, and Bavaria has taken the system to the constitutional court.

[29:27] Switzerland

A hybrid with 26 cantons, a mix of federal and canton money, a separate fund for geography and city costs, and a guaranteed floor.

[30:35] Australia

The Commonwealth Grants Commission looks at revenue and the cost of delivering services, and Western Australia, the Alberta of Australia, got the rules changed.

[32:23] The United States

No formal program and no constitutional promise, but money still moves between states through federal spending.

[34:00] Five Systems Side by Side

A quick recap of how Canada, Germany, Switzerland, Australia and the United States each handle the same problem.

[34:39] Turning the Camera Around: Alberta’s Own Resource Revenue

Alberta controls its own resources, the royalties never touch the federal numbers, and the budget swings with oil prices set half a world away.

[36:24] Three Facts from the Last 50 Years

How Alberta has handled its resource wealth: the Heritage Savings Trust Fund compared with Norway’s fund, the lowest taxes in the country, and where per student spending has gone. See the correction note at the top about the Heritage Fund.

[38:36] Health Care and the Same Line

Surgeons working in both the public and private pay systems, and the question every family should ask about the line.

[39:38] Needs Before Wants, Even for a Province

What Dwight tells every family, save in the good months so the bad months do not sink you, and the honest question to ask about the past 50 years.

[40:59] Why Real Numbers Change Minds

The Purpose Rules couple, John and Sally, and what changes when the real numbers go on the table.

[41:29] Three Takeaways

Go to the source, separate the feeling from the formula, and bring it home to your own numbers.

[43:14] Where Dwight Can Help

Licensed in Alberta and British Columbia for products, and coaching through the five stages for everyone else.

[44:53] Closing and Thank You

Where to find the show notes with the sources for every number, and the sign off.

🎯 Key Takeaway

You are allowed to be frustrated, and you are allowed to want change, but your argument is far stronger when your facts are right and when you aim it at the government that actually controls the money in question. Go to the source, separate the feeling from the formula, and then bring it home: know your income, know where it goes, know your net worth, and know what protects your family. Frustrated and accurate is hard to ignore. Frustrated and wrong is easy to dismiss.

💬 Continue the Conversation

If this episode resonated with you, here are related episodes to explore:

The John and Sally episode Dwight mentions, and the step of putting your real numbers on the table.

Protecting your family and the savings rule, the same save in the good months idea from this episode.

A guest story about rebuilding financially, and why the plan matters more than the product.

On the hidden beliefs behind strong feelings, the same ground as separating the feeling from the formula.

On how persuasion works, useful context for weighing the arguments you hear about money and politics.

🔑 Key Themes Discussed

  • How equalization works and who actually pays for it
  • Four myths about equalization, tested with the real numbers
  • What Albertans and British Columbians pay in federal tax and what comes back
  • How Germany, Switzerland, Australia and the United States compare
  • Separating the feeling from the formula, and knowing your own numbers

👤 About Dwight Heck

Dwight Heck is a financial and life coach licensed in Alberta and British Columbia, operating as Give A Heck Financial through Hub Financial Inc. He has been in financial services since September 2001, after pivoting from a career in IT consulting. Over 24 years, Dwight has developed The Purpose Rules, a five-step coaching process, and the 7 Pillars of Intentional Living framework. He is the host of the Give A Heck Podcast, a globally ranked show with listeners in over 85 countries, and the Amazon bestselling author of Give A Heck: How to Live Life on Purpose and Not by Accident. Dwight is based in the Edmonton, Alberta area and is a single dad of five.

🤝 Connect with Dwight Heck

🎧 Listen and Watch This Episode

💭 Final Thoughts

Before you share the next post or meme about equalization, take five minutes and look up the number. Then ask yourself a simpler question about your own household: are your needs covered first, and are you saving in the good months so the bad months do not sink you? The same habits apply to a province, a country and a family.

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💬 Ready to look at your own numbers?

📎 Sources

Every figure in the episode comes from the sources below. The estimates of about $770 per resident in Alberta and about $620 in British Columbia are Dwight’s own, using each province’s share of federal revenue applied to the year’s equalization total.

Equalization amounts by province, the 27.16 billion total, the 108.4 billion in major transfers, the Canada Health Transfer and Canada Social Transfer for Alberta and British Columbia, and the March 31, 2029 authorization

How the formula works: fiscal capacity, the five areas, the resource rule, the cap and the smoothing rule

Federal revenue and spending per resident in Alberta and British Columbia, the net fiscal contribution, and the per taxpayer income tax figures

Family of four example and the federal benefits that come back to households

Critics’ points on the formula, and per student spending in Alberta

Germany: the 20 billion euros, Bavaria, and the federal top up

Switzerland: the record 2027 equalization, the canton of Zug and the 86.5% floor

Australia: the Commonwealth Grants Commission, Western Australia and the GST carve up

United States: which states pay more than they get back

Alberta resource revenue, total revenue, the budget swing and the tax advantage estimate

Alberta Heritage Savings Trust Fund

Norway’s fund

📝 Full Episode Transcript

[00:00:00] Dwight: You’re allowed to be frustrated and you’re allowed to want to change, but your argument is far stronger when your facts are right and when you aim it at the government that actually controls the money in question.

[00:00:19] Frustrated and accurate is hard to ignore. Frustrated and wrong is easy to dismiss. Welcome to Give a Heck. I am your host, Dwight Heck, and for much of my life, lived my life in quiet, desperation wondering how I was going to pay the bills, take vacations, save for retirement, and one day wondering if I would get off the hamster wheel of life and have purpose, a life that most of society lives, which takes us to work, then home, then repeat, and pays us hopefully enough.

[00:00:51] Just to survive the harsh truth that most live with more months than money and have no idea how to live life on purpose, not by accident. This ensures the mass majority are living not just financially broke, however, emotionally and mentally as well. Due to financial pressures and each episode, I will introduce you to thoughts, ideas, and guests that can help you to learn how you too can live life on purpose, not by accident.

[00:01:20] Dwight: Every country with richer and poor regions has to answer the same question. How do you share the wealth and who actually pays for it? In Canada, our answer is called equalization. Almost everyone has an opinion on it, and very few people have ever looked at how it works. Germany, Switzerland, Australia, and the United States all have their own answers, and they argue about theirs just as loudly as we argue about ours.

[00:01:55] So let’s start with a fact that surprises almost every Albertan I talked to, the government of Alberta has never written an equalization cheque to Quebec. Not this year, not last year, not ever. Here’s another one. Last year, Bavaria, one of Germany’s 16 states, gave up about 11.7 billion euros of its own tax revenue, and that money went to the poor states around it.

[00:02:30] That’s a real transfer from one government’s revenue to another’s. So if you’ve ever said Alberta pays Quebec’s bills, the system you’re describing does exist. It’s just in Germany. Today, I’m going to clear up one of the most misunderstood programs in this country. What equalization really is, who pays for it?

[00:02:59] Where the money goes this year, what it actually costs. Albertans and British Columbians, how Canada compares with Germany, Switzerland, Australia, and the United States. And then a harder question about our own money here at home. No spin, just the numbers and where to find them yourself. Good day and welcome to Give a Heck.

[00:03:31] I’m Dwight Heck, and today it’s just me, no guest. I’ve been in the financial services industry since 2001, and in that time I’ve heard equalization come up everywhere at the hockey rink, at family dinners, in coffee shops, and more than once across the table from a client. I’ll be honest with you, most of what I hear is half right at best, and a lot of it is just plain wrong.

[00:04:04] It gets repeated so often that people stop questioning it. So I decided to do what I do with every client who sits down with me. Stop guessing, pull the real numbers and look at them together. Here’s my promise. I’ll show you how it works and where every number comes from. Then you decide how you feel about it.

[00:04:32] You deserve to know how the money actually moves before you make up your mind. That’s what I tell people about their own budgets. You can’t fix what you won’t look at to my listeners in the United States, Australia, Germany, the UK, and everywhere else, please stick around. Your country almost certainly does some version of this, whether it calls it equalization or not, we’ll get to you.

[00:05:09] Equalization is a federal program. It started in 1957 and in 1982, it was written into the constitution. Section thirty six subsection two commits Ottawa to making sure every province can offer reasonably comparable public services at reasonably comparable levels of taxation. Notice what that doesn’t say.

[00:05:36] It doesn’t say every province gets the same money, and it doesn’t say every Canadian gets the same income. It’s about a provincial government being able to run a hospital, a school, and a highway at roughly similar tax rates, whether you live in Charlottetown, Edmonton or Vancouver. Now, the most important point in this whole episode, who pays the federal government out of its general revenue?

[00:06:15] Provincial governments contribute Nothing. Not Alberta, not Saskatchewan, not British Columbia, not anyone. The money comes from federal taxes, which are paid by Canadians and every province, including people who live in the provinces that receive equalization. So how does Ottawa decide who gets what? It uses something called fiscal capacity.

[00:06:46] Fiscal capacity is how much a province could raise if it charged national average tax rates. It’s not what the province actually collects, and it’s not what it spends. Picture two neighbours on the same street, one works in the oil patch, the other works retail, equalization doesn’t care how either of them spends or whether one picked up a second job and asks one question.

[00:07:20] If both worked a standard week at a standard rate. What could each bring home? The one with less earnings power gets help. How either chooses to live is their own business. That’s why a province can’t get more equalization by spending more, and it can’t get more by cutting its own taxes. The formula doesn’t look at either one.

[00:07:48] Fiscal capacity is measured across five areas. Personal income tax, business tax consumption, taxes like sales tax, property tax and natural resource revenue. Natural resources get special treatment. A receiving province automatically gets the better of the two calculations. One counting half its resource revenue and one counting.

[00:08:19] None of it. There’s also a cap. No receiving province can end up with more fiscal capacity than the poorest province that doesn’t receive equalization. Each province is compared with the average of all 10. Below average, you receive a payment above average. You don’t. There’s a smoothing rule too. The formula uses a weighted three year average that runs two years behind.

[00:08:53] So this year’s payments reflect each province’s economy from a few years ago, which is why they can seem out of step with today’s headlines. And here’s the part, almost nobody knows since 2009, the total size of the pot has grown in step with the national economy, not with how far apart the provinces are.

[00:09:22] Ottawa decides how big the pie is first, and then the formula slices it up. If the formula slices add up to less than the pie, the leftover is handed out to the receiving provinces equally per person. Those are called adjustment payments. Hold on to that because it matters later. The three territories have their own program, territorial formula financing, so they are not part of today’s numbers.

[00:09:57] The current formula is authorized until March 31st, 2029. These numbers come straight from the Department of Finance Canada, and you can look them up yourself in about five minutes for 2026. 2027. Total equalization is 27.16 billion. Ottawa will send provinces and territories 108.4 billion through all of its major transfers, combined.

[00:10:27] So equalization is about a quarter of that. Seven provinces receive equalization this year, Quebec, 13.9 billion. Manitoba 5.04 billion. Nova Scotia, 3.54 billion. New Brunswick 3.36 billion. Prince Edward Island, 723 million Ontario, 406 million. Newfoundland and Labrador, 182 million. Saskatchewan, Alberta and British Columbia receive zero.

[00:11:03] That doesn’t mean they get nothing from Ottawa. This year, Alberta receives 9.2 billion and British Columbia, 10.3 billion through the Canada Health Transfer and the Canada Social transfer. The same amount per person every province gets. Quebec gets about 51% of the dollars, and that’s the number everyone quotes now.

[00:11:34] Look at it per person. Quebec works out to about $1,500 per resident. Prince Edward Island is about 3,900 New Brunswick, about 3,800 Manitoba, about 3,300 and Nova Scotia, about 3,200. Quebec gets the most dollars because it has the most people per person. It isn’t close to the top. What about Ontario? The biggest economy in the country?

[00:12:06] Ontario first qualified in 2009, 2010. Received payments for about a decade, dropped off after 2018, 2019, and came back in 2023, 2024. Its current payments come mostly through those adjustment payments. I mentioned money left over because the pie is bigger than the formula needs. Newfoundland and Labrador is back on the list too as of 2024.

[00:12:37] 2025 after years without payments. And here’s one for the history books. Since 1957, every province in Canada has received equalization. At some point, Alberta included. Alberta’s last payment was in 1964, 65. Myth number one, Alberta writes a cheque to Quebec. It bears repeating because it’s the big one. The government of Alberta sends nothing to Ottawa for equalization and neither does the government of British Columbia.

[00:13:19] What is true is that Albertans and British Columbians pay more federal tax than people in most provinces measured per resident. Alberta is the highest in the country, and BC is third behind Ontario. Federal tax pays for everything Ottawa does, equalization included. Let’s start with the people who actually pay income tax, and that’s the mostly working people.

[00:13:52] In 2024, tax year, about 2.57 million Albertans filed a tax return and owed federal income tax. Together, they paid 30.1 billion. That’s an average of about 11,700 in federal income tax per taxpayer. In British Columbia, about 3.09 million. Taxpayers paid 33.2 billion, an average of about $10,700. Across Canada, the average was about 9,900.

[00:14:25] Two cautions on those numbers first, an average gets pulled up by the highest earners, so most working people pay less than that. Second, nearly three in 10 people who filed a tax return in both Alberta and BC owed no federal income tax at all. Income tax isn’t the only federal money that leaves a province.

[00:14:53] Businesses pay corporate income tax. All of us pay GST when we shop, and workers and employers pay employment insurance premiums to compare provinces fairly. Statistics Canada and the Library of Parliament add all of that up and divide it by everyone who lives in the province. Every man, woman, and child, babies and retirees included, nobody gets a bill for that number.

[00:15:28] It’s a yardstick and it’s the fairest way to compare one province with another. I’m leaving out the Canada Pension Plan because it’s a separate fund by that yardstick. In 2024, Ottawa collected the equivalent of 14,965 for every resident of Alberta. For British Columbia, it was 12,174 and the national average was 11,825.

[00:16:02] Here’s how the Alberta figure breaks down per resident, 6,810 in personal income tax paid by individuals 3,562 in corporate income tax paid by businesses, and that’s where the energy companies federal taxes show up. 1,448 in GST paid by everyone who buys things 1,259 in excise fuel and custom taxes.

[00:16:30] 778 in employment insurance premiums paid by workers and employers about 1,100 in other federal revenue for British Columbia per resident. It works out to 6,251 in personal income tax, 2,043 in corporate income tax, 1,637 in GST 865 in employment insurance premiums and about 1,380 in everything else.

[00:17:00] That’s a real contribution and Albertans and British Columbians should be proud of it. It just isn’t a cheque from Edmonton or Victoria to Quebec City. Myth number two, Alberta gets nothing back using the same yardstick. Federal spending in 2024 worked out to the equivalent of $11,089 for every resident of Alberta and 10,738 for every resident of British Columbia. In Alberta nearly $3,900 per resident went straight to people old age security, the Canada Child Benefit, employment insurance, the GST Credit and more. A big share of that is old age security for seniors. The GST credit alone put about 806 million into Albertan’s pockets in 2024 and in July of this year, it was renamed the Canada Groceries and Essentials benefit with a 25% increase that runs for five years.

[00:18:11] About $2,800 per resident went to the Alberta government, mostly through the Canada Health Transfer, which helps pay for hospitals and doctors and the Canada Social Transfer, which supports post-secondary education, social programs, and childcare. The rest covers First Nations and local governments, federal operations, including the military, and an equal share of interest on the national debt.

[00:18:50] British Columbia looks similar with one telling difference. BC has an older population, so old age security works out to about $1,960 per resident there compared with about 1,450 in Alberta, we get nothing simply isn’t accurate in either province. So let me say it as bluntly as I can without stretching the numbers.

[00:19:20] Province wide. In 2024, Ottawa collected the equivalent of 14,965 per Albertan and spent 11,089 and BC had collected 12,174 per resident and spent $10,738. Both provinces send more to Ottawa, than comes back. Now let’s bring that down to a working household. Picture a family of four, two working parents and two kids.

[00:19:52] The kids don’t pay income tax. If both parents were average taxpayers together, they’d pay roughly 23,400 a year in federal income tax in Alberta, or roughly 21,500 in BC. On top of that, come employment insurance premiums off their paycheques and GST When they shop. Plenty of working families pay less because those averages are pulled up by the highest earners.

[00:20:25] What comes back to that family? Depends on what they earn. Take a family with an adjusted family net income of a hundred thousand dollars. One child under six, one child between six and 17 for the current benefit year, July, 2026 to June, 2027. Their Canada child benefit works out to about $8,000. Tax free at 150,000.

[00:20:53] It’s about 5,200, and here are the main federal programs that come back to households. Most of them depend on your income. For a family of four with two kids, the federal government may provide the Canada child benefit tax free up to 8,157 a year for each child under six and up to 6,883 for each child.

[00:21:22] Age six to 17 reduced as family income rises. Lower fees for licensed childcare before kindergarten through the federal childcare agreements, aiming for an average of about $10 a day. The Canada Groceries and Essentials benefit formally the GST credit for low and modest incomes. The Canadian Dental Care Plan for families with no dental insurance and an adjusted family net income under 90,000.

[00:22:01] The Canada Education Savings Grant, which adds 20% to RESP contributions up to $500 a year per child and employment insurance, maternity and parental benefits. When a new baby arrives for a single person, the federal government may provide the Canada Groceries and essentials benefit for low and modest incomes the Canada workers benefit a top up for low income workers.

[00:22:38] Employment insurance. If you lose your job, get sick or need to care for someone. The Canada Dental Care plan, if you have no dental insurance and your adjusted net income is under 90,000. The Canada disability benefit for low income working age adults with an approved disability tax credit, Canada student grants and loans.

[00:23:10] If you go back to school, old age security and the guaranteed income supplement for lower income seniors starting at 65. And then there’s what every one of us uses whether we think about it or not, the hospitals and doctors. The Canada Health Transfer helps pay for colleges and universities, the military border services, and airport security.

[00:23:42] Myth number three, kill equalization and Alberta gets its money back. This is where two different things get mixed up. One is equalization. The other is what economists call the net fiscal contribution. Every federal dollar collected in a province, minus every federal dollar spent there in 2024.

[00:24:07] That gap was 19 billion across Alberta. The largest net contribution in Canada spread across every resident. That’s the equivalent of $3,876 per person. In British Columbia, the gap was about 8.1 billion or $1,436 per resident. Those were the only two provinces that paid in more than they got back. So how much of that is equalization?

[00:24:38] Nobody pays a separate equalization tax, but you can estimate it. Alberta paid about 15% of all federal revenue in 2024 from individuals and businesses combined. 15% of that year’s, roughly 25 billion in equalization is about 3.8 billion spread across every resident. That’s roughly $770 per person.

[00:25:05] British Columbia paid about 14% of federal revenue, which works out to roughly $620 per resident. Think about that. In Alberta, about $770 of 3,876 per resident is equalization. Scrap the program and tomorrow, and Alberta would still pay in about $3,100 more per resident than Ottawa spends here. Why?

[00:25:32] Because Alberta produces more per person than any other province, and higher incomes pay more tax under the same federal rates, and Alberta is the second youngest province, so fewer people collect old age security. That’s how a progressive tax system works anywhere, as you’ll hear when we get to the United States.

[00:26:01] Myth number four, equalization rewards bad management. There’s some truth here, and I want to be fair. On one hand, the formula ignores spending and actual tax rates, so a province can’t earn more equalization by spending carelessly. On the other hand, critics make fair points. The Fraser Institute notes that when a receiving province earns more from its own natural resources, its equalization drops, which can make developing those resources less attractive.

[00:26:44] They’ve also shown that the gaps between richer and poorer provinces have been shrinking while payments keep growing. That’s the pie being tied to the economy not to need, and it’s exactly where those adjustment payments come from in the Maritimes Equalization now makes up more than 20% of provincial revenue.

[00:27:15] So here’s where I land. You can believe in this country and in the principle of comparable services for every Canadian and still think the formula could be better. Both can be true, and with that formula up for renewal before 2029, now is the time for informed people to have that conversation. Canada is far from alone.

[00:27:46] Almost every federation has richer and poorer regions and everyone has had to decide what to do about it. Germany. Germany has 16 states since 2020. Its system has worked by adjusting each state’s share of the national sales tax. Rich states get deductions and poorer states get supplements, and 2025, about 20 billion euros move this way.

[00:28:18] Bavaria gave up 11.6 billion, close to 60% of the total Baden-Württemberg and Hesse gave up about 4 billion each. And Hamburg about 330 million. Those four paid and the other 12 received with Berlin receiving the most, almost 4.2 billion euros. Bavaria took the system to Germany’s constitutional court in July, 2023, and the court still hasn’t ruled.

[00:28:55] And this summer, Germany’s federal government agreed to cover 400 million euros a year of what the paying states owe from 2026 to 2029. The key difference in Germany, the rich states own revenue is reduced to fund the poorer ones. That’s the rich province paying for the poorer province’s system. So many people think we have this Switzerland.

[00:29:27] Switzerland has 26 cantons, a bit like provinces. Its main program evens out revenue like ours. Almost two thirds paid by the federal government, and one third comes directly from the wealthier cantons. A separate program paid entirely by the federal government covers extra costs, some cantons face from rugged mountains geography, or the demands of big cities.

[00:29:59] For 2027, the Swiss system hits a record $6.9 billion. In Swiss Francs, the canton of Zug, a small low tax canton that has attracted wealthy residents and international companies pays 529.9 million francs. That’s about 4,000 francs for every person who lives there. Swiss law also guarantees that after redistribution, every canton receives at least 86.5% of the national average.

[00:30:35] So Switzerland is a hybrid, part federal like Canada part canton like Germany with a guaranteed floor. Australia. This is the one Albertans should watch most closely. Australia splits its National Goods and Services Tax, or GST among its states and an independent body called the Commonwealth Grants Commission decides each state’s share.

[00:31:06] Unlike Canada, Australia looks at two things, how much revenue each state can raise and how much it costs to deliver services there. Remote communities and spread out populations cost more. And the formula counts that. Western Australia is Australia’s Alberta. It’s resource rich built on iron ore. For years, the formula gave Western Australia far less GST per person than other states and people there were furious.

[00:31:45] In 2018, Australia changed the rules. It added a guaranteed minimum, and today Western Australia gets the same rate as New South Wales, just under 82 cents on the dollar. Here’s the important part, Australia didn’t take that money from other states. The federal government topped up the pot and in 2026, 2027, that will cost Australian taxpayers 6.6 billion Australian dollars.

[00:32:23] Now, New South Wales is upset and wants a straight per person split, and a national review is due to wrap up by the end of this year. Every system it seems has someone who feels shortchanged. The United States. The United States has no equalization program and no constitutional promise, but money still moves from some states to others through federal spending.

[00:32:55] Social Security, Medicare, Medicaid, food assistance, military bases, and federal jobs. The Rockefeller Institute of Government tracks this every year and 2023. Only three states paid more to Washington than they got back. New Jersey, Massachusetts, and Washington State. The bigger gainer in total and per person was Virginia home to a huge share of federal employees and defence contractors.

[00:33:32] Florida gets more back partially because so many of its retirees collect social security. So even a country that never set out to equalize anything ends up moving money from richer regions to others. The difference is that Americans have no formula, no stated goal, and no single number to look up and argue about.

[00:34:00] Canada publishes its numbers every year for everyone, for anyone to read, pulling it together. Canada Federal money only promised in the Constitution based on revenue capacity. Germany, rich states fund poor states directly Switzerland, a mix of federal and canton money with a guaranteed floor Australia and independent commission that counts revenue and costs with federal top-ups to keep the peace.

[00:34:39] United States. No formal program, but the money moves. Anyway. Now I want to turn the camera around because there’s a part of this story. Albertans rarely hear. Since 1930, Alberta has controlled its own natural resources. Today, the province owns 81% of the mineral rights in Alberta on behalf of all of us, and the royalties on the oil, natural gas and oil sands produced from those rates goes to the government of Alberta, not to Ottawa.

[00:35:22] Ottawa can’t touch them. They aren’t counted in the federal numbers I just gave you and none of that money funds equalization. How much are we talking about In the fiscal year that ended this past March, Alberta collected 17.9 billion in resource revenue. Most of it royalties. That was on top of the 13.3 billion in federal transfers out of the 79.75 billion in total provincial revenue.

[00:35:57] And this year, resource revenue is forecast at 23 billion. But here’s what should keep us up at night. When this year’s budget came out in February, it projected a $9.4 billion deficit by August. A conflict in the Middle East had pushed oil prices up and the province was forecasting a $2 billion surplus.

[00:36:24] That’s an 11.4 billion swing in one quarter. Our provincial budget is being decided by events half a world away. That volatility isn’t new and how we’ve handled it is a choice. Here are three facts from the last 50 years. One, we stopped saving. The Heritage Savings Trust Fund was created in 1976 to set aside part of our resource wealth for the future, in 1987 deposits stopped.

[00:36:59] Today the fund is worth about 32 billion, roughly $6,300 per person. Norway started its own fund in 1990, 14 years after we started ours. As of this, June Norway’s fund was worth about 2.39 trillion US dollars, roughly $425,000 for every Norwegian same resource two very different choices. Two, we choose the lowest taxes in the country and leaned on royalties to pay for them.

[00:37:33] Alberta’s own budget estimates that if we had the tax system of other provinces, Albertans and Alberta businesses would pay 16.9 billion more a year. No provincial sales tax and lower fuel taxes to name two. That’s money we keep in our pockets, and I’m not knocking that, but it means our schools and hospitals rest on oil prices that no government in Edmonton controls. Three, look at where the money is gone. Even the Fraser Institute, hardly a left wing think tank says Alberta has a spending problem, not a revenue problem with a real per person program spending high by historic standards. And yet by Statistics Canada’s own data Alberta’s per student spending on public schools has fallen from among the highest in the country to at or near the bottom.

[00:38:36] The Fraser Institute itself found Alberta went from third highest to last in about a decade. So if spending per person is high by our own historic standards and our classrooms are near the bottom, it’s fair to ask where the money is going. Healthcare is the other place to ask that question. As of this fall, Alberta allows surgeons to work in both the public system and the private pay for service system.

[00:39:12] About 400 specialists have expressed interest. The government says publicly insured care stays free, and this adds capacity. Critics call it a two tier health system. Here’s the question I’ll ask any family. If you can afford to pay, you now have a faster door. If you can’t, you’re still on the same line.

[00:39:38] Does that line get shorter or longer? When the surgeons in it start splitting their time? This is where my day job comes in. When I sit down with a family, the first thing we do is separate needs from wants, needs come first. A roof, food protection for the people you love wants come after the needs are covered.

[00:40:05] And when money comes unevenly, you don’t build your lifestyle on your best month. You save in the good months so the bad months don’t sink you. That’s exactly what I’d tell a provincial government. We’ve had some of the best months any jurisdiction on Earth has ever had.

[00:40:28] If we’d budgeted for needs first saved in the boom years and built the habits, I teach families every week, Alberta could be the best place to live on the planet. Full stop. So before we point East and blame Ottawa, it’s worth asking a simpler question. We get our royalties, we get our share of federal transfers, we set out our own taxes.

[00:40:59] What have the people we’ve elected here over the past 50 years done with all of it? Have they been funding our needs or their wants? You don’t have to answer that out loud, just answer it honestly. If you listen to the Purpose Rules series, you’ll remember John and Sally when I first sit down with a couple like them, they have very strong feelings about money.

[00:41:29] Some are right and some are completely wrong every time. The turning point is the same. Putting their real numbers on the table, not what they assumed, not what someone told them at work, but actual numbers. So here are three takeaways. One, go to the source. Everything I’ve shared about Canada today comes from Statistics Canada, the Department of Finance Canada, and the government of Alberta.

[00:42:09] And it’s all free. Before you share a meme or a post, look it up. Five minutes. Two, separate the feeling from the formula. You’re allowed to be frustrated and you’re allowed to want to change, but your argument is far stronger when your facts are right and when you aim it at the government that actually controls the money in question.

[00:42:40] Frustrated and accurate is hard to ignore. Frustrated and wrong is easy to dismiss. Three, bring it home. Start where you have the most. Control your own numbers. Know your income. Know where it goes. Know your net worth and know what protects your family if something goes wrong. Needs before, wants. Save in the good months that’s living on purpose and not by accident.

[00:43:14] And it applies to your household just as much as to your province or your country, wherever you live, and whatever you believe about, where your country should go. Make that decision with real numbers. If this episode got you thinking about your own numbers, here’s how I can help. If you live in Alberta or British Columbia, I’m licensed in both provinces.

[00:43:45] That means I can help you with the whole picture, your goals, your budget, and your net worth. And then products that go with the plan, RRSPs, TFSAs, First Home Savings Account, life insurance, income protection if you get sick or hurt and can’t work, and planning for retirement, if you live anywhere else in Canada or anywhere else in the world.

[00:44:17] I can’t sell you products where you live, but I can coach you the five stages. Work anywhere, your story, your goals, your numbers, protecting your family and the savings rule. Do those first and you’ll walk into any conversation with a financial professional in your own area with confidence. Either way, it starts with a conversation at no cost and no obligation.

[00:44:53] First visit. giveaheck.com/work-with-me. That’s giveaheck.com/work-with-me. Thank you for taking time out of your day and listening to Give a Heck if you find value. I appreciate you sharing this episode with your friends and family, especially the ones who love to talk about equalization at the dinner table so they too can learn how to live life on purpose and not by accident, so you don’t miss the next episode.

[00:45:29] Please subscribe on your favourite podcast platform and please also post a review. I look forward to reading your comments. This has been Dwight Heck. If you want to check out other podcast episodes or today’s show notes with the sources, for every number I’ve shared, please visit my website. giveaheck.com and remember, it’s never too late to give a heck.

[00:46:06] Thank you for taking time outta your day and listening to Give a Heck if you find value. I’d appreciate you sharing with your friends and family so they too can learn how to live life on purpose, not by accident. So you do not miss the next episode. Please subscribe on your favorite podcast platform and please also post a review.

[00:46:26] I look forward to reading your comments. This has been Dwight Heck. If you want to check out other podcast episodes or today’s show notes, please check out my website. giveaheck.com, and until next time together, let us all strive to give a heck.