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38 Can. Tax J. 913 (1990)
Equalization: The Representative Tax System Revisited

handle is hein.journals/cdntj38 and id is 919 raw text is: Equalization: The Representative Tax System Revisited Richard M. Bird and Enid Slack* PRECIS Parmi les accords fiscaux entre le gouvernement f6dbral et les provinces du Canada, le systbme de paiements de pdr6quation est un des 616ments des mieux accept6s. Depuis 1967, les provinces recoivent des paiements de transfert dont le montant est d6termin6 par leur capacit6 fiscale relative mesurde selon la m6thode du regime fiscal repr6sentatif (RFR). Dans cet article nous d6crivons I'6volution du syst6me RFR au cours des ann6es, et nous soulevons des questions sur cette m6thode de mesurer la capacit6 fiscale. Ces questions suggbrent que I'on devrait peut-6tre r6examiner la mithode et mdme le concept du RFR comme indice de la capacit6 fiscale, 6tant donn6 son r6le central dans la d6termination du montant des paiements de p6r6quation. ABSTRACT The system of equalization grants is a well-accepted component of federal-provincial fiscal arrangements in Canada. Since 1967, the amount of the equalization grants received by any province has been determined by its relative fiscal capacity, as measured by the representative tax system (RTS) approach. This article traces the development of the RTS system over time and raises questions about that approach to measuring fiscal capacity. The questions suggest that it is perhaps time to reconsider the conceptual basis and mechanics of the RTS measurement of fiscal capacity, which plays such a central role in determining equalization payments. INTRODUCTION Equalization is a subject that arouses strong emotions in the hearts of those few Canadians who have thought much about it. This article begins therefore with a brief disclaimer.' First, it does not in any way consider the rationale for equalization: for purposes of argument we just assume, like most Cana- * Department of Economics, University of Toronto and Enid Slack Consulting Inc., respectively. I We are grateful to the anonymous referee whose comments, although we did not agree with them all, showed the need for this disclaimer. July-August 1990/juillet-aoat 1990 913

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