My previous post dealt with differences in provincial health spending and how on a per capita basis some provinces were substantially above the provincial average while others were not. One of the factors behind any government spending at the provincial level is own source revenue capacity so in light of some of the comments asking about revenues I decided it would be useful taking a look at them.
As Figure 2 shows, Newfoundland & Labrador, Saskatchewan and Alberta are above the average in terms of own-source revenue Manitoba is at about the average while the remaining provinces are all below.
It does not require advanced training in public finance to realize that many of these differences can be largely attributed to the presence of robust natural resource revenues.
Own source revenues for Alberta, Saskatchewan and Newfoundland & Labrador should be adjusted for their resource rents from oil, natural gas and potash to better reflect direct tax burdens. About one-third of Alberta’s, one-quarter of Saskatchewan’s and about forty percent of Newfoundland’s own-source revenues are from resource rents. When such an adjustment is made, the national average drops to 6,390 dollars with Saskatchewan at 6,858 dollars, Alberta at 5,339 dollars and Newfoundland at 7,194 dollars. Figures 3 and 4 plot per capita resource adjusted own source revenue and the deviation from the national average and shows that there is substantial variation across the provinces though not as extreme as for total per capita provincial revenues.
If one takes per capita provincial program spending and compares it to per capita own source revenues, one can obtain an estimate of direct cost to taxpayers or the “tax price” of provincial program spending. This is done in Figure 5 and shows that the “tax price” ranges from a high of 84 percent in British Columbia to a low of 49 cents in Alberta.
The difference is the contribution of federal transfers payments and of course any natural resource revenues from oil, natural gas and potash. This is of course a crude estimate in that resource revenues are not adjusted for in all the other provinces though they are substantially less. However, it does suggest that provincial program spending in all provinces is in a sense “subsidized” with the direct burden on provincial taxpayers varying. The provinces with the lowest direct taxpayer burden are either those with substantial natural resource revenues or those with substantial federal transfers. Are these comparable levels of taxation? Does this suggest that in some provinces, more own source revenue effort could be applied?