Executive Summary

In 2014-15, the federal government spent over $250 billion on various programs including transfers to people, transfers to other governments and direct spending. Canadians expect governments to account for how their tax dollars are used. Is money spent wisely? Does the spending achieve its intended goals? Has federal spending been allocated fairly across the country?

The analysis in this paper will contextualize that last question by attempting to measure the gap between the amount of federal taxes paid by the residents of each province, and what they receive in return, in the form of federal spending. This is not a new field of research – this report is an extension of the Mowat Centre’s fiscal gap papers from 2013 and 2014 which analyzed a snapshot of the 2009-10 fiscal landscape. The suspension of a key dataset required for this analysis meant that further work was not possible beyond 2009, the final year for which data was available.

The release of the Government Finance Statistics data set by Statistics Canada this summer allows for the extension of this analysis to 2014, albeit on a somewhat different accounting basis. Our analysis reveals that, despite economic and fiscal changes, the list of net contributors and beneficiaries is largely unchanged since 2009.
This report is not an attempt to assess the value of the federation. A certain degree of inter-regional redistribution is an expected and often desirable feature of any federation. Rather, this report will undertake a quantitative analysis of the elements of the federal government’s revenue-raising and spending practices to identify which of those elements lead to net contributions or benefits to the federation, with a particular focus on Ontario.

Specifically, this report finds that Ontario continues to receive disproportionately lower shares of important areas of federal spending. Furthermore, despite having a fiscal capacity lower than the national average, Ontario continues to contribute more to the federal government in revenue than it receives in spending, just as it did in 2009.