My Postal Code Is Not a Tax Return

I was called an “Eastern parasite” on Facebook the other day.

This was not based on a detailed examination of my finances. The gentleman😐 had not seen my tax returns, reviewed my income, calculated how much federal tax I pay, or performed an actuarial analysis of the government services I consume now, or over my entire life (much of it spent in the GTA—another aggrieved region).

He figured out I live on the East Coast.

That was enough.

I understand the thinking. I have heard variations of it for decades, particularly from Alberta. Alberta pays more into Canada than it gets back. Atlantic Canada gets more than it pays. Therefore, Albertans are supporting people like me.

Therefore, parasite.

Apparently, I Could Move West and Be Cured

I have a job. I pay federal income tax.

Were I doing roughly the same job in Alberta for roughly the same income, my federal taxes would not be dramatically different. The same federal tax brackets apply whether I live in New Brunswick or Alberta.

So:

Me in New Brunswick: Eastern parasite.

Me in Alberta: hardworking Albertan whose tax dollars support Eastern parasites.

Same person and work. Roughly the same income and the same federal tax contribution.

Different postal code.

Apparently, moving to Alberta has remarkable restorative powers. I would not need to work harder, retrain, start a business, or increase my income. I would simply cross a provincial boundary and be fiscally redeemed.

This is a clue that something is wrong with the "parasite" argument.

Who Is “Alberta”?

Dougald Lamont recently wrote about the Free Alberta Strategy, a document used to make the intellectual case for greater Alberta autonomy and, increasingly, Alberta separation.

Lamont asks a question that should be obvious but rarely is.

When people say “Alberta pays,” who exactly are they talking about?

The Free Alberta Strategy, according to Lamont, focuses overwhelmingly on oil and gas while barely accounting for the rest of Alberta's economy. He notes that oil represents about $88 billion of a roughly $400 billion economy and employs only about 5.3 per cent of Alberta's workforce.

In other words, most Albertans do not work in O&G, and most of Alberta's GDP is generated elsewhere. Yet the political rhetoric routinely turns the financial performance of one highly profitable, capital-intensive industry into the collective accomplishment of an entire population.

The tax numbers raise the same problem.

Using Statistics Canada tax-filer data, Lamont notes that half of Alberta tax filers make less than $44,100 and contribute only 3.8 per cent of the province's income tax collected. The top one per cent, about 35,000 people, pay more than a quarter. About 350 people in the top 0.01 per cent pay roughly one dollar in twenty of all income tax paid in Alberta.

As Lamont rather effectively puts it, the taxes paid by those 350 people are what the strategy calls “Alberta's.”

That does not mean ordinary Albertans contribute nothing. Obviously they do.

It means that saying “Alberta pays” hides an enormous amount of information about who actually pays.

And that brings me back to my Facebook friend.

Tribal Bookkeeping

The man who called me an Eastern parasite knows nothing about my finances. Neither of us has seen the other's tax return.

Yet he believes he has standing to identify me as a recipient and himself as a contributor.

How?

Well, geography.

He has taken the net fiscal position of Alberta and assigned it to himself personally.

Then he has taken the net fiscal position of Atlantic Canada, and assigned it to me personally.

Every Albertan gets collective credit for the taxes paid by Alberta's richest taxpayers and most profitable businesses.

Every Maritimer gets collective blame for the federal transfers received.

This is not accounting. This is tribal bookkeeping.

Why Stop at the Alberta Border?

Why is a province the correct geographical unit for deciding who is a parasite? Why stop there?

Within Alberta, Calgary and Edmonton generate enormous amounts of economic activity and tax revenue. Presumably there are smaller Alberta communities where the identifiable government spending per person exceeds the tax revenue generated there.

Are those communities parasites?

Maybe Calgary should leave Alberta.

Then again, within Calgary there will be neighbourhoods where residents have much higher incomes and pay far more tax than residents of other neighbourhoods.

Why should someone in Mount Royal support someone living in a poorer part of the city?

Parasites!

We can keep going.

Perhaps one side of a street pays more property tax than the other.

Maybe the people at number 42 should demand fiscal independence from the deadbeats at number 38. 

Sidebar

The same sort of fiscal imbalance exists inside cities. Peer-reviewed research on municipal finances has repeatedly found sprawling, spatially extensive development more expensive to service. A meta-analysis of 125 local fiscal studies found that residential land uses, on average, consumed about $1.18 in attributed municipal spending for every dollar of revenue they generated, while commercial and industrial land uses consumed just 44 cents. The exact balance varies from place to place, but the idea that one geographic or economic part of a community subsidizes another is hardly a uniquely Albertan phenomenon. 

At some point the absurdity becomes obvious.

Or we could stop drawing circles altogether and look at individual taxpayers.

Do that, and we discover the shocking truth behind much of this grievance.

People with high incomes generally pay more income tax than people with low incomes.

Government spending is not returned to each citizen in exact proportion to the taxes that citizen paid.

That is how progressive taxation and government work.

The Alberta grievance industry draws a provincial border through this ordinary fiscal reality and declares the statistical result evidence of regional theft.

But the boundary is a political choice.

The province is the unit of calculation because Alberta is the political identity being mobilized.

Strangely Collectivist Libertarians

There is an irony in all this.

A great deal of Alberta separatist and autonomy rhetoric comes from people who describe themselves as individualists, libertarians, or advocates of personal responsibility.

There is nothing particularly individualistic about declaring the taxes paid by millions of other people to be “our money.”

The argument is remarkably collectivist.

The income of millions of individuals and businesses becomes Alberta's wealth.

The taxes paid disproportionately by a relatively small number of extremely high-income people become what Albertans paid.

Then millions of people living somewhere else are sorted into a geographic debtor class.

I am no longer a person.

I am The East.

The guy insulting me is no longer whatever his employment income, tax bill and personal circumstances say he is.

He is Alberta.

He has appropriated the tax contribution of oil executives, engineers, entrepreneurs, wealthy investors and corporations he has never met and is waving the total around as if he personally wrote Ottawa the cheque.

Then he calls me a parasite.

I almost admire the confidence.

If Alberta were to separate, the very few who pay so much of the tax base in that province would consider the many who do not parasites. I assure you, they have no intention of showering the commonwealth of Alberta with their billion$. Their aim is to keep it for themselves.

Provinces Are Not People

A province having a positive net fiscal balance does not make every resident a net contributor.

A province receiving Equalization does not make every resident a net beneficiary.

An Albertan does not inherit the tax contribution of the richest Albertans as a personal moral achievement.

And I do not inherit my current province's fiscal capacity as a character flaw.