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A formal system of equalization payments was first introduced in 1957. [7] [ Notes 1]. The original program had the goal of giving each province the same per-capita revenue as the two wealthiest provinces, Ontario and British Columbia, in three tax bases: personal income taxes, corporate income taxes and succession duties (inheritance taxes).
The Canadian federal government announced in 2023-24, $94.6 billion to transfer to the provinces and territories through major transfers (Canada Health Transfer, Canada Social Transfer, Equalization and Territorial Formula Financing), direct targeted support and trust funds), a $7 billion increase from the previous year, 2022-23.
Equalization payments do not, technically, involve wealthy provinces making payments to poor provinces, although in practice this is what happens, via the federal treasury. As an example, a wealthy citizen in New Brunswick, a so-called "have not" province, pays more into equalization than a poorer citizen in Alberta, a so-called "have" province.
The third major program is equalization, which represents approximately 25 per cent of major federal transfers. [4] Equalization is intended to address fiscal disparities among Canadian provinces based on estimates of provinces' fiscal capacity—their ability to generate tax revenues. [5]
The 1990 Canadian federal budget capped the annual growth of the Canada Assistance Plan at 5% for provinces who did not receive equalization payments [note 1] for 1990-91 and 1991-92 fiscal years. That decision was incorporated into the Government Expenditure Restraint Act (C-69) that received royal assent on 1 February 1991.
Canada Assistance Plan (CAP) a cost-sharing program to fund social services and social assistance. The Equalization program which was renewed unchanged for five years prior to the 1995 budget. The budget announced that the first two programs are to be combined into a single block transfer called the Canada Health and Social Transfer (CHST) [ b ...
Canada Health Transfer payments by year since FY2005. Unlike Equalization payments, which are unconditional, the CHT is a block transfer; the funds must be used by provinces and territories for the purposes of "maintaining the national criteria" for publicly provided health care in Canada (as set out in the Canada Health Act).
The CHST was announced in the 1995 Canadian federal budget as an amalgamation of two federal programs prior to 1996: [1] The Established Programs Financing program, which paid for health care and post-secondary education and was established in 1977 ; And the Canada Assistance Plan, which supported social assistance and was established in 1966.