Edward Island and Nova Scotia are below the average. Ontario is slightly
below the national average of about $59 000 per person.
In order to provide services as varied as medical care, highways, and
judicial systems, the provincial governments must levy various types of
provincial taxes. Provinces that are more prosperous, and thus have
larger tax bases, are able to provide a given amount of services while
having relatively low tax rates. In contrast, less affluent provinces with
smaller tax bases would only be able to provide the same amount of
services if they had higher tax rates—but excessive tax rates create their
own problems, as we saw earlier.
One of the guiding principles in Canada’s system of fiscal federalism is
that individuals, no matter where they live, should have approximately
the same access to what is regarded as a reasonable level and quality of
public services and should face approximately the same tax rates to
finance those services. Since revenue sources do not always match
revenue needs at each level of government, some transfers between
governments are necessary. We examine these transfers shortly.
- Geographic Scope of Services
Because the democratically elected government of a province or a
municipality is unlikely to be responsive to the needs of citizens outside
its jurisdiction, some public services may not be provided adequately
unless responsibility for them is delegated to the level of government
appropriate to the scope of the service provided. For example, national