Following the money : Federal and provincial budget balances with Canada's major cities

C. D. Howe Institute Commentary 5 The Methodology: Statistics Canada provides time-consistent data describing the amounts of tax collected, and the levels of spending on government-provided goods and services provided, by each of the federal, provincial and local levels of government in each province.7 Table 1 identifies, for the federal and provincial governments, the categories of revenue and ex [...] To determine the fraction of all direct taxes paid in a province that is paid by those living in a particular city in that province we need a measure of the distribution of income in the city and in the province. [...] Federal government transfers in the form of WWI and WWII Pensions, and War Veteran’s Allowances are allocated to cities in proportion to the city’s share of the provincial population aged 75 years and older and the city’s share of the provincial population aged 65 years and older, respectively. [...] This compares to the 1.4 percent of all personal income tax paid by those in the lowest income quintile, 5.1 percent in the second quintile, 12.1 percent in the third, and 22.8 percent in the fourth.18 The share of income tax paid by the highest 17 The share of university enrolment affected only the allocation of federal expenditures, in the form of transfers to universities, to cities. [...] Table 2 presents calculations showing the size of the federal government’s deficit and the size of the relevant provincial government’s deficit with the nine major cities, the rest of the country, and in total.