Equalization payments are one form of transfer payments from the federal to the provincial governments which include the Canada Social Transfer (CST) and the Canada Health Transfer (CHT). The territories are not included in the equalization program.

What are equalization payments used for?

Equalization payments are cash payments made in some federal systems of government from the federal government to subnational governments with the objective of offsetting differences in available revenue or in the cost of providing services.

How do equalized payments work?

Equalization is a federal program that transfers federal funds to provinces with below-average capacities to raise revenues. Provinces with stronger economies, and with high income households and businesses, raise more revenue for any given tax rate than provinces with lower incomes.