Bill C-2
An Act to enact measures to restore balance to federalism and
to improve the quality of social services in Canada

Preamble
WHEREAS Canada was formed from two distinct nations with differing customs and laws;
WHEREAS Canada today has many different populations, each with differing wants and needs;
WHEREAS a federal system of government should allow for differing wants and needs of each population to be properly realized;
WHEREAS the Provinces can no longer fulfill their constitutional duties under the current fiscal arrangement;
WHEREAS the current fiscal imbalance is to the detriment of the peoples of Canada;
WHEREAS the inclusion of natural resources in the equalization formula impedes the growth of the poorest provinces;
WHEREAS the equalization formula arbitrarily uses five provinces instead of ten provinces to depress the equalization payments given to less bountiful provinces;
WHEREAS the Standing Senate Committee on National Finance recommended in March 2002 for the permanent elimination of caps to equalization payments;
WHEREAS the sovereignty of Provinces is threatened by their inability to provide services and, further, by the equalization program's depression of the poorest provinces' aspirations;
WHEREAS the federal government no longer pays the 50% cost of health care that it agreed to at the launch of national public health care in the 1960s;
WHEREAS the Government of Canada overtaxes its citizens;
NOW, THEREFORE, Her Majesty, by and with the advice and consent of the Senate and the House of Commons of Canada, enacts as follows:

Short Title
1. This Act may be cited as the Rebalancing of Federalism Act.

Interpretation
2. In this act, "Minister" means the Minister of Finance.

Rebalancing the Finances of the Federation
3. The Minister will identify at least $5.7 billion in program efficiencies, reductions, and eliminations and will report these to Parliament by January 1, 2008.
4. The Minister will establish a Provincial Debt Reduction Transfer program to reduce the debts of provincial governments.
5. Notwithstanding the provisions of Sections 3 and 4 of this Bill, the Minister will propose to Parliament by January 1, 2006 options for increasing the Canada Health and Social Transfer to be equivalent to 25% of the provincial health and education spending.
6. The Minister will present to Parliament by January 1, 2007 a proposal to eliminate both the Canada Health and Social Transfer and the Good and Services Tax such that heath and education spending by the provinces can be accommodated under provincial taxation powers.

Reforming the Equalization Program
7. The Federal-Provincial Fiscal Arrangements Act is amended such that the "national per capita equalization standard" be the national per capita yield of all the provinces for all revenue sources.
8. The Federal-Provincial Fiscal Arrangement Act is amended such that for fiscal equalization payments, "revenue source" no longer be defined to include the following for a province unless that province does not qualify to receive a fiscal equalization payment:
(a) forestry revenues,
(b) conventional new oil revenues,
(c) conventional old oil revenues,
(d) heavy oil revenues,
(e) mined oil revenues,
(f) light and medium third tier oil,
(g) heavy third tier oil,
(h) revenues from domestically sold natural gas and exported natural gas,
(i) sales of Crown leases and reservations on oil and natural gas lands,
(j) oil and gas revenues other than those described in paragraphs (b) to (i), and
(k) mining revenues.

Restoring Provincial Sovereignty
9. Where a province chooses not to participate in a program funded by both the government of Canada and the governments of the provinces, that province will receive a payment from the government of Canada equivalent to the payment it would have received from the government of Canada to fund the aforementioned program.

Coming Into Force
10. This Act shall come into force upon receiving Royal Assent.