In a commentary in Policy Options, Prof. Douglas Sanderson says that in the future, Indigenous confederacies that exercise self-government and have taxation power could also be part of the larger equalization system ("A federal equalization program that includes First Nations," May 16, 2018).
Read the full commentary on the Policy Options website, or below.
A federal equalization program that includes First Nations
By Douglas Sanderson
May 16, 2018
The challenge of reconciliation hinges on a series of fundamental questions: How will Indigenous and settler Canadians live side by side? How are we to understand one another’s cultures and values? How are we going to divide economic and political resources in a way that is fair and justifiable in a modern liberal democracy? These are enormous questions and their resolution requires that we all — individual citizens, corporations, institutions and municipal, provincial and federal governments — take up the challenge in a coherent manner. There is always room for initiative and innovation, but the central challenge of reconciliation — the restructuring of our economic and political order — will require that many of us row in the same direction and toward the same goal.
I want to propose here a vision of what reconciliation and restructuring might look like. We are fortunate in that embedded within our federation are the tools and institutions required to take on the challenge of reconciliation. We have the constitutional, legislative and legal mechanisms. What we need now is the will to act.
The primary challenge of restructuring is not replacing the community infrastructure in such desperate shape in many First Nations communities. Dire though these conditions are, the federal government has been unable to see a path to repairing broken water systems: 75 boil-water advisories remained as of early May 2018. A housing crisis is endemic. The logistical complexities of resolving these infrastructure issues are enormous: training, building and maintenance are all implicated in running water systems and in building houses in hundreds of diverse communities and circumstances.
But there is a way in which if we solve a prior problem, then these infrastructure and logistics problems fall away. I don’t mean that the problems disappear, but the problem of the federal government having to sort out the various community needs and goals begins to disappear.
The fundamental structural challenge is this: First Nations governments do not operate like governments. Governments collect taxes, set and pursue community ends with resources obtained through taxation and pass laws that affect the material economic and social frameworks in which their citizens reside. Band councils do none of these things. First Nations communities survive on the basis of federal transfers and are, via the Indian Act, largely prohibited from raising money through taxation. They are wards of the Crown, operating under a fiscal and social framework overseen by distant administrators. Band council resolutions, meanwhile, offer virtually no scope of change for economic and social relationships. Without the ability to raise money, First Nations communities cannot set and achieve their own ends.
To address this fundamental structural challenge, First Nations need to be able to obtain resources through taxation. In northern stretches of most provinces, First Nations are the majority presence. Beyond their small reservations are vast lands with considerable riches. Currently, these lands and resources fall within provincial jurisdiction. Thus, it is the provinces, in conjunction with industry, that determine what mines get built, which trees are logged, which rivers are to be dammed.
A more reasonable distribution of jurisdiction aimed at restructuring Indigenous-settler relations would see some of these northern stretches administered by Indigenous jurisdiction. Small, isolated communities of a thousand or so souls are ill-equipped to do the science and evaluate the many environmental, ecological and economic options and outcomes related to undertakings like building mines or dams. First Nations would need to return to the days of First Nations confederacies, in which what are now distinct nations or communities bound themselves together into united decision-making territories. It is not possible for the federal and provincial Crowns to work out jurisdictional deals with each of the 650 First Nations communities, and it is not in those communities’ best interest that they do so. Instead, large regional blocks of Indigenous communities working together to make decisions about resource extraction would expand the strength of each community and its members.
Through this model, broken water systems would be fixed by the communities themselves, paid for by their own funds, obtained through taxation over their own lands. More importantly, First Nations confederacies in such a situation would have skin in the game. Without federal transfers from Indigenous and Northern Affairs Canada, First Nations’ financial futures would be tied to economic development in their territories. However, his would not mean that First Nations would have to say yes to every resource company.
In the north of Ontario, $1 billion is collected annually from stumpage fees alone. First Nations people, who have been on the land for 10,000 years and wish to stay another 10,000 years, would actively work to protect the watersheds and forests that literally provide the south with clean air to breathe and clean water to drink. Some development currently under way would continue, some new projects would be proposed and considered, and economic development and expansion in the North would continue — but at a pace set by the very people who have to live with the consequences of that development.
Most projects, I suspect, would proceed only with very well thought out mitigation plans to return lands to a more natural state once the extraction was completed. Some might object that this would force First Nations into the hands of the resource sector; and it’s true that without federal transfer payments, First Nations would need to rely in large measure on the wealth generated from resource extraction. But that is simply what governments do: they tax their citizens and lands and spend that money on their citizens and infrastructure. First Nations governments, if they are to be governments, cannot escape this hard reality about what it is to be a government.
But what of the provinces, which now obtain for themselves the riches of the North? They would never agree to such a scheme, as doing so would remove potentially billions of dollars from provincial coffers. This is where we turn to rely on fiscal mechanisms already in place.
Canada is a federation composed of provinces with very different economic circumstances. And yet provinces like Prince Edward Island, with marginal economic outputs, still manage to provide their citizens with services more or less on par with those of other provinces. How is this possible? Not by magic, but by the distributive logic of the equalization formula. Under the formula, provinces pay into the system when they are doing well, and provinces in need receive an equalization payment. In some years, both happen in a single province.
Why not make First Nations and their confederacies part of the equalization formula? After these Indigenous territorial governments use some of the wealth to fix the water systems and build the houses and make smart investments, the rest would have to be paid into the equalization formula, and in this way, the provinces could make up what they had lost in losing jurisdiction in the North. The federal Crown would also be in a position to pay into the formula, since in many case transfer payments and other expenses related to housing, health care and education in First Nations communities would no longer be a burden on the federal Crown. Precisely how the formula would work I leave to the mandarins.
There will, of course, be some costs to the provinces. I want to say three things about these costs. Remember, the key idea is this: what provinces lose in revenue will be largely made up through increased transfers from the equalization formula paid for by First Nations or, alternatively, through decreased provincial contributions in the case of provinces that do not currently receive equalization payments but still pay into the formula. There will be some price to pay, but not as much as one might think, and likely less over time once major one-time capital expenditures in First Nations communities are made to construct housing, water facilities and schools. And when First Nations see that responsible development means more dollars for their communities, we will all benefit from the increase to the GDP.
Second, the provinces cannot expect that the work and the price of reconciliation should fall entirely to others. This is a shared cost, and we must all share the burdens together. Third, imagine how differently settler citizens of the south will feel about First Nations communities when they finally realize that through the equalization formula, First Nations are the ones that are subsidizing the infrastructure, schools and health care of the south. These kinds of social, political and economic restructurings are necessary to give real effect to the concept of reconciliation.
And what of smaller First Nations communities closer to the south, communities for which there is no resource economy to tax? There are ways for these communities to raise funds through taxation. Many of these communities are small in terms of the number of people in the community, and that is because many of their citizens have moved elsewhere for work. Many Indigenous people live in the cities and make good salaries, and consequently pay a lot of their salary in income tax. Why not make it possible for those off-reserve residents to choose to remit their federal and/or provincial income tax to their home communities? I say “choose,” because being given the option creates a very high level of accountability to off-reserve members. Or maybe the transfer of income tax should be mandatory, as it is for out-of-territory residents of the Nisga’a Nation in British Columbia. Again, officials can sort out the specifics.
One thing, however, is absolutely certain. Those First Nations communities that would not be able to raise enough in income taxes to thrive and thus would still require transfer payments should not receive them from Indigenous and Northern Affairs Canada — they should be paid out of the equalization formula. All First Nations communities should be brought into economic Confederation.
PEI is sometimes said to be a have-not province. This is in some sense a statement of fact. Compared with other provinces, PEI simply does not have as much. And PEI is, rightly, not shamed for this fact, not judged as lesser or needy. The people of PEI take pride in their province and communities, their cultures and traditions. First Nations communities must be accorded this same dignity. First Nations must stop receiving handouts and instead be placed as equals in dignity alongside some of our other less fortunate brothers and sisters in Confederation. The equalization formula can, in this sense, be used not only as a tool of economic equality but as an instrument of profound dignity.
These are grand goals, vast in their reach, profound in their transformative power. And they are goals for well beyond this election cycle and the next one. So what is a federal government to do? For starters, it could announce its intention to enter into these grand negotiations with willing partners: Indigenous confederacies and nations large enough to be economically viable, and provincial partners willing to put their money where their mouth is on reconciliation. We must leave it to First Nations themselves to organize their political blocs, but I have no doubt that when First Nations leaders understand the opportunity before them and realize the commitment of the federal and provincial Crowns, a political confederacy will be formed.
There is one more piece to this reconciliation puzzle, and, in recognition that we are truly blessed by the Creator, this final piece is both the most important piece of the puzzle and one that requires virtually no financial expenditures.
Coming together on these initiatives will require in some cases treaties and in other cases ceremonies of negotiation and conclusion of agreements. There was a time, a 300-year period from roughly 1500 to 1800, when settler and Indigenous people made many treaties and lesser agreements. And by treaties, I don’t mean the “we make oral promises, but the binding agreement is in a language you can’t read and secures for us everything at your expense” rubbish that is the numbered treaty regime. I mean the peace and friendship treaties that were negotiated between Indigenous and settler parties in a framework of mutual respect. These agreements were negotiated and sealed not through written agreement but via the giving of wampum belts — physical and, to the Indigenous parties, sacred symbols of the agreement in graphic form, woven into long belts of beads made from shells.
The British and the French learned these diplomatic protocols; they learned the importance of exchanging presents, of feasting, of the wiping away of tears, the cleansing of your eyes to see clearly, of your mouth to speak the truth, of your ears to hear what is being said and of one’s heart to be just. These were just some of the diplomatic protocols of Indigenous international law that existed here, along the eastern seaboard and around the Great Lakes, for thousands of years before European arrival. And these protocols were practised by British and French diplomats and politicians, soldiers and administrators less than 200 years ago.
These are not lost arts; they have been pushed from our collective memory because it was so much easier to think of Indigenous people as nothing more than the recipients of settler civilization. Reintroducing Indigenous ceremony and tradition into our meetings, negotiations, agreements and signing ceremonies shows respect for Indigenous ways of being and is both largely without cost and priceless in its gesture.
Reconciliation requires restructuring: of our shared economy, of political jurisdictions and of a system that has allowed itself and its citizens to see Indigenous people as somehow less modern, less deserving. Reconciliation will require sacrifice and commitment over the long term. But Canada is uniquely placed to face this challenge. We have the economic and political tools to advance a vision of what it is for us to live together in a modern liberal democracy that is both just and reasonable. We do not need to change the nation overnight, or within a political mandate. To be sure, we must commit to the larger project as one for the future and begin in the short term to take on the legislative and social frameworks that will allow us to move, justly and steadily, toward the long-term goal. All we need to do right now is begin.
