Saturday, January 12, 2008

Who Said Our Taxes Must Be High?

The tax-and-spend zealots like to present high taxes as part of a distinct Canadian identity, one that actually makes us different from the Americans. Sure, Americans have slightly lower taxes, they say, but we got universal healthcare. So, they claim we must be proud that our taxes are among the highest in the developed world. And every time the Conservatives propose (let alone implement) new tax cuts, they regard it as Harper's attempt to "Americanize" Canada.

But who said that high taxes are actually a Canadian value? If you believe that Canada's founding fathers dreamed about a country with high taxes and all-pervasive public sector - I'm sorry to disappoint you, but this wasn't the case.
So, for example, the first post-Confederation Liberal finance minister, Sir Richard Cartwright, speaking in 1878, had this to say about taxation: "All taxation is a loss per se. It is the sacred duty of the government to take only from the people what is necessary to the proper discharge of the public service; and that taxation in any other mode, is simply in one shape or another, legalized robbery."
Compare those Liberals and the Liberal party nowadays. Compare it with Stephane Dion who considers reversing the GST cut. Or compare it with Paul Martin who campaigned on a slogan "choose your Canada" - referring to the tax-and-spend Canada which he apparently considered to be the "genuine" Canada. But Canada didn't start as a tax-and-spend nation.
To many present-day Canadians, such political talk seems odd. But our first governments favoured a limited role for governments and were also intent on keeping taxes lower than the Americans' in order to attract and retain immigrants. Also, contrary to popular modern belief, it was American governments, not Canadian ones, who first blazed the path to newer and higher taxes.

Take a national income tax for example. It was first introduced during the U.S. Civil War, cancelled, and then re-introduced in 1913. In Canada, our first federal income tax didn't become law until 1917.
Another example comes from gasoline taxes. This province was the first Canadian jurisdiction to tax gas, in 1922, (at two cents a gallon.) But 19 American states levied taxes on gasoline before Alberta. Similarly, plenty of U.S. states introduced sales taxes before any Canadian province. Ironically, Alberta was the first Canadian province to introduce a sales tax in 1936 (though it was repealed one year later).

This pattern, where taxes were introduced first in the United States and later copied in Canada was also evident in other provinces. The first provincial corporate tax, in Quebec in 1884, was modelled on an American precedent. When in the late 19th century, Ontario and other provinces introduced estate ("death") taxes, the Ontario legislation was directly copied from Pennsylvania and New York statutes already in force.
Only in the 1960s, when the Liberal governments (led by Pearson and later - by Trudeau) began unilaterally redefining nation's values and principles (presenting their policies as such, in order to perpetuate their rule); only then the tax-and-spend policy was proclaimed to be a part of Canada's national identity. The notion that taxes must be high and that public service must be pervasive is therefore a Trudeaupian value, not a Canadian value. And it's great to see more people willing to discard it.

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