Read on Twitter
It is the dismal duty of historians to recount periodic reinventions of the wheel. Juggling tax powers across jurisdictions is one such wheel. And yes, I think there’s a lesson from the 1930s that came to mind when I read @JohnIbbitson's interesting piece. Thread. https://twitter.com/JohnIbbitson/status/1327229751493332993
Ibbotson’s suggestion of transferring the GST to the provinces reminded me of when, in 1930, finance minister Dunning was floating the possibility that the provinces could have the personal income tax (PIT) (2 Jan. 1930, Financial Post.)
As legendary journalist Grant Dexter recorded elsewhere, Dunning told the Chamber of Commerce that “if the provinces will get together and come to Ottawa and ask for the personal income tax, they almost certainly will get it."
In Dunning’s world, the PIT was a minor tax, providing about 15% of federal tax revenue.
Giving it up might solve several problems: the chronic subsidy arguments with the Maritimes. Rising public debt in the Prairies. Double taxation of income in BC. Let the provinces have the PIT! ON and QC wouldn’t likely use it, so their residents would celebrate.
Imagine if the Liberals had won the 1930 election and followed through. How would the Dominion have been able to borrow for unemployment relief without an income tax? How would the Dominion have fought WWII without a PIT? Reintroduced it, no doubt.
Of course, the use of the Dominion’s fiscal fire power in the 1930s only exacerbated the tensions in Confederation re: the constitutional mismatch of responsibilities and revenues.
UNB economist (and philosopher! And clergyman!) WC Keirstead wanted a thorough revision of the division of powers. (Read him on “fiscal need” tweaks in CJEPS, vol. 1, no 3. He wasn’t a fan.)
But there’s no one and done with Canada’s constitution. Let’s be realists. Crises in the 1930s and 1940s launched five decades of constitutional struggle because there were real changes in the world.
After the 1990s, we’ve (mostly) let go of the dream of the single perfect match of powers and revenues. We’ve got asymmetrical federalism now, and it’s a good thing, too.
We have intergovernmental dispute mechanisms and an adaptable equalization forumula. Both provinces and feds have independent fiscal resources, giving them what Duplessis called “the power to govern.” (Surprise! Me quoting Duplessis with approval.)
Federal-provincial diplomacy remains hard work. But with good will, it’s the – dare I say? -- holy work of managing collaboration across difference in our quasi-federal system. (Here's the cover of a new survey of relevant history.)
Journalists, academics, civil servants, politicians – we’ve all got roles to play in making sure that work is done well. I like Ibbitson’s attempt to float a solution.
But, like giving the provinces the PIT in 1930, giving the GST to the provinces is a bit of shell game, I think, and it helps hide an uncomfortable truth. Most of us will need to pay more tax to deal with the health care expenses that are to come. I'm with Ted Morton on this.
