The only thing as certain as taxes is people complaining about taxes.
There is good reason for complaining, not because of the basic concept of tax itself, which is necessary for a functioning, complex society. The problem is the system, or perhaps more accurately the multiple systems which have evolved over time in response to changing socioeconomic and geopolitical pressures, but never really change aside from tinkering with rates, distribution and jurisdiction.
It is pertinent to look at how we wound up where we are.
Canadian taxation started with the oldest and simplest form, custom and excise duties. We still pay these, of course, because they are built into the price of things such as gasoline, alcohol and tobacco. Up until World War I, this made up 90 per cent of federal revenues and paid for national defence and economic development. Confederation gave the provinces authority for direct taxation so municipalities could levy property taxes. Pretty much everything federal responsibility was locally controlled and financed by property taxes.
During the First World War, however, Parliament needed cash to finance the war effort and introduced personal income and corporate taxes. In the 20s sales taxes came on board.
The Great Depression further shifted the tax burden onto individual and corporate income with the collapse in customs and excise revenue. The provinces, which had relied heavily on federal subsidies also added or increased income and sales taxes.
World War II basically gave us the system that more or less remains in place today. The provinces gave up their income taxing authority and accepted fixed federal transfers for the duration of the war and one year after and all taxation fell under a centralized authority, now Revenue Canada.
Following the war, although provinces regained some direct taxation authority, direct taxes also became a permanent fixture of the federal finance. We now had it all, custom, excise, sales, income and property taxes, much as today.
Tax reform in the latter half of the 20th century and early in the new millennium, has largely been jurisdictional shifting in federal-provincial transfers. There has been a lot of tinkering, but not much actual reform.
Disturbing trends have emerged, as well. Growing income inequality, tax evasion by the richest individuals and corporations, and artificially stabilizing taxation with borrowing and increasing the national debt (by all stripes of governments, by the way) should be of concern to everyone.
Meanwhile, Saskatchewan’s mayors, including Yorkton’s Bob Maloney, met with Amarjett Sohi, the federal minister of infrastructure and communities last week.
Infrastructure has become, perhaps always has been, the overriding issue for municipalities.
The current system makes beggars of mayors. Maloney said he got a good feeling from Sohi, but ultimately it comes down to control. The federal infrastructure program is still based applying for funding for specific projects. The big cities, with their larger voter base, have a decided advantage.
Grumbling about taxes is always about fairness. As long as people see direct benefits of paying them, the sting is not quite as great.
As long as the feds control direct taxation, however, residents of smaller cities struggle to see those benefits. One possible improvement over the project-based program short of transferring direct taxation authority to local jurisdictions would be some per capita transfer of income tax similar to the gas and sales tax sharing currently in place.
But that is just a start. There needs to be a concerted effort to overhaul a system that has not fundamentally changed for more than half a century. At the heart of that effort should be simplification.
Albert Einstein said: “The hardest thing in the world to understand is the income tax.”
The current tax system is overly complicated because it has grown out of a hodge podge of historical factors that no longer exist. It is time to take a holistic look at real tax reform, which is more responsive to local needs.
