Income Tax and Canadian Identity

Income Tax
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{Power/Lines]

The 150th anniversary of Canada’s confederation passed pretty painlessly, with surprisingly little ranting and raving, and with little to show for it overall. The fact that a tipi erected by Indigenous activists on Parliament Hill, amid a characteristically violent RCMP response, so easily upstaged the official festivities was both a bit sad for those with vivid memories of the centennial celebrations in 1967, and a bit of a relief.

Does Canada even matter? Stephen Harper’s flak-jacketed jingoism and Justin Trudeau’s denim-suited platitudes (“Canada’s back!”) both insist it does. But between globalization and the rise of social media, the patriotism that defined so many people’s identities up until the late 20th century looks increasingly hackneyed and unconvincing.

As it happens, this summer is also the centenary of income taxation, which was introduced in the darkest days of the First World War. It allows for very sophisticated debates about fairness and inequality, and allows a suite of public services to be financed in a way that apportions the burden on the basis of ability to pay. It has utterly defined Canadian politics.

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It’s important to note that, contrary to popular belief, income taxation was never temporary. The government that introduced it, like every government before and a few since, hated income taxation and would surely have wanted to get rid of it or, better yet, not introduce it in the first place. They introduced it because they had to, because it was so popular.

In fact, income taxation had almost nothing to do with paying for the war, and everything to do with buying off a particularly difficult section of the electorate: industrial workers who increasingly opposed the war and its brutally unfair apportioning of burdens, and who threatened to strike, bringing production of weapons and supplies for the war to a halt, unless the government introduced income taxation.

If the government introduced conscription, the workers insisted, then it had to also introduce what its critics slyly called ‘conscription of wealth.’

This rhetoric electrified workers and farmers, and spread quickly from rally to rally and pamphlet to pamphlet over the early months of 1917; it sickened Liberal and Conservative politicians, but they held their noses and voted in favour of the Income War Tax one hundred years ago this month.

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It would be pretty hard to overstate the centrality of income taxation to how we think about politics—not just about struggles over budgets, benefits, and burdens, as important as they are, but about the very architecture of our thought about politics, and about who speaks with what authority.

As an obvious example, think of how Indigenous people are denied a right to speak on certain issues because of a widespread misapprehension that they pay no taxes. (In fact they do, except in very specific cases.) Also, think of how politicians will say they speak for taxpayers, not citizens or residents—a formulation that suggests people’s right to representation is contingent on their contribution.

Even with a shift to consumption taxes with the Goods and Services Tax in the 1990s, income taxation is still regarded, explicitly or implicitly, as the real tax.

That’s because it’s redistributive, and therefore still has the dangerous possibility of taking from the rich and giving to the poor.

This was not the intention of its authors. Income taxation was intended to be a nuisance, pure and simple. Like advocates of carbon taxes now, advocates of income taxes hoped income taxes would wipe out high incomes, or at least make their enjoyment less easy. They also hoped, like carbon tax advocates, to shift the burden off other taxes, particularly consumption taxes that fell hardest on those with low incomes.

It didn’t work out that way, partly because higher incomes tend to be more complex than lower incomes (workers get paid in plain old wages and salaries; millionaires get paid in stock options, dividends, and capital gains), and partly because rich people can afford to pay lawyers to locate and expand holes in the tax code; low-income earners, meanwhile, didn’t make even the bottom brackets of the 1917 version, but signed on somewhat eagerly for the later versions, because they understood that the trade-off was schools, parks, and doctors for their kids, at least in theory.

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If Canada means anything, it means a shared sense of responsibility for caring for people who can’t work, whether because of illness, age, or a lack of marketable job skills—a responsibility that can only realistically be borne by income taxation.

Canadians have failed that test historically and continue to fail it with regard to the provision of health care and education for First Nations, even with the Trudeau government’s clear mandate for reconciliation, simply from lack of will, not lack of capacity.

Rather than celebrating Canada, an abstract political entity of rapidly decreasing practical relevance and emotional significance, we should take this anniversary to celebrate us, our interconnectedness, our shared strength, our frailties, and our generosity, however precarious and fleeting, and resolve to do that better. In such a celebration, the confederation of the country matters little compared to the effective instrument of our interconnection—the old centenarian, income taxation.

 

Illustration by B Mroz.

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David Tough

David Tough

david.tough

David Tough is a musician, scholar, and journalist from Peterborough, Ontario. He is Contributing Editor and co-Publisher of Electric City Magazine.