May 8, 1924

PRO
CON

Horatio Clarence Hocken

Conservative (1867-1942)

Mr. HOCKEN:

Whenever the issue in this country has been protection versus free trade, the Maritime provinces have voted for protection-I do not think my hon. friend can dispute that-it was so in 1878, 1891, and in 1911.

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PRO

Burt Wendell Fansher

Progressive

Mr. FANSHER:

There has never been

a free trade issue.

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CON

Horatio Clarence Hocken

Conservative (1867-1942)

Mr. HOCKEN:

No free trade issue in

1878? My hon. friend was not born then and perhaps, he is to be pardoned for not knowing that fact. I was alive then and I know the fight that was made in 1878. I know the fight that was made in 1891 when the Liberal party went to the country on a policy of unrestricted reciprocity, when the Hon. Edward Blake deserted his party because he did not believe in unrestricted reciprocity.

I know what happened in 1911, and those were the three occasions when the issue in the general election in this country was protection versus free trade. So, if we are to take what has happened in the past as an indication of what will happen in the future, we must conclude that the hon. member for Battleford will be trimmed to a peak, and that we shall have in this Dominion a government that will give us a cost of living tariff.

I have never had anything but -the warmest possible feelings of friendship for the people of every province in Canada. I am a Canadian. I was born in this country. I have lived here all my life. I have never lived a year out of it. I have a love for Canada such as is held by men who are born in the country. I have a vision of this as, perhaps, the greatest country in the world at the end of this century. But we can never reach that objective-we can never fulfil the destiny which the Almighty has designed for us,- unless we sit down, province by province, and figure out a national policy that will take

The Budget-Mr. Casgrain

care of the interests of every one of them. The province of Ontario, under such an arrangement, will have to make some concessions. So will the province of Quebec and the Maritime provinces, and so should the western provinces. The one thing that I ask them to do is to look at this question of protection from the standpoint, not of whether they can save a dollar or two dollars or three dollars on a binder, but of whether the great industrial cities of this country are to be preserved as places of population, of wealth, reservoirs from which to draw taxation with which to meet the war debt of this country, and to contribute in the thousand ways in which big centres do contribute to the welfare of this Dominion of Canada.

Mr. PIERRE F. CASGRAIN (Charlevoix and Montmorency) (Translation): Mr. Speaker, I do not wish this debate to close without associating myself with those who preceded me in expressing my regret at the absence of the right hon. Minister of Finance (Mr. Fielding) who, owing to a protracted illness, has been prevented from delivering his seventeenth speech on the budget. All acknowledge that he is an outstanding figure, an able statesman, a financier without an equal and of undaunted courage, who so well managed the finances of the country during the fifteen years of Liberal administration of the late and lamented Sir Wilfrid Laurier, that he was able to give the country this era of prosperity of which he was an eye-witness from 1896 to 1911. If we did not always agree with his views on certain questions, we must, however, state that he has been a man absolutely sincere and convincing.

Allow me, Sir, to congratulate the Prime Minister on his able choice in appointing to the post of Acting Minister of Finance, the hon. Minister of Immigration, the member for Chateauguay and Huntingdon (Mr. Robb). A consummate man of business, tried by experience, resourceful, he has proved worthy of the task which was confided to him. He energetically buckled down to work and was able, in a short time, under very difficult circumstances, to master all the details of the Department of Finance. Distinguished economist, he understood the present needs of the people and was able to present to the House and country an entirely acceptable budget. We had been for a long time expecting this budget. Those on the right with confidence-the others -those of the official opposition-with fear, and our friends, who sit opposite me, with doubt and great interest. Those who sit on

your right, Sir,-and I am one of them_______are

fully satisfied with this budget. It discloses,

so we see, a satisfactory state of affairs throughout the country, under present conditions. We have first, a surplus-according to the statement of the Acting Minister of Finance; secondly, a decrease in the debt; thirdly, a reduction in taxation, and fourthly-something rather astonishing-the lowering of the tariff and, neverthless, the balancing of the budget. The hon. Acting Minister of Finance must be congratulated on his work, and I think that the whole population of Canada and the party to which he belongs must acknowledge that he has done good work. The Canadian government under the able and wise leadership of the Right Hon. W. L. Mackenzie King, must be congratulated for having been able, in the space of hardly two years, to put our finances on a solid basis and improve our situation, in a general way, without harming agriculture, without injuring the manufacturing industry or the other industries of the country. These are the points which I want to touch upon in the course of my remarks that I shall submit to the House.

Immediately after the budget had been laid on the Table, we read, in many newspapers throughout the country, of rumours and criticisms of a nature to please certain classes of the population opposed to this budget. Nevertheless, all the members representing rural districts, all those who are not closely connected with the big interests, briefly all free men, all those in whom a generous heart beats and are thoughtful of the people's interests can say with confidence: Here is a government who has well sized up the situation and endeavours to do something for the people; here is a government who is trying to lighten the burden of the consumer, by reducing the taxes-which will have for effect to bring down the cost of living; here is a government who tries to fulfil its election pledges and put into practice the policy which it proclaimed when in opposition. Those that we hear recriminating and complaining as regards the budget, are the wealthy bankers, the large manufacturers, the trusts, and those who, protected by certain laws, were able to build up colossal fortunes and become magnates of finance, multimillionaires of the country. Those are the people who wish to dictate a line of conduct to certain governments, through their subsidized press. No doubt there are exceptions, but in a number of large towns it is not less true that, since the delivery of the budget speech, important newspapers have endeavoured to convince the people that the budget, is not in their interest. I think we must put the people on their guard against this faction who try to misrepresent the question and induce the people of Canada to believe that the

The Budget-Mr. Casgrain

government has not at heart the best interests of the country.

The principle applied in the budget is one of the soundest and most equitable of economic principles. Providence decreed that the people should reap the products of the soil with the least restrictions possible, and all impediments to trade and exchange of these products-if it is done without discretion-may become a hardship, may bring on a calamity for the population in general, although incidentally it may enure to the advantage of certain classes of people. However, what every wise government having the interest of the people at heart should endeavour to effect, is to place on the statutes of the country laws which, while giving revenues for the administration of public affairs, will better the conditions of all the classes of society. It is important that the taxes should not weigh too heavily upon those who are the least able to bear them. We must endeavour to distribute the taxes among those who are able to withstand them more easily. While on the subject, I may point out to you, Sir, the example given by the province of Quebec which, in its legislation, on a smaller scale than that of the Ho-minion government, apportioned the taxes among the wealthiest class, in such a way as to unburden the poorer classes, and better the conditions of the farmers in particular.

By the drift of this debate, we are aware that, to-day, as in the past, the great question is to know who wants a high tariff and who favours a low one, in other words who stands for protection and who desires free trade.

Judging from certain of their utterances, hon. members sitting on your right, Sir, endeavour to hold the Liberal party as a whole responsible for these sentiments, their words implying that the government is going to wrong the people and change the policy of this country for unlimited free -trade. Those who conclude from various speeches that the Liberal party is an absolute free trade party, are entirely mistaken. No one, belonging to a party, not even a member of the government can tie down the other members of that party, if they do not share entirely his views. The true policy of parties is known, the line of conduct they must follow is known, because when in opposition they proclaimed that policy and when in power they endeavour to put it into practice. The hon. member for St. Lawrence-St. George (Mr. Marler) stated, a few days ago, that one must only consider .what has been done by a party when in power and take no account of the policy which it proclaimed while in opposition. We cannot set aside the programme of a political party in opposition and merely go by its policy when in power so as to judge of the line of conduct which i-t will adopt in the future.

We know that the first to taunt us, to-day, for our attitude, because we lower the tariff on farm implements, are those who, last year and the preceding years, even when we were in the opposition immediately after our 1919 convention, were asking us to enact some of the most important articles of the programme of this convention. And to-day, because we -try, so as to lighten the burden of the farming class, so as to better the general conditions of the country, to enact a certain part of our programme, they tell us that our policy was not the right one, yet, they are the same gentlemen who, at that time, told us to put it into practice. They taunt us -also for giving too much to the western farmer's party, and, on the other hand, they ask for a higher protection and state that we shall be able, with such a protection, an adequate one, a protection to cover all our industries, to remedy all the evils which are supposed to be the present cause of the instability of the country. I do not think, Sir, that what we are actually doing is of a nature to hurt the industries, the factories and the large commercial institutions of our country. I think that on the contrary, the lowering of duties on farm implements as mentioned in the present budget is of -a nature to improve -t)he lot of the farming class, and representing an entirely agricultural county, a county situated in the province of Quebec, where there are some factories, but especially pulpwood mills, I cannot do otherwise than give my entire support to the government for the sound policy which they have inaugurated.

We often speak of (the government's policy, and the same line of argument is followed as that made use of last week by the hon. member for St. Lawrence-St. George. If we look over the speeches delivered in the past by the leaders of the Liberal party, by the Right Hon. Mr. Fielding when he was Minister of Finance in the Laurier cabinet, we notice that tlhe policy of the Liberal party has always been to maintain a certain stability in tariff matters, and that the party never disturbed this stability but carried on the policy inaugurated in 1878, the National Policy.

But, Sir, if we examine the tariffs which were established at that time, the truth is seen. We notice that, in all circumstances, the Liberal party endeavoured to lower in a moderate way the tariffs, nevertheless allowing a protection, which I might call "in-

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CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

(Translation): May I

ask the hon. member a question?

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LIB
CON

Arthur Meighen (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MEIGHEN:

(Translation): Do you

repudiate the statement of the hon. Minister 120

of the Interior that this budget is the death knell of protection?

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LIB

Joseph Philippe Baby Casgrain

Liberal

Mr. CASGRAIN (Translation):

No; I do not think that, when the hon. Minister of the Interior stated that , the budget was the death knell of protection or the "whisper of death" of protection, I do not think that it was what he meant, I do not believe that in this country, in the province of Quebec which I represent and in the party that sits on your right. Sir, there can be found a majority ready to abolish all protection; I do not think, as I stated at the outset of my remarks, that such was the intention and the thought of the hon. Minister of the Interior. Moreover, I do not think that a political party can be tied down by such a statement, I do not believe that the members of the province of Quebec can be tied down by the statement of one man which was made under such circumstances.

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?

Some hon. MEMBERS:

Hear, hear!

(At six o'clock the House took recess.)

After Recess

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LIB

Joseph Philippe Baby Casgrain

Liberal

Mr. CASGRAIN (Translation):

I was saying Sir, when the House took recess at 6 o'clock, that you could not tie down the policy of a whole party and all those who support the government by a few words which, during the heat of a debate, might have been uttered by one of its ministers, or by persons well up in the party I also added that I did not think there was room, to-day, either in the province of Quebec or in the whole of Canada, for free trade, and that, under no consideration, the party to which I have the honour to belong would ever do anything of a nature to destroy or ruin the industries which, for a number of years, have largely contributed to the prosperity of our country.

The government, in the budget which it has just introduced, has adopted the Liberal policy as it was prepared and handed down, by the leaders who preceded us, by the late Sir Wilfrid Laurier and those, who before him, had the destinies of the Liberal party in their hands. .

In the course of the speech of the hon. member (Mr. Hocken) who preceded me, I was astonished at some of his remarks. He stated that the Canadian workmen were emigrating in great numbers from large centres to the United States and he bewailed very much the treatment which was meted out to them in the new budget.

The Budget-Mr. Casgrain

I think the same remark was made by the ex-Minister of Finance (Sir Henry Drayton) at the outset of this debate. They are, today, very anxious over the lot of the working class, especially over the lot of the tillers of the land. However, they had not, it seems such great concern in past years when, in 1911, the government of Sir Wilfrid Laurier submitted to the people for approval the reciprocity pact which would have benefited all Canadians. With reciprocity, the whole country would have progressed, and we would not have to brood over this disquieting state of affairs that these gentlemen of the opposition, to-day, are so much fretting about.

Let us now examine what the Conservative party has done for the farming, class. If we go back to the year 1920, when the government of those who sit on your left, Sir, had appointed a commission to inquire as to changes in the tariff which it would be necessary to effect, we shall see that the farmers requested, at that time, in Quebec, from the commission presided over by Sir Henry Drayton, a lowering of duties on farm implements. The farmers foresaw, then, that profits might dwindle down, that there would be a crisis to tide over and they wanted to prepare to face it. They had been careful to request the government to adopt the necessary measures to guard against periods of hard times which might intervene and be detrimental to their interests. But the Conservatives declined to rescue them and dismissed their just claims, with the results that we now know.

The hon. member who preceded me in this debate also stated that the Liberal party was not faithful to its pledges, that it was not the old Liberal party that carried on the policy of Laurier and Fielding. But, Sir, is it not a cause for regret to see those who insist, to-day, that we should take up the policy of Laurier and Fielding, were the first, during the years when the government of Sir Wilfrid Laurier presented its budgets, to oppose them and prevent the enactment of the Liberal's budget policy which is so highly praised to-day and which is said to be the best? Are they not the same gentlemen who, in the year 1911, carried on the whole campaign against the late Sir Wilfrid Laurier to prevent the enactment of that policy known as the "Laurier-Fielding tariff policy?"

The hon. member for West Toronto, Sir, is fretting for the future of the steel industry which, he states, will suffer great losses through the lowering of the tariff on farm implements. If we consult for a moment the statistics, we shall notice that the company known as the Steel Company of Canada,

which my hon. friend mentioned, is making large profits. For the year 1921 their profits amounted to $810,292, in 1922, they were $903,596, and in 1923, they amounted to $1,432,875. So that, during the last three years, this company increased its profits from year to year, to such an extent that, to-day, the small setback which it might have to suffer would be greatly compensated by the profits it has accumulated in the past.

If we listen to the remarks which are made by the hon.. members who sit on your left, Sir, we gather the impression that they are great alarmists and pessimists. On the other hand, if we read the financial newspapers, we find that we have no such cause for alarm and fear for the future. I was looking over, not long ago, a journal that has a certain influence in Montreal, the Montreal Financial Times, dated April 11, 1924 and this is the heading I found:

Twenty-Seven Companies Have Reported Increased Net Profits During Past Year

Over 50 Per cent of Corporations Whose Annual Reports Have Appeared in Last Few Months Indicate Increase income Available for Dividends- Showing Practically the same as Year Ago-Some interesting Earnings Changes Revealed-Two Successive Years of Progress.

Evidently, Sir, one should hear both sides of a question. Some hon. members state in this House that business is bad, that industries are threatened with ruin, that no alteration should be made to the tariff; on the other hand, these same gentlemen carry on a propaganda in their newspapers 'and assert that business is improving and that the financial situation of the country seems brighter from day to day.

And the editorial continues:

It is gratifying to note that in the majority of cases, substantial progress has been recorded in the matter of earnings. In a compilation showing respective net incomes available for preferred and common dividends for the fiscal years ended in 1923, 1922 and 1921, comprising 48 companies, it is interesting to note that no less than 27 companies reported increased net income in 1923 6ver 1922, which in itself was a year of fair progress. In that year 28 out of 48 companies had net incomes registering increases over 1921.

Fifty Per Cent Increase

This showing is extremely interesting inasmuch as it indicates that progress during the past two years has been along comparatively stable lines despite the vicissitudes of general business and the constantly fluctuating influences. The past two have undoubtedly been years of comparative hardship, and industrial betterment has been confined to a large extent to specific lines. At the same time the fact that approximately 50 per cent of the companies listed in each of two years have been able to make headway speaks well for the position in which industrial and commercial companies to-day find themselves.

I also came across in the same journal, a few weeks lateT, another editorial headed' thus:

The Budget-Mr. Casgram

Seven Canadian Industrial Groups Earn $32,760,410 Per Annum in Over 5 Years Period

These are excellent results and there is no fear that such large and powerful corporations will really suffer to-day, by the small changes we are making to the tariff as regards farm implements. My hon. friend from St. John and Iberville (Mr. Benoit) who is in the business and is thoroughly acquainted with the farming class, inquires whether the farmers have earned as much as that. I think the answer is an easy one. I do not know that any farmer has ever existed who accumulated such large profits.

The editorial further states:

While industrial prosperity is still a rather elusive factor it is gratifying to learn that since the end of the war leading industries of the Dominion have had their fair share of whatever was possible in the way of profits.

The editorial further divides the companies into various groups: Heavy Manufacturing, Miscellaneous Manufacturing, Cottons and Textiles, Pulp and Paper, Public Utilities, Flour Milling, Mining and Development, and shows exactly the results obtained and the profits earned during the last five years:

Five-Years' Average of Common Capital and Earnings

Common Net P.C.Capitalization Earnings EarnedHeavy Manufacturing. Miscellaneous Manu- $106,399,000 $3,853,371 3.62facturing 21,265,280 1.957.524 9.41Cottons and Textiles 14.616.100 2.927,732 20.03Pulp & Paper.. .. 57,128,280 7,844,326 13.67Public Utilities.. .. 121,849,973 8,908,753 7.23Flour Milling

Mining and Develop- 11,992,008 2,180,483 18.09ment 39.633,700 5.088,251 12.84Total of 5-yr. averages $372,884,346 $32,760,440 8.79

There is still another basis and criterion: the market price of certain shares of these corporations. In the remarks that I am addressing this evening to the House, I wish it to be well understood that I am trying in no way to deny the usefulness of these corporations and that I am ready to recognize all the work they may have done for the development of our country and the expansion of our commercial centres. Only, it is but right to observe that all these corporations have made enormous profits which are not to be compared in any way with the farm profits.

This journal then takes up the cotton industry ; it says, referring to the Dominion Textile Company:

On March 31, 1922, net assets applicable to the old common stock amounted to $10,007,701, or $200.15 per share of $100 par value, or approximately $66.75 per present no par share.

And regarding the Canadian Cotton Company:

On March 31, 1923, net assets applicable to the common stock amounted to $5,522,145, or $203.36 per 6hare of $100 par value.

My hon. friend from St. John and Iberville inquires whether there is "watered stock", whether these companies have been over-capitalized. I am not in a position to answer, I am not prepared to give these facts to the House and supply the necessary evidence in that connection, but I only wish to quote the facts which were published in the press throughout the country and show up the satisfactory financial situation of these large corporations.

That is not all, we read in the same journal, that business is in excellent shape and besides is on the increase in the Western provinces.

In a despatch forwarded from Edmonton, Alberta, we find this extract:

Banks and loan companies are more satisfied with the outlook than they have been in several years. Alberta's productive wealth has been greatly increased and saner methods are in evidence in every department including the agricultural. Collections have been well sustained although they have not been sensational.

And a number of companies which, in past years, had not been able to pay to their shareholders substantial dividends, were lately able to do so. We have the Goodwins Ltd. Co. of Montreal, who gave out that it was paying all arrears of dividends on its stock "Goodwins Ltd pay all arrears on its stock," and all this is to be found in the same financial journals which on the other hand, try to impart to the public that business is bad and that we are passing through, to-day, a period of depression. If we examine the commercial sheets and consult the business people, we find that in a great number of cases they are not so pessimistic as our friends who sit, Sir, immediately on your left.

I have before me a circular from one of the largest firms of brokers of the city of Montreal-and we receive many of this kind of circulars.

This document is dated April 11, 1924, after the budget had been presented to the House and thereby made known throughout the country.

At the beginning of the second quarter, we have advanced sufficiently far into 1924 to get some line on the probable outlook for the remainder of the year. One thing that seems assured is that it will be a year of easy money conditions, so that with plentiful funds available for investment there is likely to be a steady demand for high grade bonds and stocks, etc.

And they refer to large industrial corporations and companies in which they encourage the public to make investments and place their savings, because they state, business being on the mend the profits will be larger. There is also another test; we often take advice

The Budget-Mr. Casgrain

from economists and it is well to inquire at that source so as to learn from these persons who are continuously in touch with these questions, what is the financial situation and if it is improving. Here is the opinion of Mr. Roger W. Babson, a distinguished economist, who publishes statistics and reports on all financial questions; speaking of the financial situation in Canada, he goes over the ground thoroughly and says, among other things:

The Situation in Canada is Improving

Roger W. Babson has published of late, on the present conditions of business in Canada, an interesting review in which he states, among other things, what follows:

" The close trade relations between Canada and the United States, says Babson, are not appreciated to their full value by the business people of both countries. In the matter of economic relations the boundary counts for very little. The different (Conditions existing in those two countries arise especially from a different equilibrium between the manufacturing and agricultural industries. The manufacturing centres are the first to react from an economic depression ; business flourishes many months before the productive regions of raw material. Although manufacturing industry is rapidly developing in Canada, this country is still looked upon as producing raw material. Thus, it is always later than the United States in its movements of fall and rise. That is why the Canadians can look upon the economic situation existing in the United States like a barometer pointing out what will take place in Canada a little later."

" Up to now the readjustment has been somewhat slow in the provinces, but it may become more noticeable during the year.

This proportion will improve, and not only will business transactions increase, but work will be distributed in a more general way throughout Canada. At present the advertising and sale must produce the best results in the eastern provinces. The industrial situation should continue to improve in 1924."

So that, Mr. Speaker, you may judge that all the members who sit nearest to your left and the press of the country, especially the influential English press, which has endeavoured to tell us that industries are in danger, that trade is fading and that the time is ill chosen to bring on the few changes to the tariff by which we are trying to improve the conditions of the farming class, all these gentlemen, I say, are not entiiely right, for we know, on ihe other hand, from people absolutely disinterested, that business is looking up, and that the financial situation is improving from day to day.

In the budget which is, at present, under consideration we note-a remarkable thing- that there are less taxes than might have been expected, when the government faced with numerous difficulties, might have been forced to enact further taxation or at least maintain those taxes which were already in existence. The slight changes that have taken place are not of a nature to bring on the

imaginary unrest that some endeavour to flash in the eyes of wrongly informed people. Pessimism is one of the causes of the straitened circumstances in which the country finds itself at present. By means of advertisements and newspaper editorials an effort is made to convince the working class and the business people that all is going wrong. That is why I ask all the members who have at least the interests of the middle class, the farming class and the working class, and who share the views expressed in the budget as brought down by the Acting Minister of Finance, to rise in this House so as to explain to the country their position and convince the people who might, perhaps, be badly informed, that the situation is not so critical as it is made out to be in certain quarters, and that the budget brought down by the government of the Right .Hon. W. L. Mackenzie King is a budget which reaches all classes of society but especially the farming class.

The depression which took place in the farming industry, is due to the fact that the government which preceded us paid no attention to the just claims of the farming class, and, consequently, did not endeavour, immediately after the war, to distribute more equitably the taxes and reduce them if possible. Wrongly did we abandon the farmer to his own resources although he had practically no more market in which to sell his products. The enormous expenses brought on by our exaggerated participation in the European conflict and the heavy taxation which the Dominion government had to have recourse to, was another cause of unrest. The Bankruptcy Act enacted by the late administration and which, up to the present, is highly depressing, is again another cause. We amended it last year. I am glad to hear that it has given better results and that bankruptcies were not as numerous as in the past, in farming districts.

I feel confident that under the administration of the hon. Minister of Justice, the member for Quebec East (Mr. Lapointe), new amendments will be added to the act and will have for effect to dispel the unrest which the farming class have to face.

We must congratulate, Sir, the King government, seeing the difficulties to which the farming class is exposed, for having acquiesced in the just claims of the farmers, the country people who, after all, make up the greatest part of Canada's population.

Now, I do not wish to be charged with bringing up local questions, however, I think it would be proper to draw the attention of the government to an industry which, in my

county and elsewhere, has become important and deserves to be better encouraged by the government. It is the maple sugar industry. It is stated that the last crop brought $5,500,000 to the farmers of the provice of Quebec, and there is no doubt, according to information which I have gathered, that should the government help this industry, to a certain extent, the farmers could still more increase this output, and that this branch of the farming industry would become more productive and give better results. The surest way would be, perhaps, to help the farmers as it was done in the past for the dairy industry. I trust that the Minister of Agriculture will find means of doing something in that line for the farming class.

We notice in the budget that is now under consideration and also in the policy which the government has proclaimed and put into force since we have assumed power, that it has always endeavoured not to go to extremes neither on the side of free trade nor on the side of protection, but has always tried to establish a moderate policy, that is has always steered the middle course, -which is the one we should adopt in a country like Canada, where there exists various opinions in all classes of society, also marked differences owing to geographical conditions which are very exceptional. I wish to add a few words with regard to the British preference. I am not an expert on the subject of trade and I have not a knowledge of all the results of this policy; but from what I hear through a number of tradesmen and manufacturers, this policy, when it was adopted, could to a certain extent have given good results; but to-day it may not be satisfactory, and may be of a nature to prejudice certain industries. I hope that the government, while considering this question, will take care of the industries which in the province of Quebec, might suffer from such a policy.

We have read, Sir, in the press throughout the country, on more than one occasion, that the provinces of Quebec and Ontario should unite with the view of giving the country a better bearing, a policy aiming at furthering the interests of Canada. It has been stated that the two oldest provinces of confederation should unite to carry high the torch of progress so as to enlighten the other provinces. Nevertheless, let me say that if we had not at our sides the other provinces of confederation to attain our end, I fear that we would not succeed. I think that the present policy of the government is broad enough and sufficiently attractive for all our provinces. What the country needs to-day, to my mind, is not class legislation or legislation favouring

The Budget-Mr. Casgrain

certain districts or provinces, but a government for all classes of society, that will endeavour as much as possible to promote the interests of all citizens, farmers, manufacturers, tradesmen and labourers. And the policy which the government proclaims takes in all the interests of the farming class as well as those of all other classes of society.

Before closing my remarks I must not forget the question of immigration which may have given the government many anxious moments, on its assuming power. Under the wise and just administration of the non. Minister of Immigration, pro tern Minister of Finance, the member for Chateauguay and Huntingdon (Mr. Robb), immigration will push ahead, I have no doubt. I am aware that the means which have been adopted will bring to this country a great number of immigrants gathered from the four corners of the globe and that they will be settled as much as possible on farms. We need people to help in tilling the soil and also, perhaps, others to live in the large centres and help in carrying the burden of taxation which still weighs on our people. However, we must not forget that we shall have to select the immigrants and give preference to those who are most able to adapt themselves to the conditions of the country and become good Canadian citizens. What strikes me most in the government's policy is that it tends to furthering the interests of all classes and keep our people at home. To reach this end, it gave its first thought, its first help to the farming class.

I think that we must congratulate the government for having succeeded, during its three years in office in obtaining such good results and having been able, notwithstanding the hard times we are passing through, to balance the budget, reduce the taxes and improve the general situation over the whole country. I further wish to congratulate it for having acquiesced in the just claims of my hon. friend for Chambly and Vercheres (Mr. Archambault) and having brought relief to the heads of family burdened with taxes, by raising the exemption for children from $300 to $500. This is of a nature to help all classes of society throughout the country but especially in the province of Quebec, where there are so many large families. I notice, Sir, that the government is doing well, notwithstanding all the false prophets and all those who insist that its policy is not a good one. All the governments are more or less forced to give way to the just and popular claims, and, we must return thanks to the Prime Minister

The Budget-Mr. Casgrain

and acknowledge that he has endowed the country wdth the best policy, the one which is in the interest of the whole country.

Allow me, Sir, in closing my remarks, to remind the House of the few lines from a poem which characterizes exactly the policy that the government has adopted and tersely describes the wise course of its administration during its three yearn' occupancy.

Remettez en hoimeur 'le soc et la charrue,

Repeuiplez la campagne aux depens de la rue,

Grevez de taxes le riche et degrevez les champs,

Ayez moins de bourgeois et plus de paysans.

Topic:   QUESTIONS
Subtopic:   MINISTER OF FINANCE
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IND

William Charles Good

Independent Progressive

Mr. W. C. GOOD (Brant):

During the

course of the present debate, Mr. Speaker, and during the course of the debate on the Address in reply to the Speech from the Throne, the fiscal policy of Canada has been discussed from almost every conceivable angle, and I should not feel justified in now participating if I had merely to repeat and reaffirm those professions of . faith and opinion that have been so well and so frequently made in this House; but I propose to break somewhat new ground this evening, and that is the sole reason why I ask the indulgence and patience of hon. members.

Two years ago when I spoke in the budget debate I reviewed the whole argument in favour of protective tariffs and I referred briefly to what might be called the fundamental principles of taxation. On the present occasion, Mr. Speaker, I purpose to deal somewhat fully with the latter part of the remarks which I then addressed to the House, namely, the general question of taxation, its principles and practice, and with special reference to the taxation of land-values.

First, however, I venture to make a few brief observations on the amendment and pn the budget itself. I think it is unfortunate that the wording of the amendment lends itself to differing interpretations. Some hold it to be a substitute motion involving a rejection of the proposals for tariff and taxation relief already brought down by the government and a direct vote of want of confidence. Personally, I am satisfied and assured that the mover had no such intention; the preamble of the amendment makes this abundantly plain. It seems to me it would 'be desirable that the House should permit such alteration of the wording as would make the meaning perfectly clear, but I do not suppose this would be permitted now. Therefore I prefer to vote for the obvious intention of the amendment, rather than reject it on technical grounds. I regard it as supplementary to,-and not as a substitute for, the proposals contained in the budget.

The whole situation, Mr. Speaker- especially * the plight of the 'Conservative party, which is very much the same as oqr own plight two years ago-gives renewed emphasis to the demand which we then made, inferentially at least, for an amendment' to the rules of the House. The rules were devised under the two-party system. Political conditions have altered fundamentally since these rules were framed, and I think it is absurd to try to apply rules devised for one situation to a situation so conspicuously and so definitely different; and therefore I would suggest that we face the question of amending the rules of the House at a very early date. Otherwise I fear we may have a repetition of the ancient story of the new wine bursting the old wine skins. In this connection I was rather impressed by an article that I read recently dealing with this very matter. It is from the pen of one of England's women members of parliament, Miss Dorothy Jewson, and I should like to read a few excerpts' for the benefit of the House. She writes:

A big national assembly must have rules and forms and ceremonies and to take all symbolism and pageantry and colour out of life would be to make it dull and bare, but the Houses of Parliament are overloaded with a heritage of tradition and precedent and archaic customs that fritter away valuable time and energy, cause immense delay, and clog the wheels of progress. The discriminating use of some sort of axe is needed. Instead of being masters of the parliamentary machine we are in danger of becoming its slaves.

How many men have come to the House of Commons, not only full of enthusiasm and animated by high ideals, but with a definite intention and the determination to get something done, to find themselves up against a huge, rusty machine that, when it is not standing still or going backwards, moves with ponderous slowness, causing impatience and bitter disappointment, and provoking members to rebellion, or reducing them to despair, or making them merely cynical.

Further on she says:

Leisurely and picturesque parliamentary methods would not matter so much if the nation were in a better condition instead of the desperate state in which it now finds itself. Certain reforms, essential to an even comparatively low level of civilization, are long overdue* and the fact that they have not been achieved is a condemnation of the way in which our national affairs have been conducted. Only a fraction of the resolution, energy, promptitude and money that were forthcoming during the war could be made the means of transforming large numbers of lives that are now almost everything that they should not be.

I submit that these remarks have a very direct application to the situation here in Canada. I am under the impression-I speak, of course, subject to correction-that the limitations under which we are operating are perhaps greater than those existing in the Old Land.

In regard to the budget, one has to confess a series of surprises. I must admit frankly

The Budget-Mr. Good

at the outset that I was surprised1 and pleased at the extent of the tariff reductions announced in the statement of the Acting Minister of Finance (Mr.'- Robb). At the same time I was disappointed that the range over which these reductions were made was not wider, and that is my chief criticism of the proposals brought down. But a short time after the proposals were originally made, and when I felt justified in supporting them, I was astonished and dismayed to find1 that a regulation had been passed, two days prior to the announcement of the budget, which, so far as I could make out, nullified very effectively the remedial measures that had been proposed; and I was wondering whether I could under those conditions support the budget. However, I am very glad to say that a day or two ago the Minister of Customs (Mr. Bureau) announced in this House the withdrawal of that recent amendment to the regulations, and therefore I feel again justified in supporting the budget proposals. I would like to suggest, however, in passing, that the whole administration of the Dumping Act has a sinister aspect-I would like to emphasize that word "sinister," and I hope I give no offence. It needs a thorough overhauling, and unless the government will do something in that connection I prophesy trouble. .

Returning to the main topic, that is, the question of taxation, I do not think it should be necessary in this House to stress its political importance. History, indeed, is replete with examples. The rebellion of the ten tribes of Israel "under Rehoboam was due to crushing and onerous taxation. The history of the Roman Empire will show that the strength of that great political organization was sapped by iniquitous taxation methods. In England during the seventeenth century we find a great civil war arising at the time of Charles I, due almost entirely, I think, to arbitrary taxation. Later on we have the American war of independence in the eighteenth century, also emphasizing and based upon the unfairness of taxation without representation. The French revolution, following shortly afterwards, was another instance of the same sort, again emphasizing the political importance of this question of taxation. I would submit, Mr. Speaker, that the present farmers' movement in Canada, which is represented in this House by over sixty members is one of the most modern protests against unfair and unjust taxation; and even now, from coast to coast, an emphatic protest is being made against unjust taxation. To sum up the importance of this subject I

submit a very significant statement made by Professor Richard T. Ely, of the University of Wisconsin, in his book Taxation in American States and Cities. It is as follows:

Taxation may create monopolies, or it may prevent them; it may diffuse wealth, or it may concentrate it; it may promote liberty and equality of rights, or it may tend to the establishment of tyranny and despotism ; it may be used to bring about reforms, or it may be so laid as to aggravate existing grievances and foster hatred and dissension among classes; taxation may be so controlled by the skilful hand as to give free scope to every opportunity for the creation of wealth or for the advancement of all true interests of states and cities, or it may be so shaped by ignoramuses as to place a dead weight on a community in the race for industrial supremacy.

Further, Mr. Speaker, I think we may say that the teaching of all history, particularly that of the English-speaking peoples, leaves with us this lesson; that the power of taxation must be retained by the people, either directly or through their representatives. We have claimed that right here in this House, and the British House of Commons claims it. We have gone even further in connection with our municipal governments, where money by-laws are subject to the obligatory referendum. . ,

Now, I made certain observations during the debate on the Address respecting unsound methods of taxation, and the Minister of Railways and Canals (Mr. Graham) was good enough to ask me, on that point, whether there were any sound methods of taxation, or whether the people would admit that any methods of taxation were sound. I replied that at all events some methods were sounder than others, and I proceed now to elaborate that thought.

First, I think we shall have to define our terms, and I ask the question, what is taxation?' In olden times, if we consider the feudal structure of society, the taxation then existing really had the purpose and effect of giving the individual serf or peasant, protection of life and property under his lord. The system was abused only as and to the extent that, the lord or king taxed for petty or personal causes. Leaving that condition of society and coming to what we may call modern democratic institutions and organizations, what shall we say as to taxes? I submit that the following may be a fairly satisfactory definition: Taxes are payments by

the individual to the community for the protection of life and property and for the carrying on of collective activities. In other words, taxes are payments by the individual to the community in return for services rendered the individual by the community. Let me take some exampies in order to illustrate my point a little more fully.

1SS2

The Budget-Mr. Good

Take the rural municipalities in this country. We have there for instance, certain common or collective activities that are carried on such as schools and the maintenance of roads, bridges, and things of that sort. Then take our urban municipalities where we have the same collective activities carried on and in addition such enterprises as police and fire protection, water, electric and sewage services, health, recreation and so on; and as these communities develop we find a growth in the variety and importance of these collective activities. Then in our Canadian provinces we have further collective activities that are carried on, such as the administration of law, the support of education, the maintenance of some roads, the care of unfortunates, and so on. And so far as our Dominion is concerned, we have only to look over the estimates to see the variety and extent of the services which as a Dominion we perform for individuals in Canada and for which we exact taxes from individuals in Canada.

I submit, Mr. Speaker, that if these services are necessary and desirable, and if there is efficiency in the administration or in the execution or carrying out of these services, there is no cause for complaint against the aggregate amount of taxation. That is a comment I would like to make on many speeches that have been made in this House. It goes without saying, of course, that we can afford to provide the services: that I think must be taken for granted; and in such cases the presumption is we would not undertake these services collectively if we could get better results by individual action. For instance, unless we can educate our children better by operating collectively in the establishment and carrying on of our schools, we would not do so; we would do as was done in former times, have each family educate its own children. I take it, Mr. Speaker, that the scope of our collective activities is constantly widening, and that that must be so in the case of a developing civilization. Therefore, the aggregate of taxation is likely to grow. I do not think there is anything regrettable or objectionable in this. I wish, however, to submit this thought to the House, that these various collective activities which are now paid for by taxation may be carried on under other auspices than state auspices. We find, for instance, in many cases that they are being carried on by voluntary, co-operative organizations, and it is quite possible we may have what has been called the fading state as civilization develops, where more and more of the activities which are now carried on under state auspices, where coercion exists, where taxes are enforced, shall be carried on

by voluntary co-operative organizations under entirely different psychological conditions, at all events. But the tendency in that direction is not apparent at the present time; in fact, there has been in recent years, in many countries at least, a tendency towards the enlargement of collective activities under state auspicies. My own feeling, however, is that ultimately there will be a turning of the tide and that it will seem better that many of these activities should be conducted by voluntary co-operative organizations rather than under state auspices.

Now taxation is not only payment for present services, but also for past debts, which I presume may be taken to represent services rendered to the individuals of the past. This is particularly the case in all wars, and I was very much interested, as I think the House was, in getting the information submitted the other day by the hon. member for West Calgary (Mr. Shaw) which showed conclusively that practically all national debts were incurred only during wars and for war purposes.

I should like to read in that connection some remarks made by Professor Irving Fisher recently in a pamphlet entitled "Europe's Big Debt." This is something that we should take to heart. I quote:

The greatest economic problems before the world to-day are those growing out of the big war debts and post-war debts. These debts constitute one of the two millstones around the neck of Europe. The other millstone is that of armaments. Under the weight of these two millstones, much of Europe is sinking into chaos.

Further on he says:

The common notion that the present misery of Europe is directly due to the war, and so was unavoidable, is erroneous. That misery is due to certain by-products of the war-especially militarism, debts, and inflation-which were very largely preventable.

To understand this we must first disabuse our minds of the common impression that in paying these debts " the world is. paying for the war." The truth is the war cost has already been paid for. It was paid for during the war itself when the shells were exploded, when the soldiers' clothes were worn out, when their food was eaten. The debts that are now left merely mean, that, during the war, some people paid more than other people, so that now the latter, are asked to reimburse the former. That is, the taxpayer is asked to reimburse the bond-holder. The world as a whole not only pays but receives. It distributes from one set of pockets to another.

War unfortunately, Mr. Speaker, furnishes a splendid opportunity for money makers and money lenders to fasten chains upon their victims more tightly and to lay the masses of the people under tribute. I think if the methods whereby war debts are 9 p.m. piled up were well known and analyzed, the widespread repudiation now going on would be more intelligible. But we are not repudiating, at least as yet:

The Budget-Mr. Good

in fact, we have vastly increased our war debt through deflation. I would like to suggest to the House that members should read in that connection a recent work written by John Maynard Keynes on Monetary Reform, which deals exhaustively with that question. Possibly there should be some repudiation of debt; possibly there will have to be in the future. But, Mr. Speaker, it is difficult to discriminate with justice. We cannot tell as yet what is going to happen, but I want to submit to the House as did the hon. member for West Calgary the other day, that this question of our debt has not yet received any serious consideration by the Canadian people, and I think it ought to. I should like to read in that connection some extracts from this book by J. M. Keynes. He says.

There is a respectable and influential body of opinion which repudiating with vehemence the adoption of either expedient-

He is referring there to what are known as the capital levy and devaluation.

-fulminates alike against Devaluation and Levies, on the ground that they infringe the untouchable sacredness of contract; or rather of vested interest, for an alteration of the legal tender and the imposition of a tax on property are neither of them in the least illegal or even contrary to precedent. Yet such persons, by overlooking one of the greatest of all social principles, namely, the fundamental distinction between the right of the individual to repudiate contract and the right of the state to control vested interest, are the worst enemies of what they seek to preserve. For nothing can preserve the integrity of contract between individuals except a discretionary authority in the state to revise what has become intolerable. The powers of uninterrupted usury are too great. If the accretions of vested interest were to grow without mitigation for many generations half of the population would be no better than slaves to the other half. Nor can the fact that in time of war it is easier for the state to borrow than to tax, be allowed permanently to enslave the taxpayer to the bondholder. Those who insist that in these matters the state is in exactly the same position as the individual, will, if they have their way, render impossible the continuance of an individualist society which depends for its existence on moderation.

I should like to read further in that connection, but I forbear, as the time is passing. This matter, indeed, Mr. Speaker, is somewhat outside the immediate subject for discussion this evening, and therefore I sum up thus: Taxes constitute payment for services rendered.

The analysis which I propose to give further differs somewhat from that given by Professor Henry C. Adams in the Science of Finance; but it covers practically the same facts and is I think a little more applicable to our existing situation. I refer to his book in passing as dealing in an exhaustive way with the whole question of public finance. I propose therefore to examine and classify the different kinds of taxation that we find existing at the present time.

My first classification is that of direct and indirect taxation. Politicians are very fond of saying that people will not stand for direct taxation. I would like to submit to the House that no enlightened people will stand for indirect taxation, and I emphasize the point that, other things being equal, direct taxation is always preferable to indirect taxation. I want to issue that challenge to the country, to the House and to those politicians who are fond of saying to the people, for purposes which it is not hard to discern, "Now, of course you will not stand for or endure direct taxation". I say that direct taxation is always preferable to indirect taxation because it is honest and above board, less easily shifted or -evaded, and the taxpayer knows what he is paying, and therefore he will be very vigilant to see that he gets his money's worth.

My second classification is on a different basis and is as follows: First, taxes on consumption, for example tariffs and sales taxes. These may be either direct or indirect. Let us take for an example the case of the average man with a large family. He necessarily bears the largest share qf taxation on consumption; and I would submit, Mr. Speaker, that he renders the greatest services to society in the matter of raising his family. In fact I have often heard it said that every child that is brought up to a state of manhood or womanhood is worth a thousand dollars to the state. I do not know whether that figure is accurate or not. It may be much too small. At all events it expresses the obligation the state is under to the individual in this connection; and yet taxes on consumption place the burden on those who render service to the state, and in proportion to the services which they render. I submit, Mr. Speaker, that such a tax is absolutely indefensible. I should like in that connection also to refer briefly to two cases which I mentioned two years ago; first that of a rich mine owner who, by reason of the fact that the state guarantees to him peaceable possession of his property, is in the receipt of, say one hundred thousand dollars a year, for which he makes no effort whatever. Contrast his situation with the situation in which one of the miners is placed, say with a family of five, and in the receipt, we shall suppose, of five dollars a day. Now, Mr. Speaker, there is a contrast worth dwelling upon in connection with our consideration of taxes on consumption. The other case that I referred to two years ago was that of the Canadian Pacific Railway western lands, increasing in value every year by reason of the

1S94

The Budget-Mr. Good

labour of neighbouring settlers. The railway company which has title to these lands is in receipt of a large amount, has indeed a large claim upon the services and commodities which society produces without rendering any services in return, whereas the poor settler in the neighbourhood pays heavy customs and sales taxes on all his supplies. Here again is a case where the rich idler is exempt or nearly so, and the poor worker has to bear the brunt of the burden. I think there is no tax so utterly indefensible as the tax on consumption. The only thing that makes it tolerable, or the only ostensible and nominal justification for it is in the case of commodities which are needless or harmful in use. Now it is difficult to find such commodities, for this reason, that what is useless or harmful to one person is often useful and necessary to another. Perhaps we might specify such a commodity as alcoholic beverages, which we might very sensibly subject to a consumption tax; but in regard to most of those things which we call luxuries, I think it will be difficult to justify even a consumption tax; although if we are to retain any taxes on consumption, the distinction which is made for convenience, and somewhat illogically, between necessaries and luxuries, ought to be retained. I am prepared to admit the propriety of a tax on luxuries if we can decide with satisfaction to ourselves, what luxuries are. On the whole, however, taxes on consumption are unwise and unjust and ought to be abolished.

Secondly, I mention taxes on incomes, inheritances and profits, whether such are graduated or otherwise. These taxes are

usually justified on the ground of "ability to pay", a principle which I shall shortly examine.

Thirdly, we have taxes by monetary inflation, whether that inflation is carried out by governments or by other agencies. This unfortunately is not generally recognized as a method of taxation, but it is a very important method of taxation and resorted to very frequently. When a government inflates the money volume with its own promises to pay, it thereby decreases the purchasing power of the money already in the hands of its citizens. Therefore, it taxes them to that extent. I should like to read in this connection another extract from this book on Monetary Reform by John Maynard Keynes. I quote:

A government can live for a long time, even the German government or the Ru3sia:i government, by printing paper money. That is to say, it can by this means secure the command over real resources-resources just as real as those obtained by taxation. The method is condemned, but its efficacy, up to a point, must be admitted. A government can live by

this means when it can live by no other. It is the form of taxation which the public find hardest to evade and even the weakest government can enforce, when it can enforce nothing else.

Further on in his book I quote again:

It is common to speak as though, when a government pays its way by inflation, the people of the country avoid taxation. We have seen that this is not so. What is raised by printing notes is just as much taken from the public as is a beer-duty or an income tax. What a government spends the public pay for. There is no such thing as an uncovered deficit. But in some countries it seems possible to please and content the public, for a time at least, by giving them, in return for the taxes they pay, finely engraved acknowledgements on watermarked paper. The income tax receipts, which we in England receive from the Surveyor, we throw into the waste paper basket; in Germany they call them bank notes and put them into their pocketBooks; in France they are termed " rentes " and are locked up in the family safe.

It would be a good thing for our people generally if they would use some discrimination, insight and discernment in respect to this matter.

Topic:   QUESTIONS
Subtopic:   MINISTER OF FINANCE
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LAB

James Shaver Woodsworth

Labour

Mr. WOODSWORTH:

Who were the

beneficiaries of the deflation jwhich took place in Canada? Did the government

benefit?

Topic:   QUESTIONS
Subtopic:   MINISTER OF FINANCE
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IND

William Charles Good

Independent Progressive

Mr. GOOD:

If the hon. member for

Centre Winnipeg will wait just a moment, I propose to deal briefly with that subject, and I will try to answer his question when I come to it. Inflation is not always brought about by governments. Banks also inflate the money volume and thus bring about taxation. I should like to read in that connection just one sentence from John Maynard Keynes and also an extract from a speech by Professor Adam Shortt. This is the sentence from Mr. Keynes' book.

The internal price level is mainly determined by the amount of credit created by the banks, chiefly the Big Five.

This has reference, of course, to Great Britain. That is a clear statement of a fact which is not generally recognized and admitted, and a fact which was denied last year in the Banking and Commerce committee by a good many of the Canadian bankers, but which Mr. Keynes, as an economist, and other economists have stated very clearly, namely that the banks, through their expansion and contraction of credit and the consequent alteration of the money volume, influence the price-level.

The reference which I submit from Prof. Adam Shortt is taken from an address which he delivered before the University of Manitoba on May 12, 1919, and is as follows:

The credit expansion came mainly, however, through the advances made by the banks, especially the ad-

The Budget-Mr. Good

vances of credit to the government-largely in anticipation of future loans. Under the suspension of specie payment and taking the banking system as a whole, the indefinite continuance of this process is quite practicable because a credit once granted and poured by the issue of cheques into the general money volume of the country never passes out of the circle until it is retired, usually by conversion into another form, as when the bank advances are paid off by the further government loans. Thus a credit of $5,000,000, granted to the government is merely an entry in the bank s books, and when drawn upon by the government in favour of munition industries, transportation companies, and supply purveyors of all kinds, much of it may not leave the books of the individual bank involving nothing more than debit and credit entries in its ledgers. Even when the parties to whom the credits are transferred, keep their accounts with different banks, the interchange of such credits between the banks, through the clearing house, practically offset each other in the long run. Thus a credit of even $5,000,000, on government account makes little or no drain on the individual bank, and none at all on the general circle of banks, unless it comes to a matter of foreign exchange.

These are very clear statements of the connection between the operation of our banks and the matter of inflation or deflation. I should like to submit that we have had in recent years sufficient evidence of the extraordinary danger and damage which may result from the unregulated, bungling and stupid lack of control or mismanagement in this regard.

Governments and banks also often combine to inflate when the former issue bonds which are paid for by borrowings and not out of savings. Instead of such a procedure it would be just as well, if not better, for the government to print paper money and! thus save the interest. The effect on the price level is identical whichever policy is pursued, and we might just as well, as a people, pursue the more economical policy. In the United States and Canada during the war years we witnessed a tremendous inflation, and a large part of the inflation which was noticed was, no doubt, due to the issuing of bonds and the payment therefor by the extension of credit by the banks, the banks taking the bonds as collateral security. Now inflation is bad enough, but the mischief is made much worse by deflation, and, unfortunately that usually follows. I shall here answer, in part at least, the question which has been asked me by the hon. member for Centre Winnipeg. And I shall read in this connection some remarks by Mr. Keynes. I think this is particularly important for us to take to heart.______I

quote:

In the first place, deflation is not desirable, because it effects, what is always harmful, a change in the existing standard of value, and redistributes wealth in a manner injurious, at the same time, to business and to social stability. Deflation, as we have already seen, involves a transference of wealth from the rest of the

community to the rentier class and to all holders of titles to money; just as inflation involves the opposite.

In particular, it involves a transference from all borrowers, that is to say from traders, manufacturers, and farmers, to lenders, from the active to the inactive, But whilst the oppression of the taxpayer for the enrichment of the rentier is the chief lasting result, there is another, more violent, disturbance during the period of transition. The policy of gradually raising the value of a country's money to (say) 100 per cent above its present value in terms of goods I repeat here the arguments of chapter 1-amounts to giving notice to every merchant and every manufacturer, that for some time to come - his stock and his raw materials will steadily depreciate on his hands, and to everyone who finances his business with borrowed money that he will, sooner or later, lose 100 per cent on his liabilities (since he will have to pay back in .terms of commodities twice as much as he has borrowed). Modern business, being carried on largely with borrowed money, must necessarily be brought to a standstill by such a process.

It will be to the interest of everyone in business to go out of business for the time being; and of everyone who is contemplating expenditure to postpone his orders so long as he can. The wise man will be he who turns his assets into cash, withdrawn from the risks and exertions of activity, and awaits in country retirement the steady appreciation promised him in the value of his cash. A probable expectation of deflation is bad enough; a certain expectation is disastrous. For the mechanism of the modern business world is even less adapted to fluctations in the value of money upwards than it is to fluctuations downwards.

We have seen in Canada, in the United States, and in many other countries a very serious inflation between the years 1916 and 1920 and a very marked and rapid deflation during the succeeding two years. The hon. member for Centre Winnipeg (Mr. Woods-worth) asked who was responsible for that. It is a big contract to answer that question, but in my judgment banks, governments, and a number of parties and institutions were responsible, although it would be difficult to fix the responsibility definitely upon any one group of people. At the same time, while it is difficult to fix this responsibility, it is absolutely certain, that immense damage has been done; and so far as this country is concerned we as legislators have a responsibility in that connection, to prevent a recurrence of this sort of thing in the future. No kind1 of taxation has been more frequently resorted to in recent years than that of altering the purchasing power of money, and nothing has done more harm.

Mr. MACLEAN (York); The hon. member has quoted a number of experts on taxation, and certain suggestions have been submitted. Would a permanent board of experts, men of extensive business experience, always in session, studying the changes that occur from time to time, prove of essential value as an advisory body available to parliament in dealing with these questions with a view to improving the system of taxation?

The Budget-Mr. Good

Topic:   QUESTIONS
Subtopic:   MINISTER OF FINANCE
Permalink
IND

William Charles Good

Independent Progressive

Mr. GOOD:

I propose to deal with that

matter definitely at the conclusion of my address, if the hon. member will be good enough to wait until then.

In the fourth place-to resume-I note what the hon. member for North Waterloo (Mr. Euler) has very properly termed "nuisance taxes." We have a variety of trivial imposts, such as stamp taxes, receipt taxes and I know not what, on all kinds of documents, which are a penalty on exchange. These are very similar to the taxes on consumption and there is little if anything to be said in their favour.

In the fifth place, and lastly, we have property taxes. Now, what do we mean by property ? I submit that there are two kinds of property: First, there are those kinds of property which are not the products of labour, such, for example, as unimproved farm land, mineral resources, water powers, timber limits, and so on. Secondly, there is the property which is the product of labour such as wheat, houses, clothing, and so forth. And this distinction is given expression to in the farmers' platform by the phrase "unimproved land values including all natural resources." Briefly stated, therefore, property consists of two kinds, land-values and labour-values, which I think are two very concise terms, describing adequately two different kinds of property. As I shall attempt to show later on, a tax on land-values is a payment for service rendered to the individual by the community; and I submit that there is no other tax which conforms so completely to that principle of payment for service rendered as does the tax on land-values. The tax on labour-values, though it may be to some extent based on the principle of ability to pay, is largely in proportion to what the individual does for the community and not vice versa; in fact, it is very much the same in principle as the tax on consumption, where a man is taxed not in proportion to what he gets from society but in proportion to what he gives to society. And that, I submit, is a most anomalous and questionable procedure, particularly from the standpoint of common morality.

Now, I have surveyed the field of taxation which is familiarly known to us, and the question arises as to what principles are discernible in these various kinds of taxation. There are I submit only two principles discoverable in these systems of taxation that have any show of justice. Only two principles need we study any further, namely, first, taxation according to benefits received, or [Mr. Good.}

service rendered, which is another way of putting. it; and, secondly, taxation according to ability to pay.

The principle of payment for benefits received is that which normally prevails in our business life. If for instance we go into a store to buy a pair of boots or a suit of clothes we do not pay in proportion to the amount of money we have in our pockets. The rich man pays no more than the poor man; every one pays for what he gets. That is the common principle that is accepted everywhere in ordinary commerce. Occasionally, however, this principle is departed from, as for example when a doctor charges a rich patient more than he does a poor one. That however, I submit!, is the exception that proves the rule; and I think the world would be a rather topsy-turvy place if we departed very far from that sound common sense idea, of payment for benefits received. But some departure from the general principle is justifiable. And that leads us to the second principle, of taxation according to ability to pay.

The general argument upon which this principle is defended is based on the proposition that the individual is a social product; that all he has and is are due to social influences and forces; that society owes all to him and he all to society; that there is no real distinction between "mine" and "thine." To put it in brief, as one United States writer has said, the individual is "society at a point." I should like hon. members to retain that phrase in their memories: the individual is "society at a point." They will recall perhaps also some words that are put by Tennyson into the mouth of Ulysses when he says:

I am a part of all that I have met.

This reasoning leads us to the well known motto of the socialist: "From each according to his ability, to each according to his need." It leads to communism, to that condition of society pictured by Edward Bellamy in two or three of his books. I am prepared to admit very frankly that there is a good deal of truth in such reasoning, and as an ultimate ideal it may be impossible to successfully challenge it, I suggest however that it is wise not to push its application too far or too fast. We have a long road to travel yet before we can safely deprive the individual of all rewards of individual effort and sacrifice.

I think that would be safe only when, and as, the motive of rendering service to the public becomes dominant. Of course, it is true that the old and infirm and unfortunate are supported by the able-bodied and enterprising; the strong must bear many burdens for the weak, so that to this extent we oblit-

The Budget-Mr. Good

erate the distinction between "mine" and "thine." But we do not generally, or at least we should not, give the rewards of labour to the idler. Unfortunately, Mr. Speaker, we often do: unfortunately idleness often eats the bread of industry. But I think we should hesitate to endorse that principle. I think we should hesitate to make no distinction in reward between two farmers side by side on land equally fertile, equally well situated, one of whom is thrifty and industrious and the other extravagant and indolent. Are we prepared to ignore completely the difference between those two individuals and give no recognition to their individual efforts and individual sacrifices? I think not. Gradually I hope and believe the truth of the co-operative motto, "Each for all and all for each," will come apparent; gradually I hope and believe people will learn that the individual serves his own interest best in serving the public interest.

In this connection I have one or two quotations that I shall submit to the House in order to clarify the point. My first quotation is from the Public, an American journal which no doubt hon. members are familiar with, as follows:

The proposal to tax land values to the exclusion of labour values should not be confused with either socialism or communism. It is individualism, pure and simple. It secures to the individual all that he produces as an individual and also his share of the social value that he helps to produce as a member of the community. It involves no new idea of property, no change in land titles, no increase of officials, and no complication of accounts.

The point there is simply this, that the taxation of land values is not socialistic. Whatever truth there may be in socialism would suggest a modification of the taxation of land values. This taxation is strictly individualistic as contrasted with socialistic. I now read a rather humorous letter from an ex-congressman of the United States, written some time ago to an American paper. It deals with this very point, and I think the House will appreciate its humour. It reads:

I wish I felt equal to dictating an entirely profane statement of present conditions and where they are leading.

With the same inevitable tendency that destroyed agricultural production in Russia by taking away peasant initiative, we are destroying every productive enterprise in this country, and need only a few million more bond salesmen, bankers, and rakeoff experts, to reach a millenium where everyone will live on the interest of his debts.

We should go ahead wrecking commerce and destroying cargo by protectionist insanity and then restore the carrying trade by subsidizing vessels to haul bad air from New York to Rio de Janeiro and from San Francisco to Hong Kong. We especially need as a prophecy of prosperity high-priced land upon which to raise cheap foodstuffs and to conduct manufacturing operations. Four or five more agencies between the

production of coal and the man with the chilblains will furnish a competence for millions of our people. We ought to give away our natural resources to philanthropists who will fence them in and who are willing to divide with many unnecessary distributing agencies but not with the producer or consumer.

I sincerely hope you will publish a mean, nasty sheet that will devote itself to drastic criticism and avoid the attempt to provide theoretical Utopias.

I quote also from a speech recently delivered in the United States congress by Congressman Keller of Minnesota. I will refer to his activities later. The following deals with the point under consideration:

But again it may be objected that my land value tax does not conform to the "ability-to-pay" principle of taxation. My answer is that it is a great improvement over this principle. The present ability-to-pay principle of taxation has two very serious defects:

1. It makes no distinction between incomes that are earned and incomes that are unearned, and

2. It penalizes the man who properly uses his land and rewards the man who deliberately keeps from using it. In other words, the ability-to-pay principle-or income tax-discourages industry and production and encourages idleness and speculation.

I come to this conclusion, Mr. Speaker, which I submit to the House, that the basic principle of sound taxation is payment for service rendered; that it is logical and necessary, however, that this principle should be modified to a limited extent by that of "ability to pay." Also, I think it goes without saying, a sound system of taxation should be such as cannot easily be evaded and shifted, and whose cost of collection is a minimum. In that connection I would submit to the House the four classic maxims of Adam Smith, as follows:

The best tax by which public revenues can be raised is evidently that which will closest conform to the following conditions:

1. That it bear as lightly as possible upon production-so as least to check the increase of the general fund from which taxes must be paid and the community maintained.

2. That it be easily and cheaply collected, and fall as directly as may be upon the ultimate payers -so as to take from the people as little as possible in addition to what it yields to the government.

3. That it be certain-so as to give the least opportunity for tyranny or corruption on the part of officials, and the least temptation to lawbreaking and evasion on the part of the taxpayers.

4. That it bear equally-so as to give no citizen an advantage or put any at a disadvantage as compared with others.

Now, Sir, I ask the House: What system

or systems best fulfil the above requirements both as to principles and methods? The quotation from Adam Smith deals largely with methods; the arguments that I have been advancing deal mainly with principles. I submit that the taxation of land values, above all other systems of taxation, is the one which conforms most closely to the requirements both as to principles and methods. Time will

The Budget-Mr. Good

not permit full elaboration, but I quote some authorities in this connection. I shall examine the subject under the following headings:

First, a tax upon land values is in proportion to service rendered, in regard to which I quote the following from C. J. Buell, author of The Minnesota Legislature:

All the benefits of government are accurately measured-not by any man-made statutes-but by a law of nature as irresistible as the law of gravitation.

What is that measure? The measure is this: The benefits of all good government are accurately reflected in the value of land. Why is a lot in one part of a city worth five, ten, a hundred, a thousand times as much as the same sized lot in another part of the same city? Everybody knows the answer. Where the streets are improved-paved and curbed, with sidewalks, water, gas, sewer, street car service, etc., there lots will be high priced, provided only that these improvements have been put in where they are needed -where the people congregate and need them to use. Build a new schoolhouse and lots go up in price. Run a paved road through the country and the farms will sell for more money. But good government is not the only thing that increases the price of land in the country or lots in the city. Every child born into the world adds to the value of land.

And he continues to elaborate that thought. I have also a quotation from Henry George dealing with the same subject but as it is somewhat lengthy I shall only mention it. However, I should like to quote a statement made by Dr. Bland, who is well known by most of the western members present. He says:

But, to ascertain what benefits any man derives from living in a certain community is not impossible. It is not even difficult. He cannot live in such a community except on the land, and the price men are willing to pay for land represents precisely what in the general judgment are the advantages which that community provides for that location. Everything is taken into account in fixing that value-police and fire protection, schools, churches, roads, sidewalks, social and business opportunities. The price a man is willing to pay for any piece of land apart from improvements is his own acknowledgment, without any evasion or falsification, that he thinks it worth that much, at least, to be a landowning member of that community. The community, then, has the right according to its needs, to tax that man precisely in proportion to the value of the real estate he owns. If his real estate is very valuable, he is enjoying great benefits and should pay proportionately. If his holdings are of little value, he should pay little. If he owns no land, he should pay nothing.

It is obvious no man can live in that community except as a landowner unless he obtains permission to live on somebody else's land. To obtain that permission, he will have to pay that landowner at least all the latter thinks the privilege of using that land is worth. This includes all the benefits that the community confers. Consequently, every tenant pays for community benefits in his rent. If a further tax is imposed on him he is being compelled to pay his taxes twice.

I had other quotations, Mr. Speaker, but I cannot cover the subject in any exhaustive way; I simply submit these as samples in

[Mr. Good.J

proof of a statement which I think can be made abundantly clear.

Second, this species of taxation cannot be shifted. I have here six quotations from economic authorities dealing with this point. I shall read only one of them, from Professor Thorold Rogers' Political Economy, as follows:

A tax on commodities is always transferred to the consumer. A tax on rent cannot be transferred.

I have further quotations from Walker's Political Economy; John Stuart Mill's Political Economy, Ricardo's treatise on the same subject; Thomas G. Shearman's Natural Taxation, and E. R. A. Seligman's Incidence of Taxation. The argument, in brief, is as follows: If this tax can be shifted, if we may suppose that a landlord can diift his tax to his tenant, then he can raise the rent, but in that case the tenant will vacate unless other landlords can also raise their rents. To become effective, therefore, rents must be capable of being raised all round. But as everyone knows, the taxation of land values penalizes the holding of land out of use and must result in a tendency toward lower rents; therefore, the initial supposition is proved impossible. I have much additional information on the same point, but I think it need not be given to the House to-night. It can be clearly proven, Mr. Speaker, that this tax cannot be shifted.

Third, it cannot be evaded. Land cannot be hidden. The values are known or easily ascertainable; no tax dodging is possible. I should like to quote from some authorities in that connection, but as the hour is late I shall simply leave it at that.

Fourth, it will tax privilege and not industry; it will break monopoly and get rid of speculators. I have two very short quotations from Professor John R. Commons, of the University of Wisconsin; the first is as follows:

Tax reform should seek to remove all burdens from capital and labour and impose them on monopolies.

The other quotation is as follows:

If the size of fortunes is taken into account, it will be found that perhaps 95 per cent of the total values represented by these millionaire fortunes is due to those investments classed as land values and natural monopolies, and to competitive industries aided by such monopolies. [DOT]

That is from Prefessor Common's book on the Distribution of Wealth. In that connection I need only refer to the land gambling mania that prevailed in our own northwest during the years 1910-12, with all its horrible and disastrous consequences.

The Budget-Mr. Good

Fifth, this type of taxation would stimulate production by cheapening land, cheapening commodities and forcing social parasites to work. I quote the following from Surgeon General Gorgas, who, you will recollect, supervised the construction of the Panama canal and may therefore be supposed to be a man of some weight and judgment in the United States. He wrote as follows in the Constructive Quarterly in 1916:

For the first two hundred years of its settlement the United States had no tramp at the edge cf starvation. Is it possible for us to reconstruct the economic conditions which existed during those first two hundred years? It seepns to me that it is. . . . Fifty-five per cent of the arable lands are at present held out of use. . . .Any system of taxation whereby land values were taxed to such an extent that it would be unprofitable to keep them unused would bring about this desirable condition.

I have also, Mr. Speaker, some quotations from the late President Harding, Senator Ladd of North Dakota, Mr. Cullman of Chicago, president of the Manufacturers' and Merchants' Federal Tax League, and the following advertisement which is, I think, very notable. Members have heard of the place called Muscle Shoals in Alabama. Here is an advertisement that appeared in one of the American papers:

'Buy lots in Muscle Shoals-'The Chicago of the South '-now! Your lots will be right in the path of the city's development. No matter who develops Mupcle Shoals-government or private enterprise-Vast new industries are assured. These industries will mean a great inflow of population to Muscle Shoals, and land prices will advance rapidly.

" Remember the basis of all land value is industry. Industry means population. Population means land values. The greater the population, the greater the land values."

This, of course, is a direct appeal to the cupidity of investors to protect themselves by buying this land and then exploiting those who might need to purchase it in the future. A few years ago I noticed a similar advertisement that appeared in one of the western papers with respect to land in Manitoba, advising investors to "buy now." That was just before the soldiers came back, so that when the soldiers should return, land hungry, the way would be clear to extort high prices from them. That was a compliment to Canadian patriotism!

Sixth, it is adequate to meet the needs. I have several quotations in that connection, but I shall read only one, from the Chairman of the United States Commission on the High Cost of Living. This article appeared in July, 1917. It says:

The committee estimates that the aggregate unearned profits of land speculators, owners of natural resources and natural monopolies is approximately six and a half billion dollars this year, while the producers of the

'country have to pay nearly two and a half billion dollars in taxes, because landowners are permitted to retain most of the ground rent.

I may say I personally made some investigations as to the adequacy of the taxation of land values some years ago, and according to my figures-I have forgotten the exact figures at the moment-we could get a very large proportion of the revenue which is now necessary in Canada by a very moderate tax on land values.

Moreover, this type of taxation effectively discriminates between earned and unearned incomes. I mentioned when the resolution of the hon. member for Chambly and Vercheres (Mr. Arcbambault) was under discussion in this House that I would point out a more logical distinction between earned and unearned incomes than was described in his resolution, and I would like to submit to the House now that here is a logical and precise distinction between earned and unearned income. Theodore Roosevelt wrote as follows in this connection in the Century Magazine of October, 1913:

We believe in a heavily graded income tax that discriminates sharply in favour of the earned, as compared with the unearned incomes.

William G. McAdoo, who may be a candidate for the United States presidency at the next presidential election, spoke as follows at Newton, Kansas, in. 1921:

The time has arrived when earned incomes should be distinguished from the unearned, and taxed at a lower rate.

I have another quotation from Professor Brown of Missouri University but I shall not read it on the present occasion.

Now, Mr. Speaker, having thus surveyed the field from the standpoint of economic theory, and established certain principles, and outlined the way in which the taxation of land values harmonizes with those principles and with sound maxims of taxation, I would like to submit very briefly to the House an outline of the progress which has been made throughout the world in connection with the movement for the taxation of land values.

First, in Europe: Municipally throughout

Europe this system has been applied in connection with many municipal enterprises, not perhaps in the way it has been familar to us in America, but effectively though in a slightly different form. The king-10 p.m. dom of Denmark, a country which has led the world and is still leading the world in very many respects, in the year 1922 adopted for federal purposes a tax on land values, and I have here in this

The Budget-Mr. Good

magazine a very interesting article outlining-the growth of this movement in Denmark, which culminated in the course of some twenty years of education and propaganda in the establishment of this national tax on land values. It is perhaps significant that the movement in Denmark was begun by the organized farmers, and has been maintained by them ever since. Denmark is well known to us as a country of farmers, as a country which has shown the world and particularly the farmers of the world the best methods of organization, a country which stands out probably above all others in many essential respects, and certainly the first country in Europe to adopt what I claim to be this better sj'stem of taxation for federal purposes. Some time ago, in fact it was just last year, an international conference was held in England dealing with this question and I have here an address delivered by a Danish woman entitled the "Spiritual, Mental and Economic Background for the Henry George Movement in Denmark." She gives a very interesting account of the growth of this movement in Denmark. That is all the information I have time to submit in this connection as to the European situation.

Now in. the Australasian countries this system has been adopted municipally provincially, and federally, for a good many years. T need not give the details as the hour is late, but there more than anywhere else this system has been worked out with considerable advantage. I must admit it has not developed much in recent years, probably due to the very heavy taxation resulting from the war. It may be also that as eternal vigilance is the price of liberty and progress, some friends of the movement there have become weary in well doing. I have a good deal of information here as to taxation in the Dominions of Australia and New Zealand which I shall simply refer to in passing, and not give to the House; I wish time permitted me to do so, but it will not.

Now in Canada I think we are more familiar with the situation, particularly our western members. I desire, therefore, simply to refer in passing to the very considerable degree of application of this system of taxation municipally in the various Canadian provinces, also to the provincial taxes on wild lands, or surtaxes or extra taxes that have been adopted in our western prairie provinces. I note also as significant the exemption of live stock and implements in practically all of the Canadian provinces for municipal taxation, and the additional exemption of buildings throughout

all the rural municipalities, I understand, on the prairies. We all know the Drury Act that was passed in Ontario some few years ago, but which was recently repealed by the present government of Ontario, a most unnecessary and unfortunate action, in my judgment.

Federally, I would like to point out that this matter received some consideration in the Canadian parliament in 1919, when a subcommittee of the House of Commons, with Mr. Calder as chairman, reported on suggested forms of taxation as follows:

With respect to the federal land tax-

That was intended, I believe, to be a federal land value tax, although it is not so stated.

-this proposal came from many sources and is worthy of consideration. There is no question of jurisdiction.

If parliament desires to levy a tax on all land within Canada whether used or not, it may do so.

Sir Thomas White, then Minister of Finance, said he had thought about a tax of this kind. There were some estimates as to what it might yield at that time. The further information I have here in connection with the Canadian situation I shall not submit to the House. I would like to remark, however, that there are a number of Labour organizations which have taken a definite stand on this matter. I have a resolution which was sent to me by one of the local labour organizations, also a resolution passed by the Ontario Independent Labour party in 1920, as follows:

Therefore be it resolved that this convention favour the following plank in the party platform:

The gradual elimination of import duties on all necessaries of life, such as food, clothing, including boots and shoes, and the tools and machinery used in production, the revenue hitherto derived from this source to be derived from taxation of land values and luxuries.

So far as the United States is concerned, the matter has been before congress for some years. I cannot say just what headway has been made, but Mr. Oscar E. Keller, one of the congressmen from Minnesota, has had several bills before congress for some years past and I have a copy of the Congressional Record, giving his speech delivered in congress on the 18th January last. I will quote a brief statement of his proposals as follows:

The tax plan which I herewith submit consists of four bills. My first bill repeals a large variety of excise and nuisance taxes, including all corporation income taxes, the total reduction from these sources amounting roundly to $1,075,000,000.

My second bill makes a distinction between earned and unearned incomes, and cuts the present rate on earned incomes in two, making a total reduction of about $230,000,000.

My third bill increases the inheritance tax to the ' extent of about $110,000,000.

My fourth bill places an excess tax of 1 per cent on the privilege of holding lands and natural resources worth over $10,000, after deducting all capi-

The Budget-Mr. Good

tal and labour values, improvements, standing timber, and fertility. This bill, as I shall show, will yield about $1,100,000,000 a year.

I refer to this to show that the matter is being considered seriously in the United States. It has also been under consideration locally in the United States for some time. In Pittsburg they have had it partially in effect for ten years with very satisfactory results. I shall not now refer to the various arguments presented in congress by Mr. Keller. I have much additional information regarding the situation in the United States, but as the hour is late I shall not submit it to the House.

Some time ago an hon. member in this chamber said we were not looking for precedents to the United States, that we ought rather to turn our eyes to Great Britain, and we have often heard of "the mother of parliaments." Therefore, I submit certain information to the House as to the situation in Great Britain. I quote first from the manifesto of the Labour party now in office:

The Labour party proposes to restore to the people their lost rights in the land, including minerals, and to that end will work for re-equipping the Land Valuation department, securing to the community the economic rent of land, and facilitating the acquisition of land for public use.

The increased revenue derived from taxation of land values would make it possible to reduce the burden of income tax, abolish not only the food duties, but also the entertainments tax, and the corporation profits tax, as well as provide money for necessary social services.

I might quote also the following from the present Lord Chancellor of the Exchequer, Phillip Snowden:

We hold the position that the whole economic value of land belongs to the community, and that no individual has the right to appropriate and enjoy what belongs to the community as a whole. Let there be no mistake about it. When the Labour government does sit upon those benches it will not deserve to have a second term of office unless in the most determined manner it tries to secure social wealth for social purposes.

I have also a quotation from Ramsay MacDonald which I shall not read.

However a short time ago a deputation waited upon Mr. Snowden, representing 221 members of the British parliament who were personally pledged to the taxation of land values, and I have here a rather extended report of their interview with Mr. Snowden. I quote the following:

Mr. Snowden said he agreed that the deputation was entirely unique in this respect that so far from seeking to make a raid on the treasury, it came to him with suggestions which would ultimately result in a large increase of revenue. He was in general accord with the aims of the deputation, and he adhered without qualification to the statement which he made last year that it was desirable to obtain for the public the enormous social economic value of land. He was in agreement as to the theory, the justice and the necessity of the taxation and rating of land values. The deputation had raminded him of promises made by the Prime Minister. He was pledged individually, and the Labour party was pledged as a party" to deal with the matter at the first available opportunity.

I will not read the rest, but he goes on to speak about the difficulty under which the Labour party is exercising power at the present time, and the practicability of bringing this into effect in the immediate future. I quote also the remarks of the Right Hon. C. F. G. Masterman in reply as follows:

The Right Hon. C. F. G. Masterman expressed the thanks of the deputation to Mr. Snowden and repeated the assurances which had been given that he would receive support from all progressive sections of the House of Commons in any proposals for the taxation of land values which he was able to introduce in the forthcoming budget. They would be prepared to spend nights as well as days in assisting him to press the measure forward, and would not care in the slightest to whom the credit was given so long as the object which they desired was achieved.

As hon. members know no such proposal was brought down in the last budget by Mr. Snowden for the very obvious reasons outlined by him in his reply to the deputation.

I mention next the question of the feasibility of the taxation of land values. There seem to have been doubts in some people's minds as to the feasibility of this system, but I submit the feasibility has been demonstrated by the actual carrying out of this idea in a great many countries. It was also considered feasible by a committee of this House a few years ago. I submit also that the taxation of land values is applied in part throughout Canada for local purposes, and during the war there was a provincial tax- not a tax on land values but on real estate- levied by the provincial government of Ontario for war purposes-a tax of one mill on the dollar on real estate.

I should like also to submit to the House that here is a system of taxation by which the federal government can utilize some of the machinery already being utilized for local taxation, at least to a very large extent; and in that way there will be great economies effected. The problem of the equalization of assessment is not an insuperable one, because it has been already tackled and solved to a reasonable degree by our various municipalities. For instance, in Ontario we have equalization as between the various townships for county purposes. We merely require the extension of the same idea in respect of provincial or federal taxes. I submit to the House also that here is a system in which we can collect local provincial and federal taxation with the same machinery. And any modi-

The Budget-Mr. Good

fication of it, such as is in conformity with the principle of "ability to pay," may be carried out through the existing income tax machinery.

We have at the present time a most complicated tax machinery and it is high time that there was some simplification. I should like to know the average cost of collection in Canada of our various taxes. I think it will be found to be very high. The multiplication and overlapping of machinery, is scandalous. In the taxation of land values we have a system that would lend itself easily to a very marked simplification in machinery. I do not, of course contend for reasons already advanced, that taxation of land-values is the only kind of taxation that may be justified. As I said, I think the principle of "ability to pay" has some logical and philosophical basis; but we ought to go very much further in the application of the taxation of land values than we have yet gone. We have not applied it at all as yet for federal purposes, and it is high time that we gave this matter consideration.

Concluding and in reply to the question of the hon. member for South York (Mr. Maclean) as to a commission or committee, I understand that in the Speech from the Throne the appointment of a committee or commission to study methods of taxation is foreshadowed. In fact, the government has, I believe, promised-and the Acting Minister of Finance (Mr. Robb) made reference to this the other day-that a committee would be appointed to study methods of taxation. I heartily endorse that suggestion; I hope it will be promptly and effectively carried out, and whether or not the committee should be made permanent will appear later. But the appointment of a committee immediately to go into this matter carefully, to study principles and methods, and to make some recommendations, is entirely wise, proper and timely. In that connection, too I should also like to repeat what I have said before, that there should be some co-operation between the federal, provincial and municipal authorities in order to abolish the present overlapping and waste.

I realize that I have imposed at great length upon the patience of the House; but as I stated at the outset, I would not have felt justified in speaking at this length, were it not for the fact that this subject, so far as I know, has never before been presented to this House in any but the most cursory fashion. For that reason and because of promised committee of inquiry, I have placed myself on record.

Topic:   QUESTIONS
Subtopic:   MINISTER OF FINANCE
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LIB

John W. Carruthers

Liberal

Mr. JOHN CARRUTHERS (East AI-goma):

Mr. Speaker, as a back bencher, one

who is not enamoured with the sound of his own voice, I purpose to be very brief in my remarks on this subject to-night. In the first place, I wish, with former speakers, to express my regret at the absence from his accustomed place of our revered Minister of Finance (Mr. Fielding), and at the same time to congratulate his understudy upon the concise and short way in which he delivered the budget speech on this occasion, a budget speech that, I think, is more far-reaching and momentous than any that has ever been delivered in this House since the days of the so-called National Policy. In connection with that National Policy, I should 'like tc put this question to the House. Will any hon. member stand in his place and state that he is satisfied with the progress that Canada has made in the last forty-five years under a high protective tariff? Canada, a country which comprises more than one-half of the continent of North America, a country that is rich in natural resources, yet in this year of 1924 has a population of only -I was going to say 9,000,000 people, but it is really less than 9,000,000 people.

I do not intend, as I said, to deliver any learned discourse upon this question. We have just heard a very learned symposium on taxation from the hon. member for Brant (Mr. Good), which leaves nothing to be said upon that point. We have also listened to many figures and statistics during the last few weeks in connection with this debate, figures and statistics that very few paid much attention to and, I believe, very few read after they are'printed in Hansard. I intend only to give expression to a few wandering thoughts that have come to me in the somewhat idle hours I have spent in this chamber listening to the debate. One thing that has somewhat bewildered me in this debate is the action taken by our friends of the opposition in regard to two questions: One in regard to the Canadian National Railways; the other in regard to the protective tariff. As hon. members all know, the Canadian National Railways was a foundling left upon the doorstep of the Liberal party by our Conservative friends opposite. We had to take it in and do the best that could be done to keep it alive. We have done fairly well and the husky chap is growing very nicely, but unfortunately our friends opposite refuse to grant it the proper nourishment which would come from the branch railway lines that are required in order to keep the growth of that railway intact. The other question is the action taken in regard to the National Policy. I am a young member in this House, but I can well remember

The Budget-Mr. Carruthers

the election campaign of 1878 when the National Policy was propounded by the Conservative party. In our old home county of Haldimand, I think it had no better advocate than the late Nicholas Flood Davin, whom a good many in this House will remember. I can remember perfectly the stand that he took in regard to that policy, namely that it was to be only a temporary policy and that as the industries which were protected grew in strength, the protection was to be gradually removed until it was wiped out altogether. I might also draw the attention of the House to the stand taken by the present leader of the opposition Mr. Meighen) in 1911 in regard to the National Policy. The resolution that he moved in this House on that occasion was as follows: That in the opinion of this Hous? a substantial reduction in the import duties on agricultural implements is now due the agriculturists of Canada, and is in just a'ccord with the true end of a protective tariff.

That sounds almost like an echo from Brome. He also goes on as follows in the eloquent speech that he made on that occasion. I will quote just a few extracts from it and this is one of them:

It is this, that in their attempts, to continue the National Policy which had obtained for years before, they have overlooked, they have neglected one essential feature of that policy, they have quite forgotten its guiding principle, namely, the principle that as our industrial institutions advanced in strength and as they were able with every advance to acquire a hold on the home market, the import duties were to be diminished and adjusted in order to meet the evolving and changing conditions. It is that restraining, guiding principle which I claim this government has entirely overlooked, and as a consequence they have allowed, in the respect which I am discussing this afternoon, protection to run rampant, and they have for reasons that are only too obvious, become the slaves of those who helped them into power and who now maintain them there behind ramparts if gold.

I am afraid the leader of the opposition has capitulated to those gentlemen behind the ramparts of gold. Further on in the same speech he says:

Now, Sir, what are the manufacturers of agricultural implements enabled to do? They are able, under this tariff, to exact a higher price than they could exact if the tariff were lower. I do not say that a reduction will, to any very enormous extent, affect the price; I believe it will materially, and I think it will render some relief to, particularly, the farmers of the West, many of whom, notwithstanding any statements that have been made here, are struggling between success and failure every hour. It will accord some relief to them and I believe it is the bounden duty of the government to so afford it.

Here is another gem:

From 10 to 20 per cent is about the addition which these manufacturers are able to obtain from our farmers, by reason of the increased protection afforded them by this government.

121i

Let me cite another passage from the' hon. gentleman's remarks:

-but it has remained for this government to push the line far beyond that, and they have not only given the manufacturers a grip on the whole home market, but practically given them a monopoly of it and they have taxed the consumer in order to push the manufacturers and their industries successfully into the markets of the world.

A further statement he made was this:

But before I go into that, 'let me give you a few figures to show that the conditions of manufacture at the present time do not warrant a very material duty of any kind. . . . and I think I will convince the House that there is very little, if any difference in the cost of production of these machines on this side of the border and in the United States. . . . They (the manufacturers) are able under this tariff to exact a higher price than they could exact if the tariff were lower. It (the reduction of the tariff) will accord some relief to consumers and I believe it is the bounden duty of government to so afford it.

That was his view in 1911. At the beginning of this'year, or in the latter part of last year, at London, speaking at a Conservative meeting, he made the following statement:

The tariff is at the bottom of the commercial stagnation of Canada to-day. The 2.J per cent reduction on farm implements has been followed this year by an increase in the cost of implements of Canadian manufacture and the mounting cost of production.

Now there is the problem. If the 2 1-2 per cent reduction in the duties on implements in 1922 has increased prices, why would a substantial reduction in 1911 have reduced them? It seems a strange conclusion to draw, and I wonder whether the leader of the opposition expects the Canadian people to accept "such a jumble of inconsistencies" as a National Policy for this Dominion. Protection to my mind is an unsound and illogical policy, especially for a young country like Canada which has great natural resources to be developed; for if you followed out protection to its logical conclusion, every country in the world would have a right to resort to it; and with a prohibitive protective duty in force everywhere, where would international trade go to, or what would become of the exportable surplus of the products of any country? Why, international trade would absolutely vanish and the manufacturers of each country would have only the home market as an outlet for their products.

I come from a riding in which all the basic industries are carried on-farming, mining, fishing, lumbering and paper making. It contains an area of about 20,000 square miles and has a population of some 50,000. Yet I can say that ever since my advent to this House 1 have received no request from any of the manufacturers or any of the other

The Budget-Mr. Carruthers

The representative of Prince Albert in the House of Commons, Mr. Andrew Knox, has been having a discussion with the Ottawa Citizen with regard to the Hudson Bay Railway. He concluded a letter to that newspaper as follows:

" Lastly, it might be well to keep in mind that editorials of this character will not deter the West from insisting that this much delayed, though much needed, national enterprise be completed at an early date."

Then the Edmonton Journal goes on:

It has too long been the habit of parliamentarians from this side of the Great Lakes to undertake to speak in the name of " the West," when setting forth their individual wishes, or those of their own particular districts. At least half of " the West " is very little interested in the' completion of the line to Hudson Bay and it is doubtful if the people of the other half are as much concerned in having the project put through as its advocates represent. Alberta and the western half of Saskatchewan would be very foolish to lend their influence to it, when all the money that the government can spare is so badly needed for the construction of branch lines and the development of the western route. It is on the latter that the increased prosperity of the area in question must largely depend. There can be no comparison between the benefit which the West will derive from this route and that which can come to it through the Hudson Bay line.

Then, here is a small quotation from the Swift Current Herald.

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PRO

Andrew Knox

Progressive

Mr. KNOX:

Might I ask if the hon. gentleman knows who controls the Edmonton Journal?

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LIB

John W. Carruthers

Liberal

Mr. CARRUTHERS:

No, I admit I do not know, I am just quoting what is given in the papers out there, which shows that they are not in perfect agreement on the subject throughout the western country.

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PRO

Andrew Knox

Progressive

Mr. KNOX:

I think the hon. gentleman would find it interesting if he would investigate.

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LIB

John W. Carruthers

Liberal

Mr. CARRUTHERS:

Well, we will try to investigate. How about the Swift Current Herald? Is it owned by the same people? Here is what the Swift Current Herald says:

Misrepresentation prospereth nothing, and instead of assisting in getting early completion of the Hudson Bay railway by the style of campaign now being waged, the desired end will probably be defeated or postponed indefinitely. It is well known in informed quarters that there are many heavy investments in mines, etc., along the route and that these investors are anxious to get quick financial action through completion of the railway to the bay. They believe that by filling the minds of the farmers of the prairies with fairy tales about " transportation savings " there will be sufficient pressure brought to bear at Ottawa to hasten completion of the steel to Port Nelson.

That is from Saskatchewan.

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PRO

Andrew Knox

Progressive

Mr. KNOX:

Is that not proof that there are some possibilities along the line of railway?

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May 8, 1924