March 17, 1926

LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

In considering

the increased taxation following 1921, has the hon. member taken into consideration the large borrowings that were necessary to make up for the lack of taxation in the years previous to 1921?

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Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
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CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

I did not

understand from the arguments advanced and applied all over the country that gentlemen of the party to which my hon. friend belongs thought there was any lack of taxation in those years. I thought they were all complaining that the taxation was entirely too heavy.

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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

Perhaps the hon. member did not understand my question.

I asked if he took into consideration the immense amount of money raised by way of loans previous to 1921 on which this government had to pay interest raised by way of taxation. _

Mr. EDWARiDS (Frontenac): I think the governments previous to 1921 paid their way pretty well. I know that previous to 1921 they had to meet, and did meet, obligations amounting to many, many millions of dollars, which their successors in office did not have to meet. There were many things arising out of the war which called for enormous expenditures under the former government, which expenditures this government did not have to meet.

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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

Did you meet those expenditures by taxation or by borrowing?

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CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

By both.

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LIB

William Daum Euler

Liberal

Mr. EULER:

Were they not largely capitalized, loans raised on which interest had to be paid later on?

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CON

John Wesley Edwards

Conservative (1867-1942)

Mr. EDWARDS (Frontenac):

That is very true. They were largely capitalized, but if you compare the expenses for the four years previous to 1921 with those of the four years after 1921, I say that in the former period there were expenses of a special nature which had to be met by the government of 19171921 which did not have to be met by their successors in office, and that therefore their successors in office should have been in a position to implement the promises they made previous to the election of 1921 and reduce taxation all along the line, especially along those lines -which they so roundly condemned at that time. But as a matter of fact there has not been amelioration in the slightest degree since they came into office.

I think the income tax as such is a legitimate source of revenue, and one to be generally approved. The only question I believe in the minds of members of this House is as to the best method of applying it. I for one am strongly in favour of the income tax if it can be justly arranged. I believe there has been a fair attempt made by all parties in this House to fairly adjust that tax. It is a comparatively new source of revenue so far as this country is concerned, and it is quite possible that it is open to a good deal of improvement. I think, however,' there is a general disposition among the people of this country, irrespective of the party to which they belong, to continue the income tax and see that it is properly and fairly adjusted and applied. It is a source of revenue which I think we shall have to continue, and it is only a question of the best way of continuing it.

I presume we must take into consideration one thing in connection with the income tax; we must take into consideration the fact that there is a similar tax in effect across the line. We must, it seems to me, be somewhat influenced by that tax whether we want to be or not. We cannot afford to have in Canada an income tax very much higher than a similar tax in the country to the south. We may have one somewhat higher, but we cannot afford to have it very much higher. We must endeavour to follow their line of taxation to some extent although not to the extent, perhaps, of following it figure for figure.

I think this tax is a source of income which has quite properly been brought into effect and should be continued. I do not think any censure is due the government that introduced this tax in the first place. When it was introduced benefits were given to certain people which were not extended in later applications of the tax. But it was a new principle in this country and perhaps mistakes were made in that respect which would not be committed if in the light of our present knowledge we were now adopting an income tax for the first time. At any rate, the principle of the tax is right, in my estimation, and the tax should be continued as a legitimate and proper source of revenue to the country.

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Subtopic:   DUPLICATION AND DEMAND FOR REDUCTION
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LAB

Abraham Albert Heaps

Labour

Mr. A. A. HEAPS (North Winnipeg):

I have just one or two observations to make on this particular question. Having had a little municipal experience prior to my coming here, I have a good deal of sympathy with the motives which actuate the mover of this resolution (Mr. Church). There is hardly a municipality in this Dominion to-day that is not complaining about the burden of taxation; there is hardly a province that is not

Taxation in Canada

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'COMMONS


making the same complaint; and I think everybody is advancing the same complaint against the Dominion government. I regret sometimes to see the rather partisan spirit which characterizes discussions of this character, and I have no wish personally to display any of that spirit. I think it makes very little difference whether we have a Conservative government or a Liberal government in office; the question of taxation has got to be met; revenue must be raised to meet the necessary expenditure, and the question arises what is the fairest method to adopt. Personally I know of no fairer method of raising revenue than that based on the ability to pay, and the income tax meets that particular requisite. Now, I want to deal more particularly with the resolution which has been placed before the House, and especially one particular part of it. The motion wishes " to restore to the municipalities their former exclusive rights and prerogatives to this form of taxation." This is the first time I have ever heard it stated that the collection of income tax was the exclusive prerogative of municipalities. If I understand anything about municipal government in Canada it is a fact that municipalities receive their charters from the provincial government, and that the rights of municipal taxation are distinctly set forth in those charters. That is true of the city of Toronto; it is equally true of the city of Winnipeg in which I am interested. The government of Manitoba has been asked for a number of years to allow the city of Winnipeg to levy a local income tax. Each year the request was made it met with refusal until a couple of years ago, when the provincial government itself imposed an income tax in Manitoba. I say that for all purposes of taxation a local income tax is bound to be a failure. It cannot be a success because it is far too restricted in its area; and if you tax a man who is living in a certain municipality he will probably move over into the next municipality where there is no such tax in force. If I understand the taxation law in effect in the province of Ontario this particular tax is not an income tax, it is an optional form of taxation. For example if a person, say, in the city of Toronto, has a certain amount of property, and is liable on real estate assessment as well as for income tax he pays the tax which happens to be the higher of the two. An hon. (MEMBER: That is not the case.


LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

I understand the law to be

that if this real estate tax is higher than his income tax he would not pay income tax.

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LIB
LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

Perhaps it is the case in

some and not- in all. One of the difficulties of creating local forms of income taxation, is that you do not secure uniformity throughout the province. Thus if you give local authorities the right to levy taxation you are going to have a dozen or two different forms of income taxes within the provincial area making it almost impossible to have an equitable application everywhere within those limits.

Now what would happen if this motion were to carry? It would entirely dio away with $56,000,000 of revenue. How is the government going to replace this revenue? Where [DOT]would it get the money to do so? I do not think the government can get along without this very substantial sum of money. Now the Minister of Finance claimed that 58 per cent of the money expended fey the federal authorities was uncontrollable, leaving 42 per cent capable of being controlled. If you take away $56,000,000 it means that you remove 33 per cent of the money available for controllable expenditure, making it almost impossible for the government to function properly. Now, let us see what our financial situation is. Compared with the period prior to the war the national debt has more than trebled. In pre-war time, I believe, the interest alone on the national debt amounted to $35,000,000 per annum, but that interest to-day amounts approximately to no less than $135,000,000 annually. If I am correctly informed no part of the capital expenditure -which goes to make up the national debit has yet been liquidated1-I mean to say that part which arose out of war conditions. Therefore, if you are going to reduce your taxation and allow the national debt to stand where it is, how are you going to solve the problem which exists in connection with it? The national debt is a very serious problem, and it will have to be dealt with by the present government or some future administration. Some way must be found by which to reduce our national debt. Australia is reducing its national debt, so is Great Britain, but Canada is not. Whatever government is entrusted with power this issue will have to be fairly and squarely dealt with. And when I speak of reduction of the national debt I mean some large and substantial reduction. It is in that way that relief from

Taxation in Canada

taxation will come to us. I do not know how this reduction can be brought about Certainly you are not going to do it if you reduce the income tax in the way suggested by my hon. friend (Mr. Church). In my estimation there will have to be more taxation in some form or other before the national debt can be brought to the figure where it ought to be 'at the present time.

There is another problem which ought to be dealt with, and that is to define clearly the sphere Of activity as between the Dominion and the respective provinces. A little while ago a conference took place at which it was hoped some solution of the problem might be reached. That conference, however, proved abortive, a fact which is much to be regretted.

I agree somewhat with the statement of the mover of the resolution as to the machinery of government in Canada. I believe with my hon. friend, that Canada is over governed at the present time. We have in the provinces what we might call nine states, and we have in the Dominion one super state. I do not know exactly how we are going to reduce the governmental machinery, but in Australia a strong movement is on foot for the abolition of some of the state governments and to hand over the authority now exercised by the parliament of those states to the federal parliament, as well as to grant a larger amount of authority to the municipalities. I think one of the states of Australia has passed a resolution along that line, and it has gone so far in Australia that one of the federal ministers has suggested that a plebiscite be taken to ascertain whether the people are in favour of the abolition of the state governments. I suggested last- week at a meeting I addressed in my own city that it might be desirable to reduce the number of provincial legislatures in Canada. That will mean an amendment to the British North America Act. I can understand the difficulties and I can understand some of the feeling of certain hon. members in this House towards a move along that line, but 1 suggest, as a step in that direction, that there Should be one legislature for the three prairie provinces, Manitoba, Saskatchewan 'and Alberta, where their problems are almost identical. I do not know whether it would be possible at the present time to have one legislature for Quebec and Ontario. [DOT]

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CON
LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

I am not going into that

question just now. But 1 think it would be possible to have one legislature for the three

provinces down by the Atlantic, Nova Scotia, Prince Edward Island and New Brunswick, and that might be a step in the right direction whereby we might get more centralized government. I think one of the things we are suffering from in Canada at the present time is that we have either too much authority or too little authority. It is always a question of passing the buck, if I may use that term, between the provinces and the Dominion government, and I think it would not be a bad move at all if the British North America Act were so amended as to give the three provinces one legislature, with the consent of the provinces of course, and reduce the number of provincial legislatures from nine to five.

While I have a good deal of sympathy with the motion of the hon. member for Toronto Northwest (Mr. Church), I do not think I can support it, for the reasons I have outlined, because after all I do not recognize that this sphere of taxation is the exclusive preserve of the municipal authorities. I think it ought to be the preserve of the Dominion government, and then it migjht at some time be advisable for the Dominion government, being the central authority for the collection of the taxes, to remit a certain portion of the money collected for taxes to the provincial- authorities, and they might in turn, if they saw fit, hand back some of the money to the municipalities. I think the method in the state of Wisconsin is that the state collects the income tax and remits a portion to the county and also to the municipality.

At the present time in Canada there are as many as two and possibly three collections of income tax. There is too much duplication. If the matter were centralized in one authority, which should be the Dominion government, and the Dominion government were to hand back some of the money collected to the provinces, it would be a far better method of dealing with the resolution than that proposed by the hon. member for Toronto Northwest.

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CON

Edmund James Bristol

Conservative (1867-1942)

Hon. EDMUND BRISTOL (Toronto East Centre):

I do not propose at this time to make a lengthy speech on this important matter of the income tax, but I would like to call the attention of the government to the fact which is well known, namely, that we have been losing during the last four years about 500,000 of our young men and women, born possibly in the provinces of Ontario and Quebec. Two factors operated in taking these people away. First, there was the lack of work in these provinces, occasioned by the tariff policy and the higher wages necessarily paid in the United States, and second, there was the very important fact that the income

Taxation in Canada

tax paid by people in the United States who earn incomes up to $10,000 is very small in comparison with what young men and young women earning from $1,200 upwards in this country have to pay. In other words, Canadians who want to work here as stenographers, or in other small positions, earning from $1,000 to $3,000, pay $30, $40 or $50 as against a payment of $7 in the United States. I really think those members of the community, who are trying to make a living and get ahead in this country and who cannot get as good wages here as in the United States, should receive from any government in power in Canada every possible encouragement along that line.

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CON

George Brecken Nicholson

Conservative (1867-1942)

Mr. G. B. NICHOLSON (East Algoma):

Without going into the question at length, I desire to make one or two observations. In relation to the resolution itself, and the remarks of my hon. friend from North Winnipeg (Mr. Heaps) as to whether the tax had been looked upon as a special preserve of municipalities, I think what the hon. member who moved the resolution had in mind was this-and I believe is the fact-that prior to the war no income tax was levied by any except municipal authorities. There had been no federal income tax, with the possible exception of British Columbia, and I am not certain with regard to that. No provincial income tax was levied prior to the war. There is a very good reason for that, and a very definite reason why this form of taxation should be the preserve of the municipalities. Neither municipal bodies nor provincial bodies have the right in Canada to levy indirect taxes. They must secure all their revenues by the method of direct taxation, while the federal authority is the only one that has the right to levy anything in the character of an indirect tax. Prior to the exigencies of the war I think it was generally looked upon as the right of municipalities to levy income tax. I do not know the situation in Manitoba or any of the other provinces, but so far as Ontario is concerned my hon. friend is entirely misinformed when he intimates that it is optional with the taxpayer whether he shall pay his taxes on assessed value or on his income, whichever is the higher. The fact is that if he derives an income from taxed property he pays a tax on that property and does not have to pay a second tax.

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LAB
CON

George Brecken Nicholson

Conservative (1867-1942)

Mr. NICHOLSON:

That is the law in Ontario, and it must be applied in the same

.

way in all the municipalities. You cannot apply it one way in one municipality and differently in another.

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LAB

Abraham Albert Heaps

Labour

Mr. HEAPS:

Has the city of Toronto a special charter, or does it come within the municipal law of the province?

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March 17, 1926