Give and Take:

The Citizen-Taxpayer and the Rise of Canadian Democracy

By Alvin Finkel

by Shirley Tillotson
UBC press
2017/$39.95/420 pp.

A wealthy Canadian federal politician introduced income tax changes to remove the loophole of lower rates for family and personal corporations. But he ended up on the defensive because he had also proposed tax changes from which he would personally benefit. No, the plutocrat in question is not current federal finance minister Bill Morneau but rather Prime Minister R.B. Bennett, who in 1931 considered removing a loophole introduced in 1926 but then pulled back.

On another occasion, Bennett was asked by a revenue official how to deal with a group of income tax evaders whose swindles he had discovered. “Prosecute!” said Bennett immediately. But when given the list of crooks, he changed his tune: Prosecuting those men would destroy confidence in Canada’s financial leadership. KPMG anyone? Panama Papers? Paradise Papers?

These are two of many examples from Give and Take, Shirley Tillotson’s innovative history of Canadian taxation from 1917 to 1972. The book reminds us that current debates about who should pay what to fund the state programs that most of us want have a long pedigree. So does tax evasion.

Tillotson—a long-time professor of history at Dalhousie University—argues that questions about whether taxes should redistribute wealth have been with us ever since federal personal and corporate income taxes were introduced as an allegedly temporary measure during the First World War. Hidden indirect taxes dinged all Canadians and hurt the poor most in terms of the proportion of their incomes taken by the state in the period before income tax and corporate tax became key revenue sources. Most Canadians did not pay income tax before the costs of fighting the Second World War, and later the costs of creating the welfare state, forced reconsideration of how governments raise revenue. As most Canadians became direct taxpayers, they developed the conviction that they should speak up on how much was collected from them versus others and on how their money was spent. Tillotson observes that the combination of being revenue providers and service receivers enhanced Canadians’ sense of being democratic participants in political life.

It also resulted in widespread tax avoidance, the growth of parasitical industries such as tax accountancy and tax law, and the development of huge bureaucracies of tax inspectors and tax courts. More interesting in Tillotson’s telling are the citizens of every social class who wrote letters to politicians, to the Canada Revenue Agency’s predecessors, and to newspapers detailing the personal impact of income taxes. While the whining of the ultra-rich about high taxes—that they were mostly evading—rings hollow, the heartfelt notes from people barely hanging on ring quite true. Though many of them were beneficiaries of health and social programs that earlier generations longed for, they often appeared little aware of any connection between their taxes and their state benefits. And they often suspected rightly that the fancy people were not paying so much tax that they could barely afford to pay for necessities.

Tillotson is best on the early periods of the income tax and on comparisons of Canadian and American attitudes to taxation. She somewhat runs out of energy as she dissects the debates around the momentous (for tax debate purposes) Kenneth Carter Royal Commission on Taxation, and comparisons with the tax-hating US should have been balanced with some investigation of tax-friendly Scandinavia. But this is a path-breaking work that hopefully will lead to other investigations of Canadians’ love/hate relationship with the state, a relationship where taxes generally land in the hate department.

—Alvin Finkel is professor emeritus at Athabasca University.

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