Tax, Borrow and Spend: Financing Federal Spending in Canada, 1867-1990

Raymond B. Blake is a history professor at York University.

This is a primer on the financing of federal spending in Canada from
1867 to 1990. By creating a new database on federal spending, borrowing,
and taxation, and by analyzing the budget speech of each minister of
finance, Gillespie presents his positive theory of federal budgetary
behavior, which argues that Canadian governments have raised revenue in
ways that maximized their chances of political survival. Hence, this
author does not assign to the taxpayer the role of hapless, helpless
victim of a rapacious government that taxes indiscriminately. He instead
argues that in order to survive, governments carefully choose their
revenue mix to win support from taxpayers. “It is,” he concludes,
“the taxpayer’s political opposition that shapes the government’s
revenue choices.” When the government misjudges or misreads the
relative political costs of proposed tax changes, either it suffers
defeat (Turner in 1974 and Crosbie in 1979) or it amends its proposals
in response to observed opposition (Rhodes in 1934, Gordon in 1963, and
Wilson in 1985).

Gillespie provides new insights into how governments raised their
revenue. Deficit financing, he argues, is nothing new for Canada:
governments used it regularly after the 1880s. The income tax was as
much the result of an increased demand for fairness in the tax system as
it was necessitated by increased war-related expenditures. Nor was
income tax ever presented as a temporary measure. Sales tax became
popular only after strong political opposition forced a reduction in the
tariff.

The author also claims that federal financing policies during the 1930s
reflected a coherent set of objectives, not the haphazard, chaotic,
nonfiscal assault on the taxpayer that so many writers have depicted.
Gillespie concludes that a preference for fairness and equity,
unimportant in the first 50 years of Confederation, has since become an
overwhelmingly important consideration in raising government revenue.

Despite much that is new, this is a tedious book and most readers will
find the author’s style cumbersome and uninspiring. The absence of an
index is unfortunate.