Income tax in Canada before 1917

The Dominion of Canada adopted income tax as a wartime measure in 1917, 75 years after Britain. It was widely argued that few Canadians were sufficiently wealthy to justify the complex and intrusive administrative machine needed to enforce the measure. However, income tax was charged by at least one province, British Columbia, from 1876, and by several cities across the country.

The Canadian government's reliance upon customs and excise revenue before 1917 The basic point about the income of the Dominion of Canada for the first half century of its existence has long since been established by Donald Creighton, writing of the British North American provinces in 1866, and by Peter Waite of the early decades of Confederation: the Canadian government was massively dependent upon customs and excise duties for its income. In 1866, the British North American provinces had derived 64 percent of their income from customs, plus a further 12 percent from excise duties. This pattern carried over into the new system of government: by 1873, import duties accounted for three quarters of Ottawa's income.[1] Despite (or, perhaps, because of) massive expansion of the economy, the picture remained largely unchanged in 1917, the year in which Canada finally adopted income tax as an alternative source of revenue. After fifty years, customs duties still provided 57.8 percent of Ottawa's income, excise duties 10.3 percent – jointly, two-thirds of the Dominion revenue.[2] In fact, dependence upon customs and excise was even greater than the raw figures indicate. Government accounts were presented as balance sheets, with revenue from major areas such as post office and public works entered under income, while the (larger) costs of maintaining post and telegraph services and publicly owned canals and railways appeared under expenditure. It is simpler to elide these figures, and also to set income from several smaller areas against their associated outgoings. Thus, in 1882, the gross figure for revenue was $27.067 million, but this included $5.494 million of the receipts related to specific budget items. If these are set against the cost of running those services, effective government income from taxes is reduced to a net figure of $21.573 million. The result of this relatively simple calculation is that the percentage of revenue raised from customs jumps from two thirds to three quarters.[3]

The decision to introduce income tax in 1917 is relatively easily explained. It was politically impossible to impose compulsory military service without also conscripting wealth or, at least, to be seen to pursue those who were allegedly profiting from the sacrifices of others.[4] However, dependence upon customs and excise meant that, throughout the first half-century of Confederation, Canada raised almost all its revenue from consumption taxes, not by tapping into wealth and income. This note explores some aspects of the issue of income tax in Canada before 1917.[5] It examines the political orthodoxy of the time that taxation of incomes by the Dominion government would have been an unacceptable infringement of personal freedom, administratively almost impossible and financially not worthwhile. Yet, paradoxically, many municipalities and at least one province did impose income taxes, with apparently neutral results – they produced neither widespread resistance nor large sums in revenue. Perhaps most surprising of all is the fact that the province that most tenaciously used the device was British Columbia, often regarded as a frontier community characterised by a transient population. The exploration begins by looking at the comparison with Victorian Britain, which had introduced income tax in 1842.

The comparison with Britain Britain's adoption of income tax happened four years before the country's switch to free trade.[6] The contrast might seem to justify a historian's flourish: Britain used income tax to get rid of tariffs, Canada relied on customs duties to avoid its introduction. In reality, the picture was not so simple. Surprisingly, for all Britain's quasi-religious free trade rhetoric, in 1882 central government derived 22.98 percent of its revenue from customs, mainly levied upon imports of tobacco, spirits, tea and wine, plus a further 32.38 percent from excise, four fifths of which was derived from alcohol-related sources. Put simply, almost a quarter of Whitehall's income came from customs duties, plus almost a further third from excise duties. Income and property taxes, not separately distinguished, produced just 11.43 percent.[7] Thus income tax was a useful adjunct to the income of the British Treasury rather than its vital and central component. It was an article of faith for some British politicians that income tax was a temporary nuisance which could and should be abolished over a period of years: Gladstone, one of the greatest financial statesmen of the age, clung to this hope as late as 1874. Unfortunately, events kept deferring this happy outcome. By contrast, the introduction of income tax was simply not on the agenda at Ottawa: the very term was hardly ever mentioned in the Dominion parliament throughout the first two decades of Confederation, and then usually only in connection with some overseas transaction.

Dominion-provincial taxation boundaries Formally, this might seem to be a silence respectful of constitutional boundaries, since the British North America Act of 1867 apparently assigned the subject to the provincial sphere. The Section 92 provincial powers included "Direct Taxation within the Province in order to the raising of a revenue for Provincial Purposes." However, from the late 1880s there was occasional speculation that a Dominion-wide income tax would be required to cover the shortfall in revenue if free trade could ever be achieved with the United States, and the niceties of federalism did not prevent its introduction in 1917. The problem of overlap with provincial activities was not so much constitutional as practical, as Sir John A. Macdonald outlined on a visit to England in 1880, when he was confronted by a highly discontented deputation of Manchester textile manufacturers. "We are deprived practically of the possibility of imposing direct taxation to any extent by our circumstances," he explained. "In the first place, we are a federation of provinces. Those provinces have the power of raising money by direct taxation. Besides, Canada is divided into municipalities, and all the development of the country, such as roads, bridges and other matters, school rates, &c., are all raised by direct taxation by the municipalities. Our power of direct taxation has been exhausted practically by our municipalities for local wants, and by the provinces for provincial wants, so that we are driven to impose duties on imports, and to levy excise duties for our revenue."[8] The argument was plausible, and there were good tactical reasons for pleading the complexities of Canada's system of government to head off a group of angry free-trader businessmen. But Macdonald's case was undermined by the fact that the separate colonies were already reliant upon tariff income before Confederation had introduced dividing lines between federal and provincial spheres of activity. Put simply, Ottawa politicians were not interested in the explosive possibility of imposing income tax.[9] As Macdonald put it to his Mancunian critics, "you cannot tax people against their will. When you are obliged to extract money from the people the only thing you can do is to extract it in such a manner as will meet their wishes and their prejudices."[10]

Posterity should resist the temptation to condemn late-nineteenth century Canadians for refusing to broaden their tax base. It is by no means certain that a Canadian income tax would have raised worthwhile sums of cash. It can be calculated that a one percent rate of income tax in Britain would have produced £4.6 million in 1882. In rough figures, this converts to $22 million, which – if applied to Canada – must be divided by eight to take account of the population difference. The result would estimate that a one percent rate of income tax might have produced around $2.8 million for the Dominion Treasury. Thus to have halved the Dominion's dependence upon income from customs would have required an income tax rate of five percent – a level that surely would have been politically unacceptable.[11]

Would income tax have worked in Canada before 1917? It is by no means certain that this notional United Kingdom figure would have applied across the Atlantic. Canada was generally regarded as a comfortable land for the working man, but not a very rich country and certainly one that lacked concentrations of great wealth. "In a young country like Canada, where there is not much realised wealth, direct taxation would be comparatively unproductive and oppressive," Macdonald told the Manchester deputation. "An income-tax, for instance, would be unproductive." When one of his inquisitors helpfully speculated, "I suppose because there is nothing to levy it upon?", Canada's prime minister gravely agreed. Evidently they did not notice that this assertion did not sit easily with his description of the extensive use of direct taxes at provincial and municipal level.[12] As late as 1917, Laurier's finance minister Sir Thomas White resisted the introduction of income tax by offering an implied contrast with Britain: "We are not a country of large accumulated wealth and of incomes derived from investments."[13] As already noted, income tax was introduced in 1917 not because it was either easy to collect or likely to raise large sums but primarily in response to the argument of equity that required the wealthiest in society to be seen as making a fair contribution to the war effort.[14]

It seems that direct taxation at local level was mainly a feature of the towns. A Dominion-wide income tax would have faced the problem of assessing farm incomes in cash terms. It is likely that many farmers operated on the margins of the cash economy, consuming their own food and bartering produce and services among their neighbours. In 1880, there were 464,000 Canadian farmers; even twenty years later, the total number of wage earners in factories, male and female, was only 300,000.[15] Britain's tax gatherers levied income tax not upon farm earnings, which were probably impossible to reduce to cash terms, but upon the rental value of land. Even in times of agricultural depression, farmers aimed to make a profit, so the use of the rental qualification effectively gave them a rebate – possibly a sizeable discount – on their earnings. Since the landed interest remained powerful in Victorian Britain, even that tax was imposed at a lower rate than for wage or salary earners, and with further discounts for agriculturalists in Ireland and Scotland. Nicholas Flood Davin pointed out in 1895 that some English farmers argued nonetheless that they were overtaxed. "Does any one suppose ... that we should not have an income tax here as they have it in England, and that our farmers would not cry out in the same manner?"[16]

In Canada, almost 87 percent of farmers owned their own land, which would have rendered any attempt to estimate rental values very difficult and probably of minimal utility.[17] Indeed, administrative complexities were of themselves sufficient to spare the agricultural community from becoming a major target when income tax was introduced in 1917. As one Ontario MP put it, "the farmer ... probably keeps his wife and family out of the products of his farm. He does not begin to estimate his expenditure until he goes outside of his family expenses".[18] When income tax became fully effective in 1918, just 3,623 farmers contributed, well below one percent of the agricultural community. Although they constituted 14 percent of taxpayers, they paid only 3.5 percent of the total.[19]

The great advantage of customs and excise revenue was that it was payable at a relatively small number of ports, distilleries and warehouses, making it cheap to collect and straightforward to enforce. By contrast, a Canadian income tax would have yielded poor pickings, much of which would have been swallowed up in the cost of collection: as late as 1917, Sir Thomas White claimed that "its administration would require almost a second Civil Service sufficient in number to cover every municipality, rural and urban, throughout the Dominion."[20] In the late 1880s, a few Liberal politicians had displayed an impressive commitment to political suicide by speculating that an income tax might make up the shortfall in revenue that would necessarily follow from Commercial Union with the United States.[21] Although sympathetic to the policy, the Toronto Mail thought "it would be exceedingly difficult to educate the Canadian taxpayer up to direct taxation, and we question whether any scheme of the kind would be practicable in Quebec."[22] Its rival, the Globe, was even more forthright: income tax was "offensively inquisitorial and very unequal in its pressure ... it tempts to fraud and falsehood."[23] In any case, it was not going to happen. As Charles Hibbert Tupper put it in 1889, "no one would dare to go to the people and say that he intended to raise the revenue of the country in any other way than by indirect taxation."[24]

Provincial and municipal income tax: the case of British Columbia We find ourselves with a paradox of a peculiarly Canadian kind. It was an article of political faith that income tax was administratively impractical and electorally unacceptable. However, as Macdonald had explained, one reason for ruling it out at Dominion level was that income tax was already levied across some parts of the country, which a logical mind might conclude invalidated the orthodoxy that it was neither feasible nor tolerable. Perhaps most remarkable was the fact that the province that appears to have most consistently employed the device was British Columbia, where settler population was fluid and government structures flimsy. There is certainly no indication that public opinion encouraged its introduction. Rumours of plans to introduce a provincial income tax in 1872 provoked press denunciations. In Britain, commented a New Westminster newspaper, it was "the most unpopular tax in the country. ... an Englishman would rather pay ten dollars taxes on his sugar and coffee, than five dollars directly". From Vancouver Island came an even fiercer denunciation. "An income tax is among the most odious of all systems of taxation, on account of its inquisitorial character. People do not like to be compelled by act of Parliament to reveal their private affairs to any one whom it may please the Government to appoint as collector of revenue, in order that the amount of income for which they are liable to pay a tax may be ascertained. It will certainly not work in this country".[25]

Income tax was introduced into British Columbia by Premier Andrew Elliott in 1876-7 after reckless spending by the previous administration of G.A. Walkem had left the provincial finances in such disarray that Ottawa had unilaterally frozen the annual subsidy payment. Elliott insisted that it operated on the principle of "the rich man paying the income tax and the poor man escaping". No doubt predictably, the unscrupulous Walkem played the tyranny card: "No man liked to be asked what his income was, what it cost him to live, how he kept his wife or other searching questions of a like nature." His ally Dr John Ash, an irascible medic, predicted that it "would be a most vexatious tax and difficult to collect." It also seemed a very blunt instrument. With a threshold of $1500 a year, its absence of graduated rates meant that a man earning $1505 paid on his full income, while a man in receipt of ten dollars less paid nothing at all.[26] Most of all, it was planned to operate at such low rates that its imposition hardly seemed justified: Ash calculated that "it would take at the proposed rate incomes amounting to $1,750,000 to pay the salary of one Minister."[27]

Essentially, British Columbia's adoption of income tax was an overdue exercise in virtue-signalling: the financially feckless province was finally biting the bullet of fiscal probity. In practice, during its early years, the bullet was barely nibbled: income tax, intended to raise $5,000 in 1876, actually generated $516, out of a provincial revenue of $$380,643 – less than one-eighth of one percent.[28] However, when Walkem returned to office in 1878, he not only continued its imposition, but added a 25 percent penalty for late payment.[29] John Ash continued to criticise both "the paucity of the amount received by way of income tax" and the alleged harassment tactics of tax officials in its enforcement. On the first heading, he had a point: in the financial year ending on 30 June 1880, it brought in just $1217.85. The distribution of payments was noteworthy: $1021.18 from Victoria, $88 from Nanaimo and New Westminster $51.[30] There must be some suspicion that the device was primarily intended to tap into the pensions of retired British military and naval officers who were already a feature of the Vancouver Island community. However, for much of the eighteen-eighties, there seems to have been an element of carrot-and-twig in its enforcement: income tax was charged at 0.5 percent if paid before 30 June, a rate that doubled after the first of July.[31]

There seems to be no evidence that British Columbia's income tax was either burdensome or controversial.[32] By 1901, British Columbia's income tax yield had risen to $23,831, out of a total of $289,622 – just 8.23 percent: $13.50 was reported to be charged on an income of $10,000.[33] A committee of the provincial legislature looked at taxation 1905, by which time the target yield from income tax was $80,000. Most was paid by corporations. An official reported that detailed returns were required from taxpayers, but that they were not usually asked to sign their statements, and an "obnoxious" provision to declare income on oath was unenforceable.[34] In 1910, the province's revenue from income tax reached $191,000. While some members of the Victoria Board of Trade favoured scrapping it altogether in 1911, most had another imposition in their sights. Where liability for property tax was higher than an individual's income tax assessment, the income tax demand was waived. However, property tax was alleged to be set at levels that deterred entrepreneurial activity: energetic businessmen might be better off simply investing their capital and drawing dividends. "The merchants were perfectly willing to pay income tax."[35] In a 1918 House of Commons debate, its income tax was described as "quite onerous", charged at 7 percent "upon incomes that are quite low".[36] British Columbia was "the only province which has really imposed that tax to an extent that the people feel."[37] Indeed, the British Columbia government expressed some concern at the Dominion's intrusion on to its revenue patch, describing income tax as "one of the chief sources of Provincial revenue."[38]

Municipal income tax: examples from New Brunswick and Ontario Some municipalities levied income tax before Confederation. Timothy Warren Anglin, editor and proprietor of Saint John Morning Freeman, revealed something of its workings in the New Brunswick port city in an 1860 attack on the colony's restrictive franchise, which was based on a £100 property valuation.[39] Local taxpayers declared their income, to which was added 20 percent of the assessed value of their property. Thus a resident earning £40 a year and property with rateable value of £100 paid local taxes on £60. The Saint John tax assessments were riddled with anomalies, with many non-voters contributing more to the community than qualified electors. Under-declaration was also a scandal. According to Anglin, rival newspaper proprietor George E. Fenety claimed to make a profit of £1200 a year from his newspaper, but only declared himself as earning £200. Two of the professional men who served as tax assessors returned themselves at the suspiciously low figure of £150, although it was known that one received more than that from the Corporation.[40] Half a century later, not much had changed. A detailed study of municipal income tax in Saint John in 1916 – one of the few such enquiries ever undertaken – reported that it was "raised very largely from wage earners and men with small and fixed salaries such as clerks and other officials". Wealthier citizens were more likely to draw their income from trade or from professional fees, sources which tempted them to under-declaration.[41] New Brunswick's much smaller capital city, Fredericton, was also raising revenue through income tax before Confederation. It 1862, it infuriated the lieutenant-governor, Arthur Gordon, by attempting to assess his salary.[42]

Municipal income tax was also widely used in Upper Canada before Confederation. In 1865 a correspondent of the Toronto Globe, who signed "Scrutator", criticised the unequal way in which it was applied: "income derived from real estate, or securities based on real estate, is not liable to taxation. It is only income derivable from 'any trade, calling, office, or profession, exceeding the amount of fifty pounds per annum,' which is assessed for income tax" As a result, "the large holder in property or mortgages escapes any tax upon his income, while the mechanic earning over fifty pounds per annum, the struggling physician or lawyer, and the clerk with a limited income, and perhaps a large family, are all called upon for a portion of their scanty means, and are taxed to provide a revenue, the greater part of which is spent in maintaining or improving the value of the property of the men of wealth." However, "Scrutator" foreshadowed the arguments of the Victoria merchants half a century later, arguing that taxation of incomes would be fairer to retailers than assessments based on property and stock. Urban property values could be high, while the merchant might have stock on hand that had remained unsold for years: "his stock may be large, and, if business be dull, his income may be small, yet his personal property tax may be high, whereas if the tax was on his net income it would be proportioned to his degree of prosperity in business."[43] Presumably the inherent injustices of municipal income tax were tolerated because the burden was generally light. In Hamilton, which was levying income tax by 1862, indigent citizens sometimes appealed for mercy, coupling their pleas with requests for relief from the city's dog tax as well.[44] Nonetheless, some citizens evidently objected to the burden on principle. In 1901, the editor of the Hamilton Spectator was sued by the municipality for five years of unpaid tax, in total the relatively small sum of $79.95. He boldly claimed that he ran the newspaper from a farm located beyond the city limits, an argument rejected by the judge on the grounds that his income manifestly came from a downtown printing company.[45]

In response to widespread outrage that property values were seriously understated for assessment purposes, Ontario premier George W. Ross appointed a 1900-2 commission of enquiry into local taxation, which encouraged a further shift towards municipal income tax. However, in 1917, his son, the Liberal MP Duncan Campbell Ross, claimed that Ontario's municipal income tax was "practically ... a dead letter".[46] Perhaps this was an exaggeration: the manufacturer and property investor W.F. Cockshutt described how he prepared his income tax returns to the city of Brantford, starting with his gross receipts before deducting "all expenditures in the way of taxes, repairs, insurance, and everything of that kind".[47]

Dominion employees and local income tax  Provincial and municipal income tax came up against the arcane provisions of the British North America Act. "The fixing of and providing for the salaries and allowances of the civil and other officers of the Government of Canada" was one of the powers assigned by Section 91 to the central government. Furthermore, all Section 91 powers were exclusive. "Any matter coming within any of the classes of subjects enumerated in this section shall not be deemed to come within the class of matters of a local or private nature comprised in the enumeration of the classes of subjects by this Act assigned exclusively to the legislatures of the provinces." Therefore – so it was argued – the authority given to the provinces by Section 92 to impose direct taxation to generate local revenues could not apply to employees of the Dominion government. Ottawa-appointed civil servants were quick to demand exemption from British Columbia's income tax, but it was a case the following year in the Ontario courts, Leprohan v. The City of Ottawa, that gave Dominion government officials immunity from local taxation.[48] For the municipal authority in the national capital, the loss of so large a part of its potential tax base was a serious blow. Although Ottawa fought back, over the next thirty years a dozen cases across the country consistently upheld a principle that, in retrospect, seems absurd: if the Dominion possessed the absolute right to determine the income of its staff, then logically shopkeepers should supply civil servants with free goods, and landlords grant them free accommodation.[49] When the New Brunswick courts ruled in 1882 that Dominion employees were not subject to local income tax, the city of Saint John adopted the practice of "valuating" their property – which could be taxed – to include a notional sum for the income tax that could not be imposed.[50] In 1889, J.V. Ellis, a Liberal MP from Saint John, tried to introduce a bill into the House of Commons ending their immunity from local income tax, arguing that it was "only right and fair that employés of the Dominion government who live in cities and who enjoy all the privileges which the city affords ... should pay a fair share of the assessment wherever incomes are assessed in Provinces." His proposal was ruled out of order on various procedural grounds, not least that parliament had no jurisdiction over the taxation arrangements of the provinces.[51]

Curiously, the issue was reopened in 1907 after a similar issue arose across the Pacific. In 1901, the Australian colonies had formed a federation, with a temporary capital in Melbourne. Commonwealth civil servants resisted the attempt by the State of Victoria to tax their incomes, but lost a test case before the Judicial Committee of the Privy Council in 1907.[52] Canadian cities regarded this as a precedent that entitled them to attempt to bring Dominion employees within their tax net. Saint John became the key battleground. Carrying the burden of the continual upgrade of its harbour facilities, the city needed revenue. A substantial part of its labour force worked for the government-owned Intercolonial Railway, and could hardly be regarded as wealthy. By December 1908, their refusal to pay left a $7,000 hole in civic finances, the equivalent of 15 percent of the total assessment.[53] The issue came before the Supreme Court of Canada in the case of Abbott v. The City of St John. There was plenty of legal meat for the justices to get their teeth into – the usual happy hunting grounds of Sections 91 and 92, plus the intriguing question of whether Commonwealth-State relations in Australia were constitutionally identical to the Dominion-provincial balance. Essentially, however, the judges – three out of the four, at any rate – adopted a common-sense approach, simply rejecting the illogicality of the case law of the preceding three decades as illogical. Interestingly, they dragged into the open a suspicion that was assumed to have coloured previous decisions, the fear that provincial or municipal institutions might effectively nullify the operation of the Canadian government within their boundaries by imposing such punitive taxation upon its employees that Ottawa could not provide the personnel to discharge its functions. By 1908, this seemed highly unlikely. In any case, "Dominion officials could only be taxed upon their incomes in the same ratio and proportion as other residents." After four decades, Confederation was at last taken for granted, a welcome normalisation of the structure although achieved at the expense of its personnel, who now became liable to local income tax.[54]

Conclusions and agenda This note is intended as an exploration which, it is hoped, might encourage other studies. It focuses upon three provinces, British Columbia, New Brunswick and Ontario: other case studies will certainly produce a broader picture. It hardly needs saying that contemporary commentators - both in parliament and press – reflected the values of the time in assuming that all taxpayers were male. Research into local tax returns (if they survive) would surely undermine this generalisation, potentially highlighting aspects of the feminist case for the franchise and civil rights.[55] While income tax is not one of the most exciting byways of Canadian history, it is nonetheless striking that so little is known about its apparently widespread imposition at local level in the half century before the device became one of Ottawa's fiscal tools in 1917. In particular, there is little awareness among historians that it was a feature of revenue-raising in British Columbia, in many ways the province where such an intrusive tax might have been least expected. Overall, its low profile would seem to suggest that local income tax was rarely burdensome. Even so, it would be of interest to know more about its extent. The evidence uncovered for this study is drawn exclusively from the towns and cities, and it would be useful to explore how local government was financed in rural areas.

Income tax might be considered in relation to the theme of community. Canada as a whole adopted it in 1917 as an exercise in communal priorities rather than as a positive fiscal or economic measure. Within towns and cities, it was probably assumed that people knew how much their neighbours earned. However, more information is needed on the operation of municipal income taxes, especially how deductions operated. Saint John's 1889 civic charter would not allow claims for "household or personal expense" but the first Dominion income tax form invited entries for depreciation, bad debts, interest on money borrowed and "exhaustion of mines and wells".[56] If these provisions were borrowed from existing local arrangements, it is possible to understand how the theme of community carried with it elements of elite control. Unlike personal taxation records in most modern democracies, municipal assessments seem to have been available for public consultation, perhaps because income tax was usually associated with property rating. Employers knew how much they paid their clerks, contractors could calculate the income of labourers and artisans from their hourly rates. By contrast, businessmen and professionals might benefit from allowable deductions, unofficial amnesia, poor record keeping and – in the last resort – conspiracies of silence that enabled them blatantly to understate their liabilities. "The rich man ... may escape; the poor man so long as he able to pay cannot escape a full share of the civic burden", remarked a Saint John newspaper in 1908. "He cannot conceal the source and extent of his income and the value of his personalty [property] is apparent to any man."[57] Asked how the resources of potential contributors could be assessed, an income tax advocate giving evidence to an Ontario enquiry in 1900 could only reply that "it would be a fair thing to swear a man as to his income."[58] Again, we have a paradox: the Canadian State, whether federal or provincial, had no mechanism beyond trust for determining citizens' liabilities for income tax, yet perhaps its weakest arm, the municipalities, successfully reached into their pockets to find local expenditure.

Observing Canadian politics from his summer home in the Gatineau Hills, Mackenzie King welcomed the introduction of Dominion income tax in July 1917 as "the beginning of the war burden on the well-to-do." The new tax was "right & proper, but it indicates how the war in time will affect all."[59] King's sense of history was accurate: the adoption of income tax at national level was a landmark, a creation that would give the Dominion government a mighty engine for the raising of revenue.[60] But the story of income tax in Canada went back at least half a century before 1917.

ENDNOTES

Online sources were consulted in October and November 2019. 

[1] D.G. Creighton, British North America at Confederation: A Study Prepared for the Royal Commission on Dominion-Provincial Relations, Ottawa: J.O. Patenaude, 1939, 66-7, 72; Peter B. Waite, Canada 1874-1896: Arduous Destiny, Toronto: McClelland and Stewart, 1971, 74-79. On the eve of Confederation, the Maritime provinces were particularly dependent upon customs revenue, which accounted for 81 percent of Nova Scotia's income. However, Maritimers paid about half as much per capita as inhabitants of the province of Canada, which meant that assimilation of their import duties would lead to an increase in the cost of living. Ged Martin, "The Case against Canadian Confederation, 1864-1867", in Ged Martin, ed., The Causes of Canadian Confederation, Fredericton: Acadiensis Press, 1990, 19-49, esp. 33n. Attitudes towards taxation have been analysed by Andrew Smith as part of the economic debate associated with Confederation, in Smith, "Toryism, Classical Liberalism, and Capitalism: The Politics of Taxation and the Struggle for Canadian Confederation", Canadian Historical Review, lxxxix (2010), 1–25. A Government of Canada website, "History of Taxes", offers a bald and breathtakingly inaccurate statement on pre-Confederation tax policy. "The colonial governments collected taxes, usually through customs duties, and sent them to the two mother countries, England and France.": https://www.canada.ca/en/revenue-agency/services/tax/individuals/educational-programs/learning-about-taxes/learning-material/module-1-understanding-taxes/history-taxes.html.

[2] W. Watson and J. Clemens, eds, The History and Development of Canada's Personal Income Tax: Zero to 50 in 100 Years, 2017, 2:

https://www.fraserinstitute.org/sites/default/files/history-and-development-of-canadas-personal-income-tax.pdf.

[3] Ged Martin, "Taxing and spending: the Indian Affairs budget in the finances of the Government of Canada, 1882", to appear in martinalia, www.gedmartin.net.

[4] E.A. Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, Montreal and Kingston, McGill-Queen's University Press, 2017, 414-15. At first income tax, paid both by corporations and individuals, did not reap massive returns: in 1919 it represented 6.91 percent of the total revenue, rising to 12.58 percent in 1920. Initially, taxpayers were permitted to deduct donations to the Patriotic Fund and other war charities from their assessable income. M.C Urquhart and K.A.H. Buckley, eds, Historical Statistics of Canada, Cambridge: Cambridge University Press / Toronto: The Macmillan Company of Canada, 1965, 197. It would, of course, grow over the decades, as shown by the striking diagram in L. Di Matteo, A Federal Fiscal History: Canada, 1867–2017, Fraser Institute, 2017, 20:

https://www.fraserinstitute.org/sites/default/files/federal-fiscal-history-canada-1867-2017.pdf.

[5] I have been unable to consult G.V. La Forest, The Allocation of Taxing Power under the Canadian Constitution, Toronto, Canadian Tax Foundation, 1967 and W. I. Gillespie, Tax, Borrow and Spend: Financing Federal Spending in Canada, 1867–1990, Ottawa: Carleton University Press, 1991.

[6] Income tax had first been introduced in 1799 to pay for the war against France. It was abolished in 1816, reinstated for Great Britain in 1842 and extended to Ireland from 1853. It was an article of faith for some British politicians that income tax was a temporary nuisance which could and should be abolished over a period of years. Events kept deferring this happy outcome. UK income tax statistics are challenging for historians: the tax was levied under five "schedules", organised on principles that are not easily discerned. G. Best, Mid-Victorian Britain 1851-1875, Frogmore, Herts: Panther, rev. ed. 1973, 101-2.

[7] B.R. Mitchell with P. Deane, Abstract of British Historical Statistics, Cambridge: Cambridge University Press, 1962, 394. Whitaker's Almanack for 1878, 113, supplies statistics for a nearby year. Of a total UK central government income for 1876-7 of £81.945 million, customs accounted for £20.410 (24.9 percent) and excise netted £27.736 million (33.85 percent) – one quarter and one third respectively. Of customs income, tobacco and snuff generated 38.1 percent, spirits (rum, brandy and genever) accounted for 28.27 percent, tea produced 18.24 percent and wine 8.52 percent. Two smaller items may be noted: currants, raisins and figs, 2.54 percent, coffee, cocoa and chicory, 1.5 percent.:

https://babel.hathitrust.org/cgi/pt?id=mdp.39015065354220&view=1up&seq=115.

[8] Manchester Guardian, 7 August 1880.

[9] "Is the British method of raising revenue possible in Canada?" asked Conservative MP Emerson Coatsworth in 1895. "... we would be robbing every municipality and every province in the Dominion of a large proportion of their present revenue, and we would place on the people a burden of direct taxation which they could not possibly bear.... There is an income tax already imposed in municipalities. We have a large revenue from that in my own riding in Toronto. Do [the Liberals] propose to take that income tax from us?" Debates of the House of Commons, 20 May 1895, 1412-14: http://parl.canadiana.ca/view/oop.debates_HOC0705_01/715?r=0&s=1.

[10] Manchester Guardian, 7 August 1880. From Montreal, a correspondent signing himself "Merchant" had declared in 1863 that "of all taxes most repugnant to a population of independent men is the inquisitorial income tax, a tax which is corrupting in its nature, so much so as to entitle it to the name of a tax upon honesty." Hamilton Evening Times, 9 February 1863, quoting Montreal Herald, undated.

[11] The one percent sum for Britain is calculated from Mitchell, Abstract of British Historical Statistics, 428. Information about UK tax rates comes from The British Almanac ... 1876, London: The Company of Stationers, [1876], 64.

[12] Manchester Guardian, 7 August 1880.

[13] Debates of the House of Commons, 24 April 1917,791: http://parl.canadiana.ca/view/oop.debates_HOC1207_01/731?r=0&s=3.

[14] Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 414-15. In 1918, a single man earning $1,500 paid just $10. Brown and Cook, Canada 1896-1921: A Nation Transformed, 232-3.

[15] In 1901, Canadian manufacturing establishments employed 313,344 people on wages, and 30,061 on salaries, at a total cost of $113.249 million. The average wage-earner was paid $286 annually; the average salary was $771. CYB05, 140. If Canada had imposed the UK threshold of £100 ($480), little if any of the $89.573 million paid in wages would have been subject to income tax, while much of the $23.676 million in salaries would also have escaped, or been charged at a reduced rate. The suggestion of Liberal MP John Charlton, noted below, of a $1,000 cut-off point would have excluded all but the highest paid managerial staff in the factories. Robert Craig Brown and Ramsay Cook reckoned that when income tax was finally introduced in 1917-20, hardly any industrial employees reached the minimum threshold income of $1500. In 1918, a single man earning $1,500 paid just $10. R.C. Brown and R. Cook, Canada 1896-1921: A Nation Transformed, Toronto: McClelland and Stewart Limited, 1974, 232-3.

[16] Debates of the House of Commons, 28 May 1895, 1667: http://parl.canadiana.ca/view/oop.debates_HOC0705_01/844?r=0&s=1.

[17] In 1901, the census returned the total value of farmland and buildings across Canada at $1,403,269,501. In her study of farm renting in Ontario, Catherine Anne Wilson found that, by the 1870s, land could be rented at between 4 and 6 percent of its purchase price, and with the availability of so much free land in western Canada (where the Dominion Lands Act of 1872 introduced a homesteading policy), it is likely that rental levels remained low. C.A. Wilson, Tenants in Time: Family Strategies, Land, and Liberalism in Upper Canada, 1799-1871, Montreal and Kingston: McGill-Queen's University Press, 2009, 237; The Canada Year Book 1905, Ottawa: S.E. Dawson, 1906,       94, 76. If estimated at 5 percent, this would point to a notional rental value for all Canadian farms of $70.16 million. An income tax of one percent of this would in theory yield $0.702 million. It is unlikely that farmers, a powerful electoral bloc, would have welcomed this. In 1901, 36.37 percent of Canadian farmers occupied less than 50 acres of land, a statistic that rose to 37.55 percent in Ontario, where half of the Dominion's farmers operated, and where elections were always closely contested. Massive exemptions and disproportionate costs of collection would have been likely. Indeed, when income tax became effective in 1918, just 3,623 farmers contributed, well below one percent of the agricultural community. Although they constituted 14 percent of taxpayers, they paid only 3.5 percent of the total. Brown and Cook, Canada 1896-1921: A Nation Transformed, 232-3.

[18] W.F. Cockshutt, Debates of the House of Commons, 2 August 1917, 4077: http://parl.canadiana.ca/view/oop.debates_HOC1207_04/893?r=0&s=1. But a Nova Scotian Liberal, arguing for a low tariff, pointed out that while mixed farming was widely practised in eastern Canada, farm families were only self-sufficient in butter, meat and vegetables for part of the year, and still reliant upon the market [i.e. participating in the money economy] for purchase of items such as clothing, footwear, sugar and tea. Farmers in the West, who concentrated on growing wheat, were even more reliant upon the purchase of food supplies and manufactures. It was accepted that farming in Canada was a commercial operation, but whether this meant that all farmers followed business practices, e.g. in accounting, was less certain. G.W. Kyte, Debates of the House of Commons, 2 August 1917, 4118: http://parl.canadiana.ca/view/oop.debates_HOC1207_04/934?r=0&s=1.

[19] R.C. Brown and R. Cook, Canada 1896-1921: A Nation Transformed, Toronto: McClelland and Stewart Limited, 1974, 232-3.

[20] Debates of the House of Commons, 24 April 1917, 719: http://parl.canadiana.ca/view/oop.debates_HOC1207_01/731?r=0&s=3.

[21] In 1889, the prominent Liberal John Charlton argued that its burden would depend "entirely upon the limits to which that income tax may come down". He suggested an exemption limit $1,000 or $2,000. But in Britain, income tax was applied to incomes over £100 ($480) a year, although at a graduated rate to £300 ($1440). By 1898, the UK threshold had been raised to £160, roughly equal to the average salary of a clerk or manager in a Canadian factory. Debates of the House of Commons, 7 March 1889, 480: http://parl.canadiana.ca/view/oop.debates_HOC0603_01/486?r=0&s=2

[22] Toronto Mail, 27 December 1887. In 1917, an Ontario businessman confessed that "although I keep books and endeavour to make entries of everything, I should have the very greatest difficulty" in declaring a precise income, adding: "how will a man who keeps no books and makes no entries ascertain his income?" W.F. Cockshutt, Debates of the House of Commons, 2 August 1917, 4077: http://parl.canadiana.ca/view/oop.debates_HOC1207_04/893?r=0&s=1. With what I suspect was tongue-in-cheek irony, Marcel Hamelin commented of Quebec in the 1870s that "la taxation directe demeure pour le peuple la calamité la plus funeste qui menace la province". M. Hamelin, Les premières années du parlementarisme quebécois (1867-1878), Québec: Les Presses de l'Université Laval, 1974, 71.

[23] Quoted, from 22 September 1876, in Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 128.

[24] Debates of the House of Commons, 7 March 1889, 475:

http://parl.canadiana.ca/view/oop.debates_HOC0603_01/486?r=0&s=2. H.V. Nelles suggested that Ontario's policy of raising revenue by charging lumbermen timber dues was directly linked to a "deep-seated aversion to direct taxation". This "tentative hypothesis" might require modification in view of the fact that direct taxes were imposed in at least some parts of the province. H.V. Nelles, The Politics of Development: Forests, Mines & Hydro-Electric Power in Ontario, 1849-1941, Toronto: Macmillan of Canada, 1974, 46-7.

[25] New Westminster Mainland Guardian, 5 December; Victoria Daily Standard, 10 December 1872.

[26] BC income tax was invariably discussed on the assumption that all taxpayers were male.

[27] Victoria Daily British Colonist, 6 May 1876. Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 101-4; Margaret A. Ormsby, "Elliott, Andrew Charles", in Dictionary of Canadian Biography, vol. 11, University of Toronto/Université Laval, 2003–, accessed September 28, 2019, http://www.biographi.ca/en/bio/elliott_andrew_charles_11E.html. Initially, income tax was not paid by property owners, indicating a belief in large sums of fluid wealth in a pioneer colony. (It is also good to note that books were exempt from valuation for BC property tax.) I am grateful to Dr John Douglas Belshaw for background information on BC history in this period. 

[28] Victoria Daily British Colonist, 27 March, 7 April 1877.

[29] Victoria Daily British Colonist, 24 August 1878. The penalty took effect when payment was two months overdue.

[30] Victoria Daily British Colonist, 16 March, 27 January 1881; Wendy K. Teece, "Ash, John", in Dictionary of Canadian Biography, vol. 11, University of Toronto/Université Laval, 2003–, accessed November 4, 2019, http://www.biographi.ca/en/bio/ash_john_11E.html.

[31] According to a frequently published government notice, e.g. Victoria Daily British Colonist, 24 April 1888. Many BC political issues, notably those relating to taxation, were coded attempts to discriminate against the Chinese community. This does not seem to have an aspect of provincial income tax.

[32] This assessment is based on a sample key-word search of the online Victoria Daily Colonist.

[33] Daily Colonist (Victoria), 20 April 1901; 31 May 1902.

[34] Daily Colonist (Victoria), 11 January 1905.

[35] Daily Colonist (Victoria), 14 January 1911.

[36] A.K. Maclean, in Debates of the House of Commons, 8 May 1918, 1689:

http://parl.canadiana.ca/view/oop.debates_HOC1301_02/499?r=0&s=1.

[37] Sir Herbert Ames, Debates of the House of Commons, 30 April 1918, 1291:

http://parl.canadiana.ca/view/oop.debates_HOC1301_02/101?r=0&s=1.

[38] Daily Colonist (Victoria), 16 November 1918; Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 329. Curiously, the BC example does not seem to have had much influence in wider political debate. The nuisance of double taxation was not eliminated until 1942. (It was later reintroduced.) I am grateful to Dr Shirley Tillotson for guidance on tax history.

[39] Gail G. Campbell, "The Most Restrictive Franchise in British North America?: A Case Study", Canadian Historical Review, lxxi (1990), 159-188.

[40] Saint John Morning Freeman, 20 November 1860; C. M. Wallace, "Fenety, George Edward", in Dictionary of Canadian Biography, vol. 12, University of Toronto/Université Laval, 2003–, accessed November 3, 2019, http://www.biographi.ca/en/bio/fenety_george_edward_12E.html. Fenety became a useful chronicler of otherwise lost episodes in New Brunswick political history. Anglin remained an authority on Saint John municipal taxation even after he moved to Ontario in 1883, supplying detailed information to provincial commissions between 1888 and 1893. Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 240-3.

[41] Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 454, 128. The revised Saint John city charter of 1889 defined the target of local income tax as: "Income derived from office, profession, work, labour, trade, business, place, occupation, employment, skill or ability, during the twelve months next preceding the first day of April, and which has not before this date been invested in property subject to taxation. This amount has not been offset by household or personal expense." https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/9925/index.do?site_preference=normal#_ftnref27.

[42] UK National Archives, CO 188/137, Gordon to Newcastle, private, 24 November 1862, 321-3.

[43] Globe (Toronto), 31 May 1865. In 1849, the Globe (10 March 1849) had favoured property tax over taxing incomes.

[44] E.g. Hamilton Evening Times, 1 March 1865, reporting cases of arrears in payment.

[45] Globe (Toronto), 6 May 1881, 20, 23 July 1901.

[46] Heaman, Tax, Order, and Good Government: A New Political History of Canada, 1867-1917, 258-63; Debates of the House of Commons, 5 July 1917, 3045: http://parl.canadiana.ca/view/oop.debates_HOC1207_03/909?r=0&s=1.

[47] Debates of the House of Commons, 2 August 1917, 4092: http://parl.canadiana.ca/view/oop.debates_HOC1207_04/908?r=0&s=1.

[48] Victoria Daily British Colonist, 13 January 1877.

[49] G.S. Mahler, New Dimensions of Canadian Federalism: Canada in a Comparative Perspective, Cranbury, NJ:   Fairleigh Dickinson University Press, 1987, 41-2; Globe (Toronto), 6 May 1881. The Dominion government made a special arrangement with the city of Ottawa to exempt civil servants and politicians from most local taxation, in return for grants to the local Improvement Commission. G.P. Graham in Debates of the House of Commons, 25 July 1917, 3771: http://parl.canadiana.ca/view/oop.debates_HOC1207_04/587?r=0&s=1.

[50] Saint John Daily Sun, 4 December 1908.

[51] It was pointed out that many Saint John residents were Ottawa employees by virtue of working for the Intercolonial Railway. There was also a hint of resentment at the fact  Dominion employment provided superannuation, a relatively rare feature of any job at that time. Debates of the House of Commons, 27 February 1889, 366-9: http://parl.canadiana.ca/view/oop.debates_HOC0603_01/377?r=0&s=2.; Jennifer Allaby, "Ellis, John Valentine", in Dictionary of Canadian Biography, vol. 14, University of Toronto/Université Laval, 2003–, accessed November 5, 2019, http://www.biographi.ca/en/bio/ellis_john_valentine_14E.html.

[52] The Times (London), 29 November 1907.

[53] Saint John Daily Sun, 11 December 1908.

[54] https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/9925/index.do?site_preference=normal#_ftnref27, consulted 4 November 2019. The City Council adopted the spelling "Saint John" (in full) in 1925. Although there was talk of an appeal to the Judicial Committee in London, I can trace no further hearing of the case.

[55] But Saint John only allowed women property owners to vote in civic elections in 1914. S. Tillotson, "Relations of Extraction: Taxation and Women's Citizenship in the Maritimes, 1914-1955", Acadiensis, xxxix (2010), 27-57, esp. 42. Dr Tillotson's article offers interesting pointers to lines of enquiry into links between women and taxation issues.

[56] The form under the 1917 Act is helpfully reproduced by the Fraser Institute: https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/9925/index.do?site_preference=normal#_ftnref27.

[57] Saint John Daily Sun, 11 December 1908.

[58] Globe (Toronto), 19 November 1900.

[59] Library and Archives Canada, Mackenzie King diaries, 26 July 1917, 6384: https://www.bac-lac.gc.ca/eng/discover/politics-government/prime-ministers/william-lyon-mackenzie-king/Pages/item.aspx?IdNumber=6384&. In January 1917, King had considered taking out an annuity but opted instead to invest in a government war loan. This would preserve his capital, and generate four-fifths of the annuity income in interest which was exempt from what he called "federal income tax". The original Dominion income tax form allowed interest from "Dominion of Canada bonds, issued exempt from Income Tax" as a deduction. Mackenzie King diaries, 13 January 1917, 6145: https://www.bac-lac.gc.ca/eng/discover/politics-government/prime-ministers/william-lyon-mackenzie-king/Pages/item.aspx?IdNumber=6145.

[60] The sense in which 1917 was a landmark both in taxation policy and political rhetoric is emphasised in David Tough, "'The rich . . . should give to such an extent that it will hurt': 'Conscription of Wealth' and Political Modernism in the Parliamentary Debate on the 1917 Income War Tax", Canadian Historical Review, xciii (2012), 383-407.

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