Where the Money Goes : The Distribution of Taxes and Benefits in Canada

By Poschmann, Finn

Book Id: WPLBN0000690994
Format Type: PDF eBook
File Size: 160.76 KB.
Reproduction Date: 2006

Title:	Where the Money Goes : The Distribution of Taxes and Benefits in Canada
Author:	Poschmann, Finn
Volume:
Language:	English
Subject:	Government Canada, Political science, Administration
Collections:	Canada Government Collection
Historic Publication Date:	1998 Apr. 16
Publisher:	C.D. Howe institute


Citation APA MLA Chicago Poschmann, F. (1998 Apr. 16). Where the Money Goes : The Distribution of Taxes and Benefits in Canada. Retrieved from http://self.gutenberg.org/

Description
Canada Government Publication:

Summary
Summary: The average Canadian family?s net federal tax bill differs from province to province. The taxes Canadians pay to the federal government depend on the income of the taxpayer, and the numerous benefits Ottawa pays to Canadians also typically depend on income. When divided up along provincial lines, representative families in the higher-income provinces appear to be significant financial contributors to the federal government, on balance, while those in lower-income provinces pay very little tax net of direct transfer benefits. But this is just part of the picture of the net federal fiscal relationship with families: including the impact of intergovernmental transfers provides a fuller picture. When major intergovernmental transfers, such as the Canada Health and Social Transfer (CHST) and provincial fiscal equalization are included, the river of interprovincial redistribution of income begins to flood. The true distribution of benefits of the provincial spending implicitly funded by federal transfers is unknown. But if we attribute CHST money to the funding of health care, postsecondary education, and welfare services, for example, the distribution of benefits by family income level is reasonably well geared to income. If one does not assume that the CHST pays for those services that favor low-income Canadians, the net result appears rather less beneficial. And if the effect of the equalization program is to lower provincial tax rates across the board, the distribution of benefits is less congenial yet. Given reasonable distributional assumptions, it seems likely that the federal government collects taxes from low-income Canadians in high-income provinces in part to fund transfers to higherincome residents of poorer provinces. The existence of intergovernmental transfers adds a layer of complexity to the analysis of taxes paid and benefits received by Canadian families. This complexity makes it difficult for Canadians to assess properly the importance of the taxes they pay to each level of government in funding services provided by one level of government or another. This lack of transparency in the fiscal relationship between Canadians and their governments is a source of persistent confusion in the attempt to assess the fairness of tax and transfer policy.