FEDERAL BUDGET LIKE CROSS-WORD PUZZLE TO MEN SEEKING TAX RELIEF
J. HERBERT HODGINSApril151925
FEDERAL BUDGET LIKE CROSS-WORD PUZZLE TO MEN SEEKING TAX RELIEF
BUSINESS & INVESTMENTS
J. HERBERT HODGINS
MY NEIGHBOR leaned over our green picket fence the other evening as we both emerged from our cellars with ashes for the Tuesday morning collection.
“What do you think of the Budget which Robb brought down at Ottawa the other day?” I asked him.
“Budget?” he mused, depositing his ash can in an approved Moore Park fashion and returning to my question. “Budget? Oh yes, you were asking about the federal Budget! Well, I did notice that section ten of the electricity and fluid exportation act is to be modified, so as to impose an export tax upon electricity at the rate of $1.95 per horsepower year. And I did notice that the duty upon slack coal is to be boosted from fourteen cents to fifty cents per ton, with a British preference of ten cents per ton. And I further noticed that there is to be a new dumping clause to check foreign importations. And I also read that the duty is to be reduced upon well-drilling machinery and upon engines for the propulsion of boats owned by individual fishermen.
“All of which sounds very pretty,” continued my next door friend, who is a thoroughly domesticated individual, like the rest of us who go to city suburbs to live, “but what I want to know is this: how is the budget going to affect the family purse, other than cheapen our breakfast grapefruit?”
“When it comes to that,” said I, “when it comes to the point of what the Government is going to do to relieve such folks as you and me of our tax burden...” “Well, I guess it would be more cheerful
to spend an hour with the seed catalogue,” hastily interjected friend neighbor, giving last year’s lettuce plot a kick to see if the earth were soft enough for planting.
And there you are!
It is a typical reaction to the Budget pronouncement. The salaried man, who, in the final analysis, bulks largest in our national financial life, sees nothing to help him in the federal financing policy. At a loss to know what he, as an individual, is to do about it, he turns to apparently more personal issues. The business man gives the finance minister’s declaration a more serious turn-over in his mind and discovers that it is fairly innocuous. It does not promise to upset general business unduly. He breathes a sigh of relief that things are no worse. But the country’s financial rehabilitation will never be brought about by public indifference.
“Few budgets could have been more lifeless, more insipid,” said the Montreal Daily Star. “The outstanding financial fact is not that the statisticians figure on a surplus of $1,800,000, on the year’s working, but the fact that the debt which the people of Canada must one day pay has been swelled during the last year by over $12,000,000. Twelve million dollars more debt is the real crux and not cheaper grapefruit or a lower tariff on deep well machinery or a board of super-experts on tariff. Every day the burden grows.”
No Relief for Taxpayers
THE Financial Post concedes that the Budget indicates a disposition to ameliorate some of the burdens which
trade and industry are bearing by controlling dumping and raising duty on coal. From the broad national viewpoint, however, this is half-hearted help. What the Dominion wants is constructive action. It needs relief from the sales and heavy income taxes. As the Financial Post stresses, these taxes are hampering the Dominion. They retard our competition with other countries, where material tax reduction has been made. They halt enterprise. They tend to heighten unemployment. Every Canadian personally experiences the insidious, penalizing effects.
When will Ottawa realize that Canada cannot make economic progress while under the burden of taxes more excessive than in the United States?
In the eight years since Armageddon, Ottawa’s only cut in taxes is last year’s one per cent, lopping off the sales tax— from six to five per cent. Washington, on the other hand, has steadily cut taxes. If President Coolidge entirely eliminates the United States income tax within the next three years, how can we hope to stem the outflow of population?
Mr. Robb in his Budget has “no relief for income tax payers: nothing to say about the lamentable loss of population this country has been undergoing since his government came into office,” as the Toronto Mail and Empire points out. Ottawa, clearly, is pursuing no clear-cut, definitive policy of governmental thrift.
On the other hand, the United States policy is relentless in pursuit of economy and President Coolidge, in his inaugural speech last month reiterated the assurance that there is to be no truce in his fight for economy and tax reduction. “I favor the policy of economy,” he says, “not because I wish to save money but because I wish to save people.
“The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meagre. Every dollar that _we prudently save means that their life will be so much more abundant.
Economy is idealism in its most practical form.”
Masses Shoulder Burden
THUS much for the United States President’s recognition that it is the mass of the people of a country who shoulder the burden while high taxes persist.
Absolutely the same situation exists in Canada. The salaried man—and the small salaried man at that—is bearing fifty per cent, of the tax burden. Of 281,182 income tax payers in the 1923 fiscal year, 146,178 had incomes under $6,000. Of 239,036 income tax payers, last year, 176,089 were employees or salaried individuals; they paid in $15,529,949 or forty-nine per cent, of Canada’s aggregate income-tax revenues.
Analysis of Canada’s income tax figures for the past two years, discloses the number and class of individual payers, and the amounts turned over to Ottawa from each of these classes, as follows:—
Class 1923 1924 1923 1924
Agrarians 8,220 4,663 473,049 275,626
Profess’n’ls 19,023 20,550 2,663,900 2,327,554
Employees 208,360 176,089 16,529,949 13,726,066
Merchants 21,186 17,031 5,474,256 2,816,351
Manuf’r’s 1,732 1,293 870,261 742,943
All others 22,661 19,410 6,855,950 5,945,427
Unclassified ............ 490,046 533,79«
Total 281,182 239,036 31,689,417 25,675,335
TT IS thus clear that it is the working man, the family man—“my neighbor and me” type—who is the chief contributor of income taxes to the public purse.
Which is all the more reason why the Government at Ottawa should spend cautiously. Why should the family man deprive himself of needed dollars to pay taxes, if that money is to be unwisely, extravagantly spent by politicians?
“So long as government can be more popular by spending than by saving they may be expected to spend,” comments the Financial Post, “But there is a limit to the tax burden which the people will bear. That limit seems to have been reached in Canada.
“Canada’s position is such that a cut in national expenditure is imperative. It is a time when economic poultices should be discarded and the knife used—a time when our national physicians should have courage and perform a major operation.”
Analyzing the Budget
FOR the average individual the Budget is something in the nature of a crossword puzzle; its solution equally intriguing. The acting minister of finance, the Hon. J. A.. Robb presents figures which show a surplus approaching two million dollars on the year’s operations, in spite of a fifty-two million dollar drop in governmental income. Accepting these figures, the Toronto Globe observes that “all in all the state of the national finances in a year of quiet trade and world-wide industrial depression is highly reassuring.” However, Sir Henry Drayton, former minister of finance in the governments of Sir Robert Borden and Hon. Arthur Meighen is not prepared to accept Mr. Robb’s figures as they have been presented to Parliament. Instead of a surplus he insists that there is a deficit. Instead of the Government being $1,800,000 ahead it is $80,000,000 behind, according to Sir Henry’s arithmetic.
The matter resolves itself into a question of bookkeeping: although to the lay mind it is sufficiently obscured to become a problem in higher mathematics. The Toronto Globe accepts the Government presentation and sets forth the situation as follows:—•
“The public debt stood at $2,422,135,000 on March 31, 1922. On March 31, 1924, it stood at $2,417,783,000, a decrease of $4,352,526, though in the fiscal year 1923-24 the sum of $24,500,000 had been loaned to the National Railways. The financial condition had been such that the net debt was reduced, despite the addition to it of the railway loan. In the fiscal year which is about to close the Government will have available for debt reduction the regular surplus of $1,823,000, and in addition $4,000,000, which represents the capitalization of overdue interest from Greece and Rumania. The latter countries have issued bonds for the sum, and these have been transferred to the Dominion and classed as active assets. Against this total of $5,823,000 available for debt reduction in the current year there are advances of $18,027,000 to the National Railways, $900,000 to the Canadian Government Merchant Marine, and $600,000 to the Quebec Harbor Commission. These are assets, but for the present are considered as non-active. The total addition to the net debt for the year will be, therefore, about $13,703,000, but a reduction of $2,643,264 has been effected in interest charges—the true measure of the burden of the debt—by the maturing of capital obligations and the flotation of new issues at lower rates of interest. The steady improvement of the money market from the borrower’s point of view will continue to lighten the weight of the debt.”
Checking Up the Budget
SIR HENRY DRAYTON “checking up” upon the Hon. Mr. Robb’s statement, in his first criticism of the Budget points out that instead of a surplus there is a deficit of some sixteen million dollars. He further points out that upon the acting finance minister’s own figures, with the increased railway expenditures added, the total national deficit will reach eighty million dollars.
“The dispute between the two parties turns upon the question of Canadian National finances,” according to the Manitoba Free Press. “The Conservatives insist upon the budgets of the country and the Canadian National being taken together by the Minister of Finance when he makes his annual statement about the country’s financial condition; and there is beyond doubt an element of reason in the contention. Mr. Robb, however, has no difficulty in showing that the Government’s course in keeping the accounts distinct is in keeping with past practice. The argument for it is that the national budget should deal only with the accounts actually under the control of the Government so that the public will have before them the record upon which to render judgment. There is something to be said for this view, too.” Unquestionably, as the Winnipeg newspaper stresses, this business of mixing up the national finances and the Canadian
National railways finances in the one bookkeeping pronouncement is distinctly befogging to the man on the street. Like the cross-word puzzle it presents its difficulties, both horizontal and vertical.
Furthermore, this tendency to mix up the country’s affairs with the government owned railway’s affairs is certain to store up troubles for some future minister of finance. To quote the Manitoba Free Press, again: “Mr. Robb in his statement put the deficit on the Canadian National lines for the current year at $21,343,900, representing the interest due the public and rentals for leased lines less the operating surplus. This is the real deficit; the balance, necessary to bring the deficit up to the grandiose figures which the railway itself is obliged to show, representing interest owed the Government, is tucked away by Mr. Robb not among the country’s assets, but among the overdue accounts. The item should be cut out altogether because it will never be paid. It is a pretty safe prediction that when the Canadian National reaches the point where the operating surplus takes care of the interest on its debentures held by the public its earning power will be applied to rate reductions instead of to paying interest on the half billion dollars owed the Government.”
Out of the maze of figures presented, out of the meshes of hard-to-understand bookkeeping one dominant fact stands out for all Canadians: no tax relief is offered by the 1925 Budget. Let us accept the statement that the Government has kept the budget balanced in the face of steadily shrinking revenues, and give Hon. J. A. Robb full credit for accomplishing such a highly satisfactory result. “This has not been achieved, unfortunately, by corresponding reductions in expenditure, the saving for the year being five millions or only one-tenth the revenue shrinkage” as the Manitoba Free Press stresses, “but by heavy taxation, from which no relief is promised.”
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