OUTSIDE Quebec, Ottawa’s recent income-tax concession may not sound like much of a story. In fact it’s the latest installment of the biggest story in Canadian politics for years—a story that conceivably might end with the collapse of the Liberal Party in that strongest of all its strongholds, Quebec.
This is more than a mere squabble over dollars and cents. Among other things it involves the Roman Catholic clergy, always a potent force in Quebec politics. Only once, in 1896, has a political party defied the clergy and still won Quebec, and that was a battle that Sir Wilfrid Laurier could hardly avoid. This time another French-speaking prime minister went out of his way to affront the clergy at the very moment he was opening battle with a formidable secular foe, Premier Maurice Duplessis. The new ten-percent tax cut for Quebec is one of a series of rearguard actions that followed, but have not yet repaired, an explosion St. Laurent set off last September. Let us look at the background. Superficially the bald facts of the tax change are innocuous enough. Premier Duplessis had demanded that his provincial income tax, up to fifteen percent of the federal levy, should be made fully deductible from federal income tax. Ottawa already allowed a deduction of five percent; this has now been replaced by a tax cut of ten percent to Quebec taxpayers. (It’s available, of course, to taxpayers in any province that levies its own income tax, but Quebec is the only province doing so.) The cut will eliminate double taxation up to the bracket, approximately, of married men earning six thousand dollars a year. Since married men earning less than three thousand dollars are
entirely exempt from the Duplessis income tax, the change actually means a net reduction of ten percent for this large group.
Moreover, the total of tax relief thus given to Quebec amounts to $28 millions, or six millions more than the Duplessis income tax will earn. If Duplessis should choose to amend his tax law to bring exemptions into line with those of Ottawa, he could actually increase his income-tax revenue twenty-five percent without costing Quebec taxpayers an additional penny.
True, it would still be several millions short of the net amount Quebec could get from a tax-rental agreement such as the other nine provinces have signed. Quebec’s gross rental last year would have been $120-odd millions. Deductible from that under present law are $53 millions (seven percent of the total) corporation income tax, $14 millions (five percent of the total) personal income tax, $8 millions succession duties and $15 millions in assorted minor taxes on company income —$90 millions altogether, or more than $30 millions less than a tax rental would have been.
But after all, Premier Duplessis’ refusal to enter a tax-rent.fl agreement lost Quebec a grand total of $137 millions in seven years. JÔuring that time he had two elections and won both of them, and Libera)?: found to their dismay that the voters did not seem a bit interested in the loss of an average $20 millions a year. Surely, electors who shrugged at $20 millions would care even less about a quarter of that sum. They’d still have the autonomy which Duplessis made so much fuss about, and they’d have it at a much lower price.
The Liberals Continued on page 52
Backstage at Ottawa
CONTINUED FROM PAGE 6
fervently wish that this were the whole story. Unhappily for them, it’s not even half of it.
When Duplessis slapped on his provincial income tax last year, he got what sounded like unanimous support in Quebec for his demand that it be made fully deductible. When Douglas Abbott in his last Budget speech refused to comply, the whole
chorus—all the press both English and French, all the business and labor organizations—became anti-Ottawa.
Under the barrage of criticism Prime Minister St. Laurent grew increasingly restive. By midsummer he was telling friends and colleagues that he was fed up, that if nobody else would put Ottawa’s side of the argument he’d have to launch a major attack himself. Early in September the attack came.
In two speeches a few days apart, the Prime Minister said Canada’s progress was applauded in most places and deplored in only two—the governments
behind the Iron Curtain, and the government of the province of Quebec. This crack at Duplessis made frontpage headlines all over Canada. It rather obscured some other remarks, even more sensational, which St. Laurent made at the same time.
He was reminiscing about a conference he’d had with Jesuit fathers in New York some years ago, when Catholic delegates to the United Nations were called together and asked, “Is the church’s influence increasing or decreasing?” The Prime Minister repeated his own reply:
“I said I thought the fundamental doctrine of the church was increasing the scope of its influence in the world, but that the personal influence of our Catholic clergy in many countries did not seem to be increasing but was rather on the wane.
“The reason for that, I added, is that you tell us we are only pilgrims in this world waiting to go to heaven, and that to go to heaven it is not necessary to know how to read and write; to go to heaven it is not necessary to be in good health; in fact, it is even when one is in bad health that one stands the best chance of going to heaven quickly.
“I added that this was not the teaching of the Divine Master because, if I have read the New Testament aright, before He began to preach He cured many sick people and looked after many poor people. I wondered therefore whether it was not a mistake to neglect spreading education among the people, as well as sanitary and hygienic habits . . .”
The Prime Minister seemed quite unaware that he had said anything out of the way—“I have digressed so far,” he said amiably, “that I cannot remember where I began ... I admit that I did not prepare my speech.” Many of his listeners, Liberals to a man, bitterly wished that he had prepared it. Spoken in French to a political meeting in Quebec City, it was dynamite—TNT—nuclear fusion.
REAL, DIE-HARD LIBERALS took comfort, however, in the fact that Prime Minister St. Laurent had come out at last with a flat and fighting attack on Duplessis and all his works.
They had chafed for years at the fact that many Quebec political workers are Liberal in federal affairs but work for Duplessis in the provincial. At last, they gloated, these turncoats and timeservers would have to choose a side. At last they’d see a real showdown, a grand battle between the forces of liberalism and the forces of reaction.
“I don’t say we’d have won,” an old Liberal war horse said recently, “but we could at least have put up a fight. I wouldn’t have minded fighting my last political battle for Cañadianism against provincialism.”
Alas, they reckoned without that master of political strategy, Maurice Duplessis.
For about a week after the St. Laurent blast Premier Duplessis said nothing at all. Then, in a speech at Valleyfield, Que., he made a reply that was a model of moderation. He had been “insulted,” he said, but he wouldn’t respond in kind because “the fundamental question is too important for individuals or parties to confuse the issue.” And he went on to restate in very mild terms his usual constitutional argument for provincial income tax.
In our issue of February 15, 1952, this paper published an article written by Blair Fraser, Ottawa Editor of the paper, headed “Backstage at Ottawa, B. C. Coalition Commits Suicide.” The article purported to deal with political conditions in British Columbia and, among other things, referred to the political activities of Mr. Gordon Wismer, then Attorney-General of the Province. Mr. Wismer took exception to the article as reflecting on his honesty and brought an action for libel against the publishers of this paper and Blair Fraser, which is still pending.
Speaking both for the publishers and Mr. Blair Fraser we state that there was no intention on the part of the writer or publisher to reflect on Mr. Wismer’s honesty or to charge him with political misconduct. So far as the article is open to any such imputation of dishonesty or misconduct it is unqualifiedly withdrawn. jr
A few days later he took another step. He rang up Ottawa, asked Prime Minister St. Laurent for a meeting to discuss the tax issue.
Even the die-hard Liberals admit that St. Laurent couldn’t possibly have refused. He had always said the door was open to negotiation; he could hardly slam it now. Nevertheless, that Montreal meeting and the amiable silence that followed it sowed doubt and distrust in the bosoms of the provincial Liberals.
Just to make a bad matter worse, a rumor spread all over Quebec City at that moment. According to it, someone had asked the Prime Minister’s younger son Jean-Paul what these negotiations meant. Jean-Paul, who was believed to be feuding at the time with Quebec Liberal Leader Georges Lapalme, is supposed to have answered: “My father is fed up with Lapalme and would rather deal with Duplessis.”
There is some confusion among Ottawa Liberals as to whether or not Jean-Paul St. Laurent ever said any such thing. But rightly or wrongly, Lapalme believed the story. He was and still is furious.
All this would have been bad enough if Duplessis had been ready, as some Liberals were rash enough to hope, to cry “uncle” to Uncle Louis and sign a tax-rental agreement. Nothing of the kind. He promised to send a letter containing his “proposals,” but when it came early in November it turned out to be nothing more than a renewal of his demand for full deductibility. All he “proposed” was to remove from the preamble of his Income Tax Act a sentence that Ottawa didn’t like, claiming a “prior right” to income tax.
“He offered to drop his assertion of a prior right,” a federal cabinet minister said bitterly, “on condition that we would act to make the claim valid.”
Yet Ottawa remained silent. Nobody said, officially, that Duplessis had made no proposals at all. Ken Eaton, Ottawa’s assistant deputy minister of finance in charge of taxation, took a small team of experts to Quebec in December for long private conferences with Duplessis’ tax experts. All this conspired to encourage and seemingly confirm press speculation that a tax deal between Ottawa and Quebec was in the works.
By this time, of course, all the steam had fizzled out of the Quebec Liberals’ fighting mood. Having cooled off by degrees for three months, they no longer felt like picking up the cudgels they had so reluctantly laid down. The two-horse riders, on the other hand, the men who were Liberal workers in federal elections and Union Nationale in provincial, had quite recovered from their fright and were placidly awaiting the tax relief which circumstances seemed to promise them.
Ottawa was in a box. Duplessis hadn’t given an inch, really, but his mild tone and his initiative in requesting a conference had made everyone think a compromise was coming. To refuse any concession would bring a storm from Quebec taxpayers: to make any would look very like surrender.
Ottawa Liberals think they found as good a way as any out of that painful dilemma. Their concession, they point out, is quite unilateral—it is not a “deal,” but just a gesture of compassion toward the taxpayers Duplessis has been ill-using. They have not given way, they insist, on the principle that Ottawa and not the province decides what size bite the province may take from the federal income-tax pie. It is still true that Duplessis is depriving his people of their just due by refusing
to sign an agreement. But when all that is said, the Ottawa Grits are unhappily aware that it still looks too much like a win for Duplessis and a backdown for them.
They don’t think for a minute that all these things—tax concession, irate clergy, split party and all the rest —could bring defeat in Quebec to a Liberal Party led by Louis St. Laurent. But St. Laurent was seventy-three last February 1. Whether some Englishspeaking Protestant successor could weather the storm is a very different question, and it worries them sick. A"
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