Taxes and civilization: let's not overdo it

Printer-friendly version
Appeared in the Calgary Herald

For those who file their taxes at the last moment and cut an extra cheque to government, right about now is unlikely to be their favourite time of year. For what it’s worth, it might be of some comfort to know taxes have provoked much the same reaction throughout history.

Some background: To find the origins of tax, one has to travel back to the ancient world and to a fertile plain between the Tigris and Euphrates rivers, now modern Iraq. History’s first recorded tax was brought to mankind in Sumer, six thousand years ago. It is there, inscribed on clay stones excavated at Lagash that we learn of the first taxes, instituted to fight a ferocious war.

But as is often the case in history, when the battles ceased, the taxes stayed - a cause of no small discontent on the part of the locals. Local Sumerians apparently complained that taxes filled up the land from one end to the other.

Charles Adams detailed such history in his 1982 book, For Good and Evil: The Impact of Taxes on the Course of Civilization. As his title implies, taxes have been both useful and a scourge.

In Canada, taxes pay for items any sensible person would regard as desirable. One could point to the most basic functions you’d hope taxes would undergird. A few examples: governments that (in theory) protect your property and person from interference; courts to enforce such desirable laws; for cops and others to protect kids.

On the flip side, it wouldn’t take long for anyone to identify useless government spending. Think corporate welfare, or taxpayer-financing for professional sports and their stadiums, or above-market compensation in the public sector. Think of absurdly high salaries for some native chiefs, or the Harper government’s endless stream of taxpayer-financed commercials that tout the Ottawa’s “economic action plan,” at a cost of $78-million in 2012 alone.

Anyway, in Canada, the first known instance of taxation was an export duty on beaver pelts (at 50 per cent) and moose pelts (at 10 per cent) in what was then New France, in 1650.

While the tax on beaver furs was soon reduced to 25 per cent three years hence, by 1662, every import was subject to a 10 percent tax for six years, necessary to help pay off colonial debt.

That was then. Ever since, the number of taxes has of course multiplied, not just since the 17th century but even over the past five decades.

Two colleagues recently found that since 1961, tax increases have outpaced the growth in the cost of clothing (up by 607 per cent) food (higher by 578 per cent) and shelter costs (up by 1,290 per cent).

In fact, Statistics Canada’s Consumer Price Index, which measures the prices Canadians pay for a wide variety of goods and services, rose by 675 per cent from 1961 until 2012. But taxes? They’re up by 1,787 per cent! So in other words, tax hikes since 1961 have outpaced inflation and the necessities of life, thus squeezing family budgets.

And taxes are heading up again, most recently in British Columbia, Manitoba, Ontario, Quebec and in New Brunswick.

The response to such tax facts is usually this cliché: “Taxes are what we pay for a civilized society,” this from the American Supreme Court Justice, Oliver Wendell Holmes Jr., in a 1927 case.

Right, but as a percentage of the economy, government spending was much lower in 1927 compared to 2013. One cannot endlessly extrapolate that “taxes are good for you.” Not any more than it is useful to overdose on pharmaceutical drugs just because one pill helps kill some pain. Or to propose that because one glass of wine has healthful effects, then a dozen drinks must be even better.

Perhaps a better perspective on taxes comes from a nineteenth-century gentleman, who made clear how he thought politicians had a duty to exercise restraint in matters of taxation and spending: “All taxation is a loss per se,” he said. “It is the sacred duty of the government to take only from the people what is necessary to the proper discharge of the public service; and that taxation in any other mode, is simply in one shape or another, legalized robbery.”

It may come as a surprise to some, but the speaker of such words was not some supposed ideologue. It was Richard Cartwright, the Dominion Minister of Finance in the Liberal government of the day, in his 1878 budget speech.

Cartwright had the spirit of it right. Moderation in government and taxes, as in all areas of life, is a virtue.

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.