The Federal Spending Power is now Chiefly for People, not Provinces

Abstract

What is different between the two orders of government is the use they can make of money. A province is limited to spending on its own activities. It may impose “Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes”. The federal Parliament, by contrast, can legislate for “The raising of Money by any Mode or System of Taxation”. There is no restriction of purpose. Ottawa is not limited to spending on its own activities. It can subsidise provincial governments. It can provide money to individuals and to organizations of all kinds, on such terms as Parliament legislates.

Pubic spending is not solely the writing of cheques. It includes measures that forego taxes in order to encourage or assist people in defined ways. In the form of refundable credits, such tax expenditures can powerfully redistribute income to people in need. Most of those now operative, however, have a different motive. Many are directed to business activities. Others serve purposes as diverse as subsidising savings for retirement; encouraging charitable giving and small donations to political parties; helping to pay for health care not covered by provincial programs and for the day care of children of working parents. The characteristic common to many of these measures is that the benefit is greater the higher one’s income.