7.5 The Canadian Welfare Society Canada’s mixed economy is known as a Welfare Society – Gov’t plays big role to ensure well-being of its citizens Government Transfer Payments (CPP and EI) and Personal Income Taxes try to address the goal of income equity

Transfer Payments & Income Equity Universality: the principle that benefits apply to all individuals, no matter their incomes Means Testing: the more recently implemented principle that transfer payments vary according to a recipient’s income

Taxes & Income Equity The principles of Benefits Received and Ability to Pay help decide whether or not the burden of a tax is distributed in a manner fair to all taxpayers. Benefits Received: – Principle that suggests that taxes should be geared to the benefits each taxpayer gains from government activity. – e.g. sometimes proceeds from gasoline tax are used for road construction & maintenance – places where people drive more will have better roads Ability to Pay: – Principle that suggests that taxes should vary in proportion to a taxpayer’s income – if you earn more, you are taxed a higher percentage than someone who earns less

Taxes & Income Progressive Tax: – A tax that increases as a proportion of income as the taxpayer’s income increases Regressive Tax: – A tax that decreases as a proportion of income as income increases Proportional Tax: – A tax that remains constant as a proportion of income.

Taxes & Income Equity Sales/Excise Tax: Regressive Property Tax: Regressive (poor devote a higher percentage of income to housing than the rich) Personal Income Tax: Progressive