1. Government Revenue Economics 120

2. There is a saying that only two things in life are certain: death and taxes.

3. Government Revenue Tax: money paid to a government to fund its programs and services. Tax: money paid to a government to fund its programs and services. The taxation powers of the government are contained in the Constitution Act, 1867. The taxation powers of the government are contained in the Constitution Act, 1867. gives unlimited taxing powers to the federal government, but restricts the provincial government to collecting only direct taxes. gives unlimited taxing powers to the federal government, but restricts the provincial government to collecting only direct taxes.

4. Government Revenue Direct Tax - imposed on the person who is intended to pay the tax Direct Tax - imposed on the person who is intended to pay the tax Example: Income tax Example: Income tax Indirect Tax - levied against one person in the expectation that it will be paid by another person Indirect Tax - levied against one person in the expectation that it will be paid by another person Example: Excise tax Example: Excise tax

5. Federal Government Revenue Personal Income Tax (about 46% of gov’t revenue) Personal Income Tax (about 46% of gov’t revenue) Corporate Income Tax Corporate Income Tax Other taxes Other taxes excise taxes, customs excise taxes, customs Non-tax sources Non-tax sources profit from Crown corporations, social assistance payments, interest on loans, revenue from licenses profit from Crown corporations, social assistance payments, interest on loans, revenue from licenses

6. Provincial Government Revenue Personal Income Tax Personal Income Tax Corporate Income Tax Corporate Income Tax Sales Tax Sales Tax Excise Taxes Excise Taxes alcohol, cigarettes, gasoline alcohol, cigarettes, gasoline Property Taxes (municipal governments) Property Taxes (municipal governments)

7. Provincial Government Revenue Equalization Payments: payments to provinces to ensure it can provide a reasonable level of public services without resorting to extremely high levels of taxation Equalization Payments: payments to provinces to ensure it can provide a reasonable level of public services without resorting to extremely high levels of taxation 2000-2001 – $5689/person 2000-2001 – $5689/person Stabilization Payments: meant to ensure that provincial taxation revenues do not fall substantially from one year to the next. Stabilization Payments: meant to ensure that provincial taxation revenues do not fall substantially from one year to the next.

8. Approaches to Tax Collection Progressive Tax – the percentage of income an individual pays in taxes increases as the individual’s level of income increases. Progressive Tax – the percentage of income an individual pays in taxes increases as the individual’s level of income increases. Proportional Tax – the percentage of income paid in taxes remains constant regardless of an individual’s level of income. Proportional Tax – the percentage of income paid in taxes remains constant regardless of an individual’s level of income.

9. Approaches to Tax Collection Regressive Tax – the percentage of income paid in taxes decreases as the level of income increases. Regressive Tax – the percentage of income paid in taxes decreases as the level of income increases. Note: Regardless of which approach is used, individuals with more income will pay more in income taxes. In Canada, the progressive form of taxation is used on income. Note: Regardless of which approach is used, individuals with more income will pay more in income taxes. In Canada, the progressive form of taxation is used on income.

10. Federal Revenue 2002

11. Federal Gov’t Spending Social Services Social Services Old age security, child tax benefit program, EI, welfare, veteran’s benefits Old age security, child tax benefit program, EI, welfare, veteran’s benefits Debt Debt Education Education Foreign Affairs Foreign Affairs Health Health Transportation Transportation

12. Federal Gov’t Spending 2001-2

13. Provincial and Local Health Health Education Education Social Welfare Social Welfare Debt Payments Debt Payments

14. Provincial Gov’t Spending 2001-2