On Inequality, Taxes, and the Party System in Canadian History

Beyond Borders will publish a series of articles related to and in anticipation of “Who Pays
for Canada? Taxes and Fairness,” a conference on taxes and fairness organized by Dr. Elsbeth Heaman
that will take place at the McGill Institute for the Study of Canada from February 21-23. Today, we have a special fourth article! 

David Tough

Memories of Occupy Wall Street protests were still fresh in the spring of 2012 when the National Post hired Forum Research to survey Canadians to find out how concerns about income inequality were shaping their party preferences.

“NDP making huge gains as Canada tilts leftward,” the headline of the Post article announcing the results said. Citing the data showing respondents “think Canada suffers from an income gap, where the rich are getting too rich and the poor are getting too poor,” the article said this concern explained the then-rising fortunes of the New Democratic Party.

Screen Shot 2018-02-20 at 1.36.36 PMI use this article to open my book The Terrific Engine: Income Taxation and the Modernization of Canada’s Political Imaginary because it shows clearly how the party system and the tax system are linked, in ways people aren’t consciously aware of, through what I call the modern political imaginary.

As moderns, we position ourselves on a left-right spectrum on the basis of our eagerness to see the incomes generated by the job market redistributed more equally, and we try to align ourselves with a party that best reflects our position on that spectrum. We can all imagine how electing the NDP would change the distribution of income because we share an imaginary that tells us how the party would use income taxation to effect that change.

We also use left-right differentiation for other issues – foreign policy, the environment, feminism – but I argue in The Terrific Engine that the link between tax and left-right is historically structural: it’s how left and right were absorbed into party politics in Canada a century ago.

The modern political imaginary came late to English-speaking countries. Whereas European parliaments were arranging their parties left-to-right throughout the 19th century on the basis of their commitment to the enlightenment ideals of the French Revolution, in Canada the Liberals and Conservatives defined themselves to a large extent on the basis of the tariff until after the First World War – after the introduction of the Income War Tax, the first federal income tax, in 1917.

The adoption of left and right meant something far different in a Westminster system in which only two parties vie seriously for power, and other parties are either pushed to the margins or absorbed into a larger party, than in the multi-party systems of continental Europe. And that struggle still goes on.

The effect of Occupy on the Democratic Party in the 2016 presidential elections, when a powerful left surge encountered the entrenched resistance of the party’s centre, causing deep and ongoing rifts over policy and messaging, illustrated clearly the unforgiving nature of a two-party system operating on a political spectrum. A similar drama played out in the UK Labour Party in 2017, though in that case the left clearly came out on top.

In Canada, where the centre and the left operate independently through the Liberals and the NDP, the mantle of Occupy was taken up more convincingly by the centrists than the left in 2015, arguably because the NDP – the party of income redistribution, as Humphries’ article showed clearly – had to step lightly where Liberals could stride confidently without seriously worrying taxpayers.

While the unravelling of the neoliberal consensus since 2008 has caused havoc on the left side of the political spectrum, it was the parties on the right that were facing an existential threat in the 1930s and 40s when the modern political imaginary was being established.

Third parties that entered the party system on the left in the aftermath of the First World War, whether farmer, labour, or progressive, pulled votes away from Liberals and Conservatives alike, but it was clear that the Conservatives had the more troubled brand, losing ground even to their own breakaway groups. By the 1930s, when the fiscal and constitutional woes of the Depression dominated election campaigns, a crowded and chaotic field of new claimants – some socialist, some reactionary, and some both – vied for power against the Liberals.

Making better sense of this field was a key preoccupation of reform-minded intellectuals in the 1930s, who tried to articulate what the Canadian Forum in 1939 called “a clear and definite minimum program” that would define who was on the left and, by contrast, who was on the right.

The Rowell-Sirois Commission report, which was intended to solve the political problems of the Depression, highlighted the importance of income taxation in defining political differences and, lamenting that the division of taxing powers between the federal and

The Rowell-Sirois Commission, 1938. Wikimedia Commons. 

provincial governments made that power more diffuse and harder to follow, called for a stronger, more centralized income tax under federal authority.

At the start of the 1940s, with the cost of rearmament hanging heavily in the air and the justification of Keynesian macroeconomic ideas on the mind, the federal government did expand the Income War Tax astronomically – and the party system rationalized itself to a simple three-party arrangement, with the Liberals in the centre, the Co-operative Commonwealth Federation on the left, and the Conservatives on the right.

Simple, right? Not at the time, it wasn’t. Leading Conservatives expressed profound dismay at finding themselves placed on the right, beyond Mackenzie King’s Liberals, especially in a political climate in which collective action for the public good generally, and redistributive taxes more specifically, enjoyed overwhelming support.

What, other than electoral ruin, did it mean to be a conservative party in the aftermath of the Great Depression? Saturday Night, a conservative magazine of ideas, lamented that whereas the CCF was clearly socialist and egalitarian, “The make-up and tendencies of the Conservative party are both thoroughly obscure, and it is highly desirable that they should cease to be obscure as soon as possible.”

Reflecting on the recent changes to the party system, Saturday Night’s editor B. K. Sandwell noted that the modern political imaginary was probably an improvement, all things considered. “It would probably do no harm if the two major parties should be definitely differentiated from one another by their concept of the proper direction in which the constitution should trend,” he wrote. “This would provide a much more permanent, vital and intelligible line of cleavage than the outworn differences about high and low tariffs, which have been becoming less significant with each succeeding year.”

The adoption of the name Progressive Conservative, as part of a plan to recruit long-time Manitoba Premier John Bracken to lead the party, reflected the right’s anxious attempt to save themselves from the irrelevance of extremism. The alternative was apocalyptic: the disappearance of the party, the absorption of the entire right into one party and the left into another – a party system of absolutes. “If one [party] is out and out socialist, the other out and out individualist,” a party stalwart wrote, “a general election means in effect a revolution.”

DVR_BXOWAAYlQOq.jpg-largeEventually, of course, the Progressive Conservatives learned how to campaign uphill, just as the Republicans did in the United States. After the 1960s, when a growing body of public opinion saw redistributive taxes as damaging both to the hard-pressed taxpayer and the dependent recipient of benefits, it got easier to be on the right side of the modern political imaginary. The left is still getting its bearings back.

But the adoption of the left-right spectrum was undoubtedly a profound liberation. Despite its obvious limitations and distortions, it illuminated political differences more clearly than what had passed for a party system before, democratizing not only the instruments of public finance but also the language of politics, giving potential voters an imaginary on which to map their politics, and the politics of the party platforms, against their image of a better world. It deserves a heartfelt celebration.


David Tough works at the Trent Community Research Centre in Peterborough, Ontario, teaches courses in Trent University’s School for the Study of Canada, and writes for Electric City Magazine. His first book, The Terrific Engine: Income Taxation and the Modernization of Canada’s Political Imaginary, will be published by UBC Press in April.

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