October 14, 2025 • 62 mins
Why do taxes come out before you even get paid? Chief Aaron Pete breaks down the real story behind income tax, GST, and carbon tax — where they came from, what they were meant to do, and whether the costs are still worth it. From the “temporary” wartime tax of 1917 to today’s carbon tax debates, he explores whether Canadians are truly benefiting from what they pay — or if trust in government has quietly eroded beyond repair.
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Chief Aaron Pete (00:32):
If you work in Canada, you probably don't
notice it happen.
You check your paycheck, andthere it is, gone.
Before you even see it, thegovernment gets paid first, you
get what's left.
And that's the deal we'veaccepted as citizens that we'll
pay our share so we can all livein a country that works.
(00:52):
Healthcare when we're sick,schools for our kids, safe
streets, strong communities, andpublic infrastructure that
actually functions.
But more and more, Canadiansare starting to wonder if that
deal still holds, because we'repaying more than ever before,
and somehow getting less inreturn.
(01:13):
A century ago, most Canadiansdidn't even pay income tax.
It was introduced in 1917 as atemporary wartime measure.
Back then, only a few percentof people even filed a return.
And personal income tax made upjust 2.6% of federal revenue,
(01:34):
according to the FraserInstitute.
Today, it's more than half ofwhat Ottawa collects, and almost
three out of four Canadians nowpay income tax.
Before we even get to payrolldeductions, carbon taxes,
property taxes, and the endlesslist of fees that somehow aren't
called taxes.
So, yes, we're paying more thanever.
(01:56):
But look around.
Does it feel like we're livingin a country that's getting
better?
Healthcare alone eats up morethan one-third of every
provincial budget.
Yet emergency room wait timesare the longest they've ever
been.
According to the FraserInstitute's 2023 report on
healthcare wait times, theaverage Canadian now waits 27.4
(02:19):
weeks between seeing a familydoctor and receiving treatment
from a specialist, the longestdelay ever recorded.
In emergency rooms, one inthree Canadian waits more than
four hours before being seen,compared to just 1% in France,
according to a study publishedin the Canadian Medical
Association Journal.
(02:40):
And right now, roughly one infive Canadians doesn't have a
family doctor at all, based ondata from the Canadian Institute
for Health Information.
We were told higher spendingmeant shorter waits, but the
opposite has happened, andhealthcare isn't the only place
the cracks show.
(03:00):
In our justice system, violentrepeat offenders are released on
bail, sometimes within hours.
And I know this as a nativecourt worker, not because judges
are soft, but because thesystem is collapsing under its
own weight.
In our schools, parents areseeing classrooms more focused
on politics than on literacy ornumeracy.
(03:23):
And infrastructure, the stuffwe can all see, tells its own
story.
Just this year, BC Ferries, oneof the most important public
services in British Columbia,awarded a multi-billion dollar
contract to a state-ownedChinese shipyard to build its
next fleet of vessels.
The justification?
But think about that.
(03:46):
We tax Canadian workers,Canadian shipbuilders, and
Canadian families, and then sendthese dollars overseas to build
ferries we'll depend on fordecades?
It's the perfect symbol of acountry that's forgotten what
taxes are supposed to do.
And while all this ishappening, we're running the
largest deficits in our history.
(04:07):
So Canadians are being squeezedfrom both ends, higher taxes on
one end, higher debt on theother.
And what's left in the middle?
A citizen who's paying more,getting less, and losing faith.
That's the question we'retackling today.
If taxes are supposed to be theprice of a civilized society,
(04:27):
what happens when society stopsfeeling civilized?
In this episode, we're going tolook at how Canadian taxes
actually began, where incometax, sales tax, property tax,
and the carbon tax all camefrom.
We'll also talk about howtaxation works or doesn't work
on Indian reserves and why thathistory is often misunderstood.
(04:49):
We'll explore the socialcontract between what taxes were
meant to uphold and how bothleft and right now claim to
defend it in completelydifferent ways.
And finally, we'll ask whetherthis system, one that takes
before you earn, still deservesthe trust of people it's
supposed to serve.
(05:10):
Because if you're going to takepeople's money, you should
probably be delivering somethingworth paying for.
Let's get started.
Before 1917, the federalgovernment ran the country on
taxes you could actually see.
Most revenue came from tariffs,custom duties, and excise
(05:30):
taxes.
Simple, direct charges onimported goods like alcohol,
tobacco, sugar, and manufacturedproducts.
It was a visible system.
You paid when you boughtsomething, not when you earned
something.
If you didn't import, drink, orsmoke, you barely noticed
taxation even existed.
According to the CanadianEncyclopedia, by 1913, more than
(05:53):
90% of all federal revenue camefrom these trade-related taxes.
That was by design.
Canada was a young country witha small population and a
government that saw itselfmainly as facilitator of
commerce, not a caretaker ofcitizens.
Prime Minister WilfredLaurier's Canada, at the turn of
the century, believedprosperity would come through
(06:14):
trade, immigration, andexpansion.
The idea of taxing income, ofreaching into citizens' pay, was
unthinkable.
It was something Europeanmonarchs did.
Canadians prided themselves onhaving a lighter, freer system.
But that world collapsed in1914.
The First World War changedeverything.
(06:35):
Canada's war effort wasmassive.
By 1917, nearly 400,000Canadians were overseas, and
military spending had balloonedfrom 11 million in 1914 to 439
million in just three years.
The country was burning throughmoney faster than it could
borrow.
Tariffs couldn't keep up, andthe federal deficit was
(06:58):
exploding.
So in the summer of 1917,finance minister Sir Thomas
White stood in the House ofCommons to announce a radical
proposal, a national income wartax.
It would be temporary, hepromised, a measure to assist in
defraying the expenses of thewar.
White described it as aconscription of wealth, echoing
(07:21):
the military conscription thathad torn the country apart that
same year.
If young Canadians were beingdrafted to fight, he argued, the
wealthy could afford tocontribute more at home.
The Income War Tax Act set abase rate of 4% on taxable
income over $6,000, a fortune atthe time, and higher graduated
(07:43):
rates for very wealthyindividuals and corporations.
The average Canadian workerearned less than $1,000 a year.
So this was meant to hit onlythe top few percent.
White assured, rest reassuredParliament that it was a
temporary measure to be repealedwhen the war ends.
But like most temporarygovernment programs, it
(08:06):
outlasted the crisis.
By 1918, the 300,000 Canadianswere paying income tax.
By 1920, it was bringing inover more than 100 million a
year, and Ottawa had discoveredsomething dangerous: steady,
predictable revenue.
The temporary income taxquietly became permanent.
(08:29):
The Second World War cementedthat shift.
By the early 1940s, Canada hadbuilt the machinery of modern
taxation.
In 1943, finance minister J.
L.
Isley introduced pay as youearn, automatic payroll
deductions.
Instead of waiting for citizensto mail in checks at year's
(08:50):
end, the government would nowtake taxes directly from each
paycheck as you earned it.
That's when the relationshipbetween government and citizen
changed forever.
The state didn't just collecttaxes, it assumed them.
The citizen never even touchedthe money.
As Isley put it, his 1943budget speech, taxes must be
(09:15):
collected as incomes are earned.
This is the only practicalmethod of ensuring fairness and
of financing the war effortefficiently.
The change worked.
Ottawa's revenues surged.
By the end of the war, incometax accounted for half of all
federal revenue.
And once the war ended, themachinery stayed in place, but
(09:36):
the mission changed.
The system that had fundedarmies abroad now funded social
programs at home.
From the 1940s to the 1960s, wesaw the rise of the welfare
state.
Unemployment insurance in the1940s, family allowances in
1945, old age security in 1952,Medicare and national pensions
(09:58):
in the 1960s, all funded throughthe same automatic deduction
system.
The one that ensures thegovernment gets paid before you
even see your paycheck.
As one historian wrote inDalhousie's University Dow Space
Archives, Canada's post-warexpansion of social welfare was
only possible because of thetransformation in tax
(10:20):
administration during the war.
Pay as you earn turns citizensinto taxpayers by default.
It was efficient, it wasinvisible, and it was permanent.
What began as a temporarywartime necessity had become the
economic foundation of theCanadian state.
Let's talk about provinces.
By the 1930s, Ottawa wasn't theonly government running out of
(10:44):
money.
The Great Depression hadflattened provincial economies
and left cities scrambling tofund basic services.
Unemployment soared, socialassistance exploded, and
property taxes, the main sourceof provincial and local income,
collapsed.
It was survival mode.
And that's when provinces beganexperimenting with a new idea:
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a sales tax.
Saskatchewan was the pioneer in1937.
Saskatchewan became the firstprovince in Canada to introduce
a provincial sales tax.
It was a 2% levy on goods,small by today's standards, but
controversial at the time.
The government of PremierWilliam John Patterson, a
(11:26):
liberal, framed it as a matterof necessity, not ideology.
The province had beendevastated by drought, falling
wheat prices, and economiccollapse.
Schools were closing, hospitalswere underfunded, and public
payrolls were at risk.
Patterson's finance minister,Charles Dunning, called it a
temporary emergency measure tostabilize revenues and protect
(11:48):
education funding.
In his 1937 budget speech, hesaid the new tax would make the
continued operation of ourpublic schools and institutions
of care.
That 2% temporary measurebecame a permanent fixture and
the foundation of Saskatchewansocial programs.
By the 1950s, the PST wasbringing in over $10 million a
(12:12):
year, allowing the province topioneer Medicare under Tommy
Douglas.
In a twist of irony, a tax bornfrom financial desperation
would later bankroll one of thegreatest social achievements in
Canadian history.
In British Columbia, we saw achange in 1948.
A decade later, BritishColumbia followed suit.
(12:32):
Under Premier Brian BossJohnson, BC introduced its own
3% provincial sales tax.
The justification was explicitto fund expanded social services
in the post-war era, includinghospital construction, veterans
programs, and public education.
Johnson's government waspragmatic.
(12:52):
He said in his 1948 budgetaddress, the people of British
Columbia have asked for greaterpublic service.
They understand that thoseservices cannot come without
contribution.
It was sold as a sharedsacrifice for a shared future.
But like Saskatchewan, BC salestax never went away.
By the 1970s, that temporaryrevenue stream was the backbone
(13:17):
of provincial spending.
So much so that when PremierBill Bennett proposed modest
increases during the resourceboom of the night of the 80s,
critics accused him of turningBC into a tax province.
Yet Bennett pointed to theroads, hospitals, and schools
these revenues built and said,we can't be a have province
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without paying for what we have.
Today, BC's PST remains at 7%,contributing more than $9
billion annually to theprovincial treasury.
Ontario was reluctant in 1961.
Ontario resisted for as long asit could.
Through the 1940s and 50s, itsbooming manufacturing economy
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and strong property tax baseallowed it to avoid a retail
sales tax.
But by the 1960s, even Canada'srichest province was running
deficits.
In 1961, Premier Leslie Frost,nicknamed Old Man Ontario,
introduced a 3% retail salestax.
He called it a regrettable butnecessary step toward modern
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fiscal management.
Frost had spent years trying toavoid it, arguing that direct
taxation on goods would burdenworking families.
But with the province'spopulation exploding, highways
being built, and hospitalsmultiplying, there was no choice
left.
By 1970, Ontario's RST wasproducing $500 million a year,
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becoming one of the province'smost reliable revenue sources.
It funded the rapidurbanization of Greater Toronto
area and the creation of theprovince's college system.
In 2010, Ontario merged its RSTwith the federal GST to create
what's called a harmonized salestax, a politically unpopular
move under Premier DaltonMcGuinty, but one economist
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largely supported for reducingbusiness complexity.
Then there's Alberta, the greatCanadian outlier.
Alberta introduced a 2% salestax in 1936 under Premier
William Aberhart during theDepression, but it lasted less
than two years.
When oil was discovered atLeduc in 1947, Premier Ernest
(15:30):
Manning swore it would neverreturn.
He famously declared, inAlberta, the wealth beneath our
feet will pay for the servicesabove it.
And for decades, he was right.
Oil royalties and resourcerevenues replaced what other
provinces earned from sales tax.
By the 1970s, Premier PeterLoheed made it a point of pride.
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No sales tax, not now, notever.
That promise became politicalgospel.
Even in the early 1990s, whenPremier Ralph Klein was slashing
spending to balance the budget,he refused to consider a sales
tax.
And in 2021, Alberta enshrinedthat tradition into law, the
(16:14):
Alberta Taxpayer Protection Act,requiring a public referendum
before any sales tax could beintroduced.
Today, Alberta remains the onlyprovince in Canada without a
provincial sales tax, a decisionthat still defines his identity
as the low-tax free enterpriseprovince.
So by the mid-20th century, aclear pattern had formed.
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Saskatchewan desperation, BCtaxed for social expansion,
Ontario taxed for modernization,Alberta refused to tax powered
by oil.
Each approach reflected aphilosophy.
Whether the role of governmentwas to stabilize, build, expand,
or stay out of the way.
(16:56):
And each province discoveredsomething else.
Taxes that begin as temporarysolutions rarely end that way.
They become expectations, theybecome habits, they become
permanent pillars of how Canadafunds itself long after the
crisis that created them havefaded from memory.
(17:17):
By the 1980s, Canada's taxsystem was creaking under its
own weight.
The federal government wasstill relying on a tax that
dated back to the Second WorldWar.
The manufacturer's sales tax,or MST.
It sounded harmless enough, buteconomists despised it.
(17:38):
The MST was a hidden tax builtinto the price of goods long
before they reached the storeshelf.
It taxed companies at everystage of production on the
parts, the machinery, even theraw materials, meaning products
were effectively taxed multipletimes before a customer ever
bought them.
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The more you manufactured inCanada, the more you paid.
The more you imported fromabroad, the less you did.
In other words, it punishedmaking things here.
By the late 1980s, that systemwas dragging down Canadian
competitiveness.
Our exports were shrinking,manufacturing jobs were leaving,
(18:19):
and business investment wasstagnating.
So in 1989, Prime MinisterBrian Mulroney and his
progressive conservativegovernment proposed a radical
fix to scrap the old tax andreplace it with a modern,
transparent goods and servicestax, the GST.
Finance Minister Michael Wilsonargued it was time for honesty
(18:41):
in taxation.
He said in the House ofCommons, the manufacturer sales
tax is a hidden tax on jobs, ongrowth, and on investment.
The GST will make taxationvisible, accountable, and fair.
That was the economic argument.
And it was sound.
Tax consumption, notproduction.
(19:01):
Reward companies for buildingin Canada and tax spending
instead of saving or investing.
But the politics was adisaster.
When Canadians heard new tax,they didn't hear modernization.
They heard more money out of mypocket.
The opposition liberals, led byJean Chrétienne, seized on that
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anger.
They called it a tax oneverything.
And they weren't wrong.
The GST hit nearly every goodand service Canadians bought,
from furniture to phone bills,groceries to gas.
Public outrage was fierce.
Protesters filled the streets.
The Senate tried to block it.
And in 1990, the battle reachedits climax when Mulroone used
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an extraordinary constitutionalpower, Section 26 of the
Constitution Act, to appointeight additional senators and
push the GST through the upperchamber.
It passed by one single vote.
The new 7% goods and servicestax officially took effect on
January 1st, 1991.
(20:07):
Overnight, Canada had one ofthe most visible taxes in the
developed world, printed onevery receipt.
Mulroney defended the decisionas an act of long-term courage.
He told the House of Commons,leadership is not about doing
what's popular.
It's about doing what's rightfor the future of our country.
He was right about one thing.
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It was transformative.
The government of Canada's ownparliamentary research branch,
looking at a decade later,concluded that the GST's
modernized Canada's consumptiontax system, reduced distortions
in production, and improvedexport competitiveness.
But it also destroyedMulroney's political career.
His approval ratings dropped to11%, one of the lowest in
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Canadian history.
In the 1993 election, his partywas wiped off the map, reduced
from 156 seats to two.
Ironically, his successor, JeanChrétien, who had campaigned on
scrapping the GST, kept it.
It was too valuable to give up.
(21:15):
Even after the rate was cutfrom 7% to 5% under Stephen
Harper in 2006, the GST stillbrings in roughly $50 billion a
year.
Nearly one-fifth of all federalrevenue.
Today, it's embedded in the DNAof Canadian life.
You see it on your bill, yousee it without you pay it
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without thinking, and it fundseverything from the RCMP to the
Canada Child benefit.
But its story is a perfectreflection of how taxation
evolves.
Introduced as reform, sold asfairness, hated by voters, and
impossible to repeal oncegovernments taste that revenue.
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The GST was never just a newtax.
It was a new philosophy, arecognition that in Canada,
governments can change therules.
But never the habit.
Once they find a way to collectmoney, they rarely let it go.
Now let's talk about propertytax.
If income tax was born in a warand sales tax in a crisis, then
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property tax is the oldest ofthem all, and the most grounded.
From the very beginning ofConfederation, property tax was
the backbone of localgovernment.
It was simple, tangible, andvisible.
A levy tied directly to landand what stood on it.
Municipalities used it to fundthings you could actually touch
roads, schools, water systems,and the local police and fire
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departments that keptcommunities running.
Unlike federal or provincialtaxes, property tax had a clear
logic.
You paid in proportion to whatyou owned and received the
benefits where you lived.
It was in many ways the purestexpression of the social
contract.
Contribution matched withservice.
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But as cities grew and housingbecame both an economic engine
and a political flashpoint, thatstraightforward system became a
pressure point.
By the 1980s, British Columbiawas in the middle of a housing
boom.
Vancouver's real estate marketwas surging, prices were
climbing rapidly, and theprovincial government was
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looking for a way to coolspeculation, or at least to
appear it was doing somethingabout it.
So in 1987, under Premier BillVanderzams, British Columbia's
introduced a new levy, theproperty transfer tax, or PTT.
The idea was simple (23:41):
a one-time tax paid whenever a property
changed hands.
Vander Zam's government sold itas a temporary fix, a way to
moderate a rapidly escalatinghousing market while generating
short-term revenue to fundhousing programs.
The rate was set at 1% on thefirst $200,000 and 2% on the
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remainder.
Modest by today's standards.
But like so many temporarymeasures in Canadian history, it
never went away.
The property market cooled,then it came back.
Governments changed, the taxdidn't.
By the 2000s, the propertytransfer tax was generating more
than 1 billion annually for theprovince.
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A revenue stream too lucrativeto give up.
And as housing prices explodedover the next two decades, the
amount of tax collected explodedwith it.
Today, BC's home buyers paidthe same tax at a far higher
price.
1% on the first $200,000, 2% upto $2 million, and 3% on
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anything above that, with anadditional 2% luxury tax on
properties over $3 million.
In practical terms, that meansa typical of $1.5 million home
in Metro Vancouver now carriesnearly $30,000 in transfer
taxes, before land title fees,legal costs, or insurance.
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And here's the irony.
A tax originally designed todiscourage speculation has
become one of the barriers tomobility for ordinary
homeowners.
It discourages people fromselling, downsizing, or moving
for work, locking them in placeand freezing an already broken
housing market.
As the West Coast FamiliesNetwork put it bluntly in a 2023
(25:35):
report, the property transfertax no longer serves its
intended purpose.
It penalizes middle-classbuyers and first-time home
buyers while doing nothing tocurb speculation.
The PTT has become what manyeconomists call a friction tax,
a toll on movement.
It doesn't build homes orreduce prices.
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It just sits between Canadiansand the dream of ownership.
Meanwhile, property taxesthemselves have quietly risen
year after year, often outpacinginflation and wage growth.
In major cities like Vancouver,Toronto, and Calgary, municipal
budgets have ballooned to meetdemands for policing, housing,
and infrastructure, whilehomeowners foot the bill.
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Even renters feel the squeezeas landlords pass those costs
down the chain.
And so the oldest form oftaxation, one that was meant to
connect people to theircommunity, has become another
symbol of how disconnected thesystem now feels.
Canadians are paying more forthe privilege of staying exactly
where they are.
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Now let's talk about capitalgains.
By the early 1970s, Canada wasriding a wave of optimism, a
confident, expanding middleclass, strong unions, and a
belief that government couldshape a fairer society.
It was also a time when the taxsystem looked increasingly
outdated and unequal.
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For decades, working Canadianshad paid income tax on every
dollar they earned, whilewealthier Canadians, who made
much more of their money throughinvestments, real estate, and
capital gains were taxed farless, or not at all.
Dividends, stock profits, andland sales slipped through the
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cracks of the old system.
So in 1962, Ottawa struck theRoyal Commission on Taxation,
chaired by economist KennethCarter.
It would become one of the mostambitious policy reviews in
Canadian history.
The Carter Commission, as itbecame known, spent five years
studying how to make taxationfairer, simpler, and more
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efficient.
Its central conclusion wasrevolutionary and moral.
It declared, a buck is a buckis a buck.
In other words, all income,whether earned in working in a
mine, selling stock, or owningproperty, should be treated the
same by the tax system.
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Equal treatment of equalincome.
Carter's report was a directchallenge to the social
hierarchy of post-war Canada, acountry where wage earners bore
most of the burden, whilecapital owners found creative
ways around it.
When Pierre Trudeau becameprime minister in 1968, he took
up the cause.
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In the 1971 federal budget, hisfinance minister Edgar Benson
announced sweeping reforms basedon Carter's philosophy.
Starting January 1st, 1972,Canada would begin taxing
capital gains, the profits madefrom selling investments,
property, or other assets at ahigher value than the original
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purchase price.
It was a seismic shift.
For the first time, Ottawatreated income from wealth the
same as it treated income fromwork, at least in principle.
Benson told Parliament, we areclosing the gap between those
who work for their income andthose whose income works for
them.
The initial inclusion rate, theportion of capital gains
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subject to tax, was set at 50%,meaning half the gain would be
taxed as ordinary income.
Over that time, that rate wouldfluctuate, rising to 75% in the
1990s before returning to 50%where it remains today.
The government of Canada'sDepartment of Finance later
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summarized the reform as one ofthe most important in modern
fiscal history.
Not just for the money itraised, but for the message it
sent that taxation could be atool of fairness, not just
funding.
Critics, of course, saw itdifferently.
Entrepreneurs and investorswarned it would punish risk
taking and stifle innovation.
(29:52):
Economist Milton Friedman,reflecting on similar U.S.
reforms, once said, you can'ttax the capital of tomorrow.
To fund the consumption oftoday.
Many Canadian business leadersagreed, but Trudeau and Benson
argued that without it, Canadawould risk becoming a country
where work was taxed heavily andwealth was not, a recipe for
(30:16):
inequality and resentment.
Half a century later, thatdebate hasn't gone away.
Every federal budget thattweaks the capital gains
inclusion rate, even by a fewpercentage points, triggers the
same philosophical divide.
Should government reward thosewho earn or those who invest?
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And that one line, a buck is abuck is a buck, still echoes
through every argument aboutfairness, class, and the role of
government in the economy.
Now let's talk about the carbontax.
Among all the taxes in Canada,none has divided this country
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quite like the carbon tax.
For some, it was a symbol ofmoral leadership.
Proof that Canada was takingclimate seriously.
For others, it became a symbolof everything wrong with modern
governance, a costly, top-downpolicy that punished ordinary
Canadians for simply livingtheir lives.
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It began so many Canadians'experiments do in British
Columbia.
In 2008, Premier GordonCampbell introduced North
America's first broad-basedcarbon tax, a move detailed in
the government of BritishColumbia's 2008 budget and
fiscal plan.
It was designed to be revenueneutral.
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Every dollar collected would bereturned to citizens through
cuts in personal and corporateincome taxes.
The idea was simple economics.
Make pollution more expensive,but make work and investment
cheaper.
It started small, $10 per tonof carbon dioxide, about two
cents a liter on gasoline, androse gradually each year.
(32:02):
Campbell called it amarket-based solution to an
environmental problem.
And for a while, it seemed towork.
Between 2008 and 2012, BC's percapita fuel use dropped by
roughly 16%, even as theprovince's economy grew faster
than the Canadian average.
The OECD and World Bank praisedthe policy as a model for
(32:25):
balancing growth withsustainability.
But politically, it was aminefield.
In rural and working classcommunities, people saw it as
not as an environmental nudge,but as a direct hit to their
wallets.
By 2011, public backlash was sointense that Campbell resigned.
His successor, Christy Clark,froze the tax rate and quietly
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dropped the revenue neutralpromise that had justified it in
the first place.
A decade later, JustinTrudeau's liberal government
took BC's blueprint national.
In 2019, Ottawa passed theGreenhouse Gas Pollution Pricing
Act, or GHGPPA, creating anational framework that would
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ensure every province had aprice on carbon.
Under the law, provinces coulddesign their own systems like
Quebec's cap and trade or BC'stax.
But if they didn't, Ottawawould impose a federal backstop.
That backstop started at $20per ton and was scheduled to
rise to $170 by 2030, accordingto the Government of Canada,
(33:35):
Environmental and Climate ChangeCanada.
The government framed it not asa tax, but as a price on
pollution.
Every dollar collected, theysaid, would be returned to
households through climateaction incentive payments.
Ottawa claimed that eight outof ten families would get back
more than they paid, throughthough economists like Trevor
(33:58):
Toom pointed out that thoseestimates excluded indirect
costs such as higher food andtransport prices.
Still, Trudeau called it thecornerstone of Canada's climate
plan, proof that markets, notmandates, could drive
decarbonization.
But politically, the backlashnever faded.
(34:18):
From the beginning, PierrePolyev made the carbon tax his
defining issue.
He called it a tax on food,fuel, and families, and built an
entire political movementaround ending it.
To Polyev, this wasn't just apolicy disagreement.
It was a moral one.
He argued that while Canadaaccounts for less than 2% of
(34:40):
global emissions, Canadians werepaying amongst the highest fuel
and food costs in the G7.
And unlike large polluters,ordinary families couldn't
simply opt out.
They still needed to drive towork, heat their homes, and put
food on the table.
In rally after rally, Polyevhammered a simple line.
(35:01):
You don't fight climate changeby making life unaffordable for
working people.
His message resonated.
As inflation surged and foodand fuel prices climbed, the
carbon tax became a politicallightning rod, one that
symbolized not justenvironmental policy, but the
growing disconnect betweenelites and everyday Canadians.
(35:22):
And then came Kearney.
Before becoming Prime Minister,Kearney was the governor of the
Bank of Canada, then the Bankof England, and later the UN
Special Envoy on ClimateFinance.
He was one of the intellectualarchitects behind carbon
pricing, arguing in his bookValues: Building a Better World
(35:42):
for All in 2021, the marketsneed to reflect moral truth.
A credible price on carbontells the truth about the cost
of pollution and the value ofsustainability.
That's a quote from his book.
For years, Carney championedthe carbon tax as essential to
Canada's just transition, abridge between the fossil fuel
(36:05):
economy and a green one.
But after taking office in2024, something shifted.
The country was tired,inflation was biting, food banks
were breaking records.
And in March 2025, Kearney didsomething no one expected.
He removed the federal consumercarbon tax.
Effective April 1st, 2025,Ottawa set the fuel charge rate
(36:31):
to zero, ending the nationallevy on gasoline, home heating,
and other household fuels.
In his announcement, Kearneysaid, Canadians need relief.
The fight against climatechange cannot come at the cost
of fairness and affordability.
The move didn't abolish carbonpricing altogether.
The output-based pricing systemfor large emitters still
(36:54):
remains.
But for ordinary Canadians, thetax on daily life is gone.
The government's officialbackground or called it measured
reset to preservecompetitiveness while pursuing
emission cuts through innovationand investment.
Within days, Reuters reportedfalling fuel prices across much
(37:14):
of the country.
Kearney's decision sentshockwaves through Ottawa.
Supporters praised it aspragmatic leadership in hard
times.
Critics called it proof thatthe carbon tax had failed
politically, even if itsucceeded economically.
For Polyev, it was avindication, the final chapter
in a fight he'd waged for years.
(37:36):
The story of the carbon tax isreally a story about two
philosophies.
For the Kearney and theliberals, taxes can be a moral
instrument.
Tools to guide society towardslong-term goals like
sustainability and equity.
For Polyev and theconservatives, taxes should be
practical tools used to fundessential services, not reshape
(37:58):
human behavior.
To one side, the carbon tax wasthe price of responsibility.
To the other, it was proof ofgovernment's arrogance.
And now, after 16 years ofdebate, BC has scrapped its
consumer carbon tax.
Ottawa has followed, and Canadahas quietly stepped back from
(38:19):
one of its most ambitiousclimate experiments.
What remains is the questionunderneath it all.
Can a country still lead onclimate or anything when its
people no longer trust how theirtaxes are being used?
Now, a quick word on taxationand Indian reserves, because
this is one of the mostmisunderstood areas of Canadian
(38:40):
law and too often weaponized inpolitical debates.
Under Section 87 of the IndianAct, the personal property of
status Indians or band situatedon reserve is exempt from
taxation.
That provision is not new.
It's been there in one form oranother since 1876, but its
(39:02):
meaning has evolved through morethan a century of case law.
Courts have consistently saidthat Section 87 includes income
earned on reserve and even acertain investment income, as
long as there's sufficientconnection to the reserve
itself.
The modern legal test comesfrom the Supreme Court of
Canada's 1992 decision inWilliams vs.
(39:23):
Canada.
In that case, the courtrejected a rigid geographical
interpretation of what onreserve meant.
Instead, it developed what'snow called the Connecting
Factors Test, a nuanced analysisof where income is earned, who
the employer is, and where thework benefits the community.
(39:44):
The key question isn't wherethe money was made, but whether
it's connected to the reservelife and economic activity.
Two decades later, in BastionEstate versus Canada and Dubai
versus Canada, the Supreme Courtreaffirmed that principle,
holding that interest earned onreserve term deposits at an
(40:05):
on-reserve financial institutionwas exempt from tax.
The court emphasized thatSection 87 isn't a loophole or
privilege, it's protection.
And as the court explainedearlier in Mitchell vs.
Uh Pegu Indian Band, thepurpose of this exemption is to
shield the property and economicbase of Indian reserves from
(40:26):
erosion by taxation fromexternal governments.
It's not a blanket everywherefor everything exemption.
It's a constitutional safeguardto preserve the land-based
economic life of reserves.
So how does that play out dayto day?
For income tax, employment orbusiness income can be exempt if
(40:47):
it's sufficiently connected toa reserve under that case law.
The Canadian Revenue Agencyapplies the connecting factors
test when determiningeligibility.
This includes where the work isperformed, where the employer
resides, and where the benefitsof that work are realized.
GST, HST, and PST purchasesmade by status Indians on bands
(41:10):
on reserve or delivered to areserve are generally relieved
from federal and provincialsales tax under Section 87.
Provinces layer their own ruleson top of that.
For example, the government ofBritish Columbia provides motor
fuel and carbon tax relief foreligible First Nations purchased
on First Nations land.
For business on reserve,entities genuinely situated on
(41:34):
reserve with on-reserve offices,staff, and operations may also
benefit under the CRA'sguidelines.
But the rules are fact-specificand technical.
The CRA's guidance on businessincome makes it clear.
Simply having an office onreserve does not make a business
exempt.
It must be substantially tiedto reserve activity.
(41:55):
In other words, there's uhisn't a free pass.
There's a narrow constitutionalstatutory protection aimed at
preserving the economic base ofreserves, refined by the courts
over decades to balancefairness, self-determination,
and the unique legal status ofindigenous lands.
When people misunderstand thissystem, they often reduce it to
(42:17):
talking points.
Indigenous people don't paytax.
That's not true.
They pay GST and income taxesoff reserve like anyone else.
And their governments operateunder strict financial and
accountability frameworks.
Section 87 is not a modernexemption.
It's a historical covenant, onemeant to ensure that the
(42:37):
limited land and property stillcontrolled by Indigenous people
wouldn't be eroded by the samegovernments that once took
nearly everything else fromthem.
And when you zoom out, you cansee how it fits into this larger
story of taxation.
We have a wartime income taxthat was supposed to be
temporary but never went away.
Sales and property taxes builtto fund growing social promises
(43:00):
that governments now struggle tomeet, a capital gains tax born
from fairness that still dividesthe country by class, a carbon
tax that tried to turn climatepolicy into a market policy and
ended in retreat, and a reservetax system designed not to avoid
responsibility, but to preservesurvival.
Each of these taxes began witha clear justification.
(43:23):
Each was supposed to serve apurpose.
And the question we have to askas citizens and as taxpayers is
whether those original aims arestill being delivered, or
whether they've simply becomeanother way to take long after
the reason for taking has fadedaway.
The expansion.
(43:44):
What we're paying for now.
Canadians today live under oneof the most complex and layered
tax systems in the world.
Income tax, payroll deductions,GST and PST, property tax,
corporate tax, carbon tax,environmental fees, each stacked
quietly, one on top of theother, each taking a little more
before your paycheck ever landsin your account.
(44:05):
According to the OECD's 2024revenue statistics, Canada's
total tax to GDP ratio now sitsat around 34%, meaning the
governments, federal,provincial, and municipal,
collectively collect about athird of all economic outputs in
taxes.
That puts us roughly in linewith the OECD's average of
(44:27):
33.9%, but far above countrieslike the United States at 27.7%,
Australia at 39% or at 29.4%,and South Korea at 28.1%.
We're below the high-tax socialdemocracies like France at
43.8%, Denmark at 42.2%, andGermany at 39.3%.
But the difference is this: those countries deliver (44:50):
undefined
world-class infrastructure,affordable childcare, and
healthcare systems that actuallywork.
In Canada, we have the taxrates of Scandinavian welfare
state and the result of acountry perpetually under
construction.
The Fraser Institute's 2024Canadian Consumer Tax Index
(45:11):
found that the average Canadianfamily now spends 46% of its
income on taxes, more than onfood, housing, and clothing.
And yet, for all of that, mostCanadians don't feel like
they're living in ahigh-functioning country.
Our healthcare system, once apoint of national pride, is now
a story of endless wait timesand closed ERs.
(45:33):
In 2023, the Fraser Institutefound the average Canadian
waited 27.7 weeks before seeinga family doctor and receiving
treatment, the longest delayever recorded.
Our infrastructure is aging.
The Parliamentary Budget Officereports that major federal
projects are billions overbudget and years behind
(45:54):
schedule.
And our housing market iscollapsing under its own weight.
The Canada Mortgage and HousingCorporation estimates we need
3.5 million new homes by 2030just to restore affordability.
Meanwhile, public trust is atan all-time low.
Only 23% of Canadians say theytrust government to do the right
(46:15):
thing most of the time,according to the Edelman Trust
Barometer, 2024, down from 53% adecade ago.
So the question becomesunavoidable.
Are our taxes still fundingpublic goods, or are they
feeding a machine that's lostits purpose?
The original promises wereclear.
(46:35):
Income tax would win the war,sales tax would stabilize the
economy, property tax wouldbuild our communities, capital
gains would make the systemfairer, carbon tax would save
the planet.
But today, it feels like thesocial contract is broken.
Governments take more thanever, yet deliver less than
(46:56):
ever.
We pay for efficiency and getbureaucracy.
We pay for health care and getwaiting lists.
We pay for accountability andget slogans.
Maybe taxes were never justabout revenue.
Maybe they were about trust,the quiet understanding that if
can if citizens give, the statewill serve.
(47:18):
And maybe what's breaking inCanada isn't just our tax
system, but the faith that madeit possible in the first place.
The broken contract, when thepromise failed.
The social contract wassupposed to be simple.
Pay your taxes, and you'll geta functioning country.
Good roads, reliable healthcare, safe streets, fair
(47:38):
justice.
In return for giving up aportion of your income,
government would give backstability.
But Canadians don't seestability anymore.
They see decline.
We're told taxes are the priceof civilization, but
increasingly they feel like theprice of mismanagement.
We're paying more than ever,yet getting less with every
(47:59):
passing year.
In British Columbia, the sizeof the provincial public sector
has exploded.
According to the CanadianFederation of Independent
Business, since 2017, the numberof people working in BC's
public sector has grown by morethan 200,000, a 50% increase,
while the total cost of thatworkforce has doubled from about
(48:21):
$26 billion to over $53billion.
Nearly all the net job creationin the province between 2020
and 2023 came from thegovernment sector, not the
private sector.
The Fraser Institute found thatout of 111,000 new jobs created
during that time, 104,000 weregovernment funded.
(48:44):
The private economy added justover 7,000.
And yet, services aren'timproving in healthcare.
The problem isn't just ashortage of doctors or nurses,
it's bureaucracy.
The Fraser Valley Currentrevealed that the BC's health
authority boards quietly gavethemselves pay raises of more
(49:05):
than 50%.
Some directors now make up to$2,000 per meeting, while the
average rate across boards rosefrom about $900 to nearly $1,500
a day.
Although the total for thosedirectors across all health
authorities nearly doubled in asingle year, from lessly $1.3
(49:27):
million to $2 million.
Meanwhile, the province facesthe longest ER wait times and
staffing shortages in itshistory.
It's not just the healthcaresystem, the entire public
apparatus keeps growing.
Global News reported that thecore BC public service, the
people working directly forministries, has expanded from
(49:49):
around 29,000 employees in 2017to nearly 39,000 today.
A 32% increase.
The provincial government haseven ordered what it calls an
expenditure management andefficiency review.
A kind of internal audit whereevery ministry has to prove it's
still worth what it costs.
(50:10):
The fact we even have to havean efficiency review tells you
everything about where we aretoday.
Federally, the same pattern isthere.
The government of Canada nowemploys more than 274,000 public
servants, a 40% increase since2015, according to the Fraser
(50:31):
Institute.
Over that same period, totalcompensation for federal
employees rose nearly 37%, evenafter adjusting for inflation.
That's hundreds of thousands ofnew bureaucrats, billions in
new salaries, and no measurableimprovement in how fast
Canadians get a passport, a taxrefund, or an immigration
(50:55):
application processed.
This is what happens whentaxation becomes
self-referential.
When the system exists tosustain itself rather than serve
the people who fund it.
We've built a state thatmeasures success by the size of
its payroll, not by the qualityof its outcomes.
And when governments can'traise taxes openly without
(51:17):
backlash, they turn to theinvisible one, inflation.
Inflation is the tax no onevotes for.
It devalues your money withoutasking your permission.
Every time prices rise fasterthan wages, every time your
savings buy less, governmentdebts quietly shrink at your
expense.
As the economist FriedrichHayek wrote in The Road to
(51:40):
Serfdom, inflation is taxationwithout legislation.
His contemporary Ludwig vonMises called it a policy of
confiscation.
Because when money loses value,what's really being taxed isn't
your income, it's your time,your savings, and your trust.
Since 2020, the Bank of Canadahas increased the money supply
by more than 20%, while Ottawahas run record deficits, over
(52:05):
$315 billion during the pandemicyears alone, according to the
Department of Finance.
Those choices helped driveinflation to 8.1% in 2022, the
highest level in 40 years.
And that wasn't an accident.
It was policy.
(52:26):
Austrian economists like Hayekand Mises would say this is what
happens when governmentscontrol both money and debt.
When central banks createliquidity, governments spend it,
and citizens pay for it laterthrough higher prices and weaker
purchasing power.
And that brings us to the moraldimension of taxation.
(52:47):
Because taxation isn't justfinancial, it's moral.
It's built on trust.
The belief that when youcontribute, the system will give
something back.
But when citizens lose thattrust, the foundation begins to
crumble.
We start to see taxes not ascontributions, but as
confiscation.
We see governments not as aservice, but as a cost.
(53:09):
And once that shift happens,once people no longer believe
the system is fair, thelegitimacy of that system
collapses from within.
And that's where Canada is now.
We're not just debating howmuch to tax or where to spend.
We're debating whether thepeople running the system can
still be trusted to keep theirend of the deal.
(53:30):
The income tax began as apatriotic duty.
Sales tax were born fromcrisis.
Property taxes built ourcities.
Capital gains promisedfairness.
Carbon taxes promisedsustainability.
Inflation wasn't voted on, itwas imposed.
The story of taxation in Canadaisn't just about numbers, it's
(53:51):
about the quiet erosion oftrust, the sense that
governments keep finding newways to take without remembering
why people agreed to give it inthe first place.
If civilization really is theprice we pay for taxes, then
maybe it's time to ask whetherthe Czech's still clearing the
politics.
Competing visions of fairness.
(54:14):
And that brings us to thepolitics, because how a country
taxes says everything about howit sees itself.
On the left, people like MarkCarney and the federal liberals
still defend taxation as a moraltool, a way to build a fairer
country and correct inequality.
They've proposed lowering thelowest personal income tax rate
from 15 to 14% to give themiddle class relief, while
(54:37):
keeping higher rates for topearners.
They've promised to eliminatethe GST on new homes under $1
million for first-time homebuyers, expand tax incentives
for sectors like clean tech andAI, and keep pushing what they
call fair share policies, highertaxes on the wealthy, and fewer
loopholes for capital gains andstock options.
(54:58):
For years, the same philosophydrove their approach to carbon
pricing, what Mark Carney oncecalled a market-based solution
to a moral problem.
The idea was that if you pricepollution, people will change
their behavior.
But now, even the liberals havestarted to backtrack, facing
public backlash, they recentlyscrapped the consumer carbon
(55:20):
tax, as mentioned earlier, theso-called fuel charge, and
reframed their platform aroundaffordability and middle class
relief.
The NDP has taken a s a similarphilosophy.
They frame taxation as a toolfor justice, not just fairness.
Their message is that if youhave more, you should pay more
(55:41):
because government canredistribute it better than you
can spend it.
They've called for new wealthtaxes on ultra-rich Canadians,
higher corporate taxes onWindfell profits, and stronger
enforcement against offshoreavoidance in their tax in their
view.
Tax fairness means expandingthe public system, more housing,
more health care, more socialprograms, all funded by taxing
(56:04):
those at the top.
On the right, Pierre Polyev andthe conservatives see that as
moral overreach.
To them, taxes have becomepunishment for productivity, the
quiet theft of time and work.
Polyev's message is simple: bring it home. (56:18):
undefined
Bring home your paycheck, bringhome affordability, bring home
home con bring home control.
His platform calls for cuttingthe lowest income tax bracket by
15%, eliminating the carbon taxentirely, and introducing what
he calls Canada FirstReinvestment Tax Cut, letting
(56:38):
people defer capital gains taxesif they reinvest their profits
in Canadian businesses.
He's promised to cap governmentspending, balance the budget,
and shrink what he callsOttawa's bloated bureaucracy.
Critics point that out thatPolyev's tax cuts would
disproportionately benefithigher earners, but for many
Canadians, that's beside thepoint.
(57:00):
His argument isn't justeconomic, it's moral.
It's about fairness as freedom.
The belief that you should keepwhat you earn because you
earned it.
And underneath all of this is aregional divide that's become
almost philosophical.
Alberta, no provincial salestax, leaner public sector, lower
(57:21):
regulation, believes inself-reliance and market
freedom.
British Columbia and Quebec, bycontrast, lean into high tax,
high service governance,collective solutions, social
programs, and government as anequalizer.
These aren't just policydifferences, they're competing
definitions of what Canadashould be.
But beneath left and right liesa more uncomfortable truth, one
(57:45):
that neither ideology seemswilling to face.
No tax system can function ifthe public stops believing the
government deserves the money.
Libertarians have been warningabout this for a century.
They argue that taxation isn'tgenerosity, it's coercion
dressed up as a civic duty.
(58:05):
The late economist FriedrichHayek called it the road to
serfdom, the slow surrender offreedom in exchange for safety.
Ludwig von Mises said inflationitself was a policy of
confiscation, and modernlibertarians see both taxation
and money printing as symptomsof the same disease.
A state that keeps growingbecause it no longer knows how
(58:29):
to do less.
But even for those who don'tshare that view, the question
remains.
Because whether you're aliberal who believes in
redistribution, a new democratwho believes in justice, or a
conservative who believes inself-reliance, none of it works
without trust.
That's the foundation that'seroding in Canada today.
The left wants to expandgovernment, the right wants to
(58:51):
shrink it.
But what Canadians want, whatthey deserve is a government
that simply works, one thatearns the right to be funded
instead of assuming it.
If taxes are the price we payfor civilization, then the least
we can ask in that civilizationis to deliver a receipt.
Closing thought, the price ofcivilization.
(59:12):
Today, Canadians pay some ofthe highest taxes in the
developed world.
About 34% of GDP.
Yet we wait 27 weeks formedical treatment, face housing
prices 12 times the averageincome, and drive on roads that
crumble faster than they'rerepaired.
We're paying for the promise ofa Scandinavian welfare state,
(59:33):
but getting the delivery of abureaucracy that barely
functions.
Politically, the divide isclear and growing.
The liberals still see taxes asa moral tool.
Redistribution, fairness, andclimate responsibility.
They've cut middle class taxesslightly, but kept higher rates
for top earners, eliminated theconsumer carbon tax under public
(59:55):
pressure, and framed the resetas investing in the future.
The NDV.
NDP doubles down on thephilosophy, pushing for wealth
taxes, windfall taxes, andhigher rates on corporations.
To them, government is thevehicle of justice.
The conservatives, led byPierre Polyev, take the opposite
view.
They promise to bring home yourpaycheck, cut taxes, axe the
(01:00:19):
carbon tax, and reward producthave productivity over
dependency.
To them, every dollar taken bygovernment is one less dollar
spent by the people who earnedit.
And yet, beneath all thosedifferences lies one
uncomfortable truth.
The real crisis isn'tideological, it's functional.
It's not about how much we pay,it's about whether anyone
(01:00:41):
believes they're getting valuein return.
Trust is the real casualtyhere.
And when citizens stopbelieving their taxes lead to
tangible results, the legitimacyof the system itself begins to
erode.
Some provinces have tried todraw a line.
Alberta, for example, passedthe Taxpayer Protection Act, a
law that requires any new salestax to be approved by
(01:01:02):
referendum.
No backroom deal, no quietincrease, a direct vote of the
people.
Maybe that's something weshould talk about nationally.
Because for all the talk abouttax fairness and shared
responsibility, very fewCanadians actually get a say in
how much government takes orwhat it does with it.
There's no mechanism foraccountability, no requirement
(01:01:24):
for proof of value.
Maybe it's time that changed.
Maybe it's time for acomprehensive review of Canada's
tax system, a modern-day CarterCommission that looks at every
levy, every loophole, everysubsidy, and asks one simple
question (01:01:39):
what is this actually doing for the people who pay for
it?
How do we hold governmentsaccountable when taxes keep
rising but outcomes keepfalling?
How do we force politicians tojustify every dollar they take
the way the rest of us have tojustify every dollar we earn?
And what happens to a countrywhen people stop believing that
(01:02:01):
the system still serves them?
Because at the end of the day,this isn't a debate about left
or right.
It's about transparency, it'sabout efficiency, and it's about
trust.
Canada doesn't need highertaxes or lower taxes.
It just needs a governmentworth paying for.
If you work in Canada, you probably don't
notice it happen.
You check your paycheck, andthere it is, gone.
Before you even see it, thegovernment gets paid first, you
get what's left.
And that's the deal we'veaccepted as citizens that we'll
pay our share so we can all livein a country that works.
(00:52):
Healthcare when we're sick,schools for our kids, safe
streets, strong communities, andpublic infrastructure that
actually functions.
But more and more, Canadiansare starting to wonder if that
deal still holds, because we'repaying more than ever before,
and somehow getting less inreturn.
(01:13):
A century ago, most Canadiansdidn't even pay income tax.
It was introduced in 1917 as atemporary wartime measure.
Back then, only a few percentof people even filed a return.
And personal income tax made upjust 2.6% of federal revenue,
(01:34):
according to the FraserInstitute.
Today, it's more than half ofwhat Ottawa collects, and almost
three out of four Canadians nowpay income tax.
Before we even get to payrolldeductions, carbon taxes,
property taxes, and the endlesslist of fees that somehow aren't
called taxes.
So, yes, we're paying more thanever.
(01:56):
But look around.
Does it feel like we're livingin a country that's getting
better?
Healthcare alone eats up morethan one-third of every
provincial budget.
Yet emergency room wait timesare the longest they've ever
been.
According to the FraserInstitute's 2023 report on
healthcare wait times, theaverage Canadian now waits 27.4
(02:19):
weeks between seeing a familydoctor and receiving treatment
from a specialist, the longestdelay ever recorded.
In emergency rooms, one inthree Canadian waits more than
four hours before being seen,compared to just 1% in France,
according to a study publishedin the Canadian Medical
Association Journal.
(02:40):
And right now, roughly one infive Canadians doesn't have a
family doctor at all, based ondata from the Canadian Institute
for Health Information.
We were told higher spendingmeant shorter waits, but the
opposite has happened, andhealthcare isn't the only place
the cracks show.
(03:00):
In our justice system, violentrepeat offenders are released on
bail, sometimes within hours.
And I know this as a nativecourt worker, not because judges
are soft, but because thesystem is collapsing under its
own weight.
In our schools, parents areseeing classrooms more focused
on politics than on literacy ornumeracy.
(03:23):
And infrastructure, the stuffwe can all see, tells its own
story.
Just this year, BC Ferries, oneof the most important public
services in British Columbia,awarded a multi-billion dollar
contract to a state-ownedChinese shipyard to build its
next fleet of vessels.
The justification?
But think about that.
(03:46):
We tax Canadian workers,Canadian shipbuilders, and
Canadian families, and then sendthese dollars overseas to build
ferries we'll depend on fordecades?
It's the perfect symbol of acountry that's forgotten what
taxes are supposed to do.
And while all this ishappening, we're running the
largest deficits in our history.
(04:07):
So Canadians are being squeezedfrom both ends, higher taxes on
one end, higher debt on theother.
And what's left in the middle?
A citizen who's paying more,getting less, and losing faith.
That's the question we'retackling today.
If taxes are supposed to be theprice of a civilized society,
(04:27):
what happens when society stopsfeeling civilized?
In this episode, we're going tolook at how Canadian taxes
actually began, where incometax, sales tax, property tax,
and the carbon tax all camefrom.
We'll also talk about howtaxation works or doesn't work
on Indian reserves and why thathistory is often misunderstood.
(04:49):
We'll explore the socialcontract between what taxes were
meant to uphold and how bothleft and right now claim to
defend it in completelydifferent ways.
And finally, we'll ask whetherthis system, one that takes
before you earn, still deservesthe trust of people it's
supposed to serve.
(05:10):
Because if you're going to takepeople's money, you should
probably be delivering somethingworth paying for.
Let's get started.
Before 1917, the federalgovernment ran the country on
taxes you could actually see.
Most revenue came from tariffs,custom duties, and excise
(05:30):
taxes.
Simple, direct charges onimported goods like alcohol,
tobacco, sugar, and manufacturedproducts.
It was a visible system.
You paid when you boughtsomething, not when you earned
something.
If you didn't import, drink, orsmoke, you barely noticed
taxation even existed.
According to the CanadianEncyclopedia, by 1913, more than
(05:53):
90% of all federal revenue camefrom these trade-related taxes.
That was by design.
Canada was a young country witha small population and a
government that saw itselfmainly as facilitator of
commerce, not a caretaker ofcitizens.
Prime Minister WilfredLaurier's Canada, at the turn of
the century, believedprosperity would come through
(06:14):
trade, immigration, andexpansion.
The idea of taxing income, ofreaching into citizens' pay, was
unthinkable.
It was something Europeanmonarchs did.
Canadians prided themselves onhaving a lighter, freer system.
But that world collapsed in1914.
The First World War changedeverything.
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Canada's war effort wasmassive.
By 1917, nearly 400,000Canadians were overseas, and
military spending had balloonedfrom 11 million in 1914 to 439
million in just three years.
The country was burning throughmoney faster than it could
borrow.
Tariffs couldn't keep up, andthe federal deficit was
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exploding.
So in the summer of 1917,finance minister Sir Thomas
White stood in the House ofCommons to announce a radical
proposal, a national income wartax.
It would be temporary, hepromised, a measure to assist in
defraying the expenses of thewar.
White described it as aconscription of wealth, echoing
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the military conscription thathad torn the country apart that
same year.
If young Canadians were beingdrafted to fight, he argued, the
wealthy could afford tocontribute more at home.
The Income War Tax Act set abase rate of 4% on taxable
income over $6,000, a fortune atthe time, and higher graduated
(07:43):
rates for very wealthyindividuals and corporations.
The average Canadian workerearned less than $1,000 a year.
So this was meant to hit onlythe top few percent.
White assured, rest reassuredParliament that it was a
temporary measure to be repealedwhen the war ends.
But like most temporarygovernment programs, it
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outlasted the crisis.
By 1918, the 300,000 Canadianswere paying income tax.
By 1920, it was bringing inover more than 100 million a
year, and Ottawa had discoveredsomething dangerous: steady,
predictable revenue.
The temporary income taxquietly became permanent.
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The Second World War cementedthat shift.
By the early 1940s, Canada hadbuilt the machinery of modern
taxation.
In 1943, finance minister J.
L.
Isley introduced pay as youearn, automatic payroll
deductions.
Instead of waiting for citizensto mail in checks at year's
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end, the government would nowtake taxes directly from each
paycheck as you earned it.
That's when the relationshipbetween government and citizen
changed forever.
The state didn't just collecttaxes, it assumed them.
The citizen never even touchedthe money.
As Isley put it, his 1943budget speech, taxes must be
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collected as incomes are earned.
This is the only practicalmethod of ensuring fairness and
of financing the war effortefficiently.
The change worked.
Ottawa's revenues surged.
By the end of the war, incometax accounted for half of all
federal revenue.
And once the war ended, themachinery stayed in place, but
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the mission changed.
The system that had fundedarmies abroad now funded social
programs at home.
From the 1940s to the 1960s, wesaw the rise of the welfare
state.
Unemployment insurance in the1940s, family allowances in
1945, old age security in 1952,Medicare and national pensions
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in the 1960s, all funded throughthe same automatic deduction
system.
The one that ensures thegovernment gets paid before you
even see your paycheck.
As one historian wrote inDalhousie's University Dow Space
Archives, Canada's post-warexpansion of social welfare was
only possible because of thetransformation in tax
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administration during the war.
Pay as you earn turns citizensinto taxpayers by default.
It was efficient, it wasinvisible, and it was permanent.
What began as a temporarywartime necessity had become the
economic foundation of theCanadian state.
Let's talk about provinces.
By the 1930s, Ottawa wasn't theonly government running out of
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money.
The Great Depression hadflattened provincial economies
and left cities scrambling tofund basic services.
Unemployment soared, socialassistance exploded, and
property taxes, the main sourceof provincial and local income,
collapsed.
It was survival mode.
And that's when provinces beganexperimenting with a new idea:
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a sales tax.
Saskatchewan was the pioneer in1937.
Saskatchewan became the firstprovince in Canada to introduce
a provincial sales tax.
It was a 2% levy on goods,small by today's standards, but
controversial at the time.
The government of PremierWilliam John Patterson, a
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liberal, framed it as a matterof necessity, not ideology.
The province had beendevastated by drought, falling
wheat prices, and economiccollapse.
Schools were closing, hospitalswere underfunded, and public
payrolls were at risk.
Patterson's finance minister,Charles Dunning, called it a
temporary emergency measure tostabilize revenues and protect
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education funding.
In his 1937 budget speech, hesaid the new tax would make the
continued operation of ourpublic schools and institutions
of care.
That 2% temporary measurebecame a permanent fixture and
the foundation of Saskatchewansocial programs.
By the 1950s, the PST wasbringing in over $10 million a
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year, allowing the province topioneer Medicare under Tommy
Douglas.
In a twist of irony, a tax bornfrom financial desperation
would later bankroll one of thegreatest social achievements in
Canadian history.
In British Columbia, we saw achange in 1948.
A decade later, BritishColumbia followed suit.
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Under Premier Brian BossJohnson, BC introduced its own
3% provincial sales tax.
The justification was explicitto fund expanded social services
in the post-war era, includinghospital construction, veterans
programs, and public education.
Johnson's government waspragmatic.
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He said in his 1948 budgetaddress, the people of British
Columbia have asked for greaterpublic service.
They understand that thoseservices cannot come without
contribution.
It was sold as a sharedsacrifice for a shared future.
But like Saskatchewan, BC salestax never went away.
By the 1970s, that temporaryrevenue stream was the backbone
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of provincial spending.
So much so that when PremierBill Bennett proposed modest
increases during the resourceboom of the night of the 80s,
critics accused him of turningBC into a tax province.
Yet Bennett pointed to theroads, hospitals, and schools
these revenues built and said,we can't be a have province
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without paying for what we have.
Today, BC's PST remains at 7%,contributing more than $9
billion annually to theprovincial treasury.
Ontario was reluctant in 1961.
Ontario resisted for as long asit could.
Through the 1940s and 50s, itsbooming manufacturing economy
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and strong property tax baseallowed it to avoid a retail
sales tax.
But by the 1960s, even Canada'srichest province was running
deficits.
In 1961, Premier Leslie Frost,nicknamed Old Man Ontario,
introduced a 3% retail salestax.
He called it a regrettable butnecessary step toward modern
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fiscal management.
Frost had spent years trying toavoid it, arguing that direct
taxation on goods would burdenworking families.
But with the province'spopulation exploding, highways
being built, and hospitalsmultiplying, there was no choice
left.
By 1970, Ontario's RST wasproducing $500 million a year,
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becoming one of the province'smost reliable revenue sources.
It funded the rapidurbanization of Greater Toronto
area and the creation of theprovince's college system.
In 2010, Ontario merged its RSTwith the federal GST to create
what's called a harmonized salestax, a politically unpopular
move under Premier DaltonMcGuinty, but one economist
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largely supported for reducingbusiness complexity.
Then there's Alberta, the greatCanadian outlier.
Alberta introduced a 2% salestax in 1936 under Premier
William Aberhart during theDepression, but it lasted less
than two years.
When oil was discovered atLeduc in 1947, Premier Ernest
(15:30):
Manning swore it would neverreturn.
He famously declared, inAlberta, the wealth beneath our
feet will pay for the servicesabove it.
And for decades, he was right.
Oil royalties and resourcerevenues replaced what other
provinces earned from sales tax.
By the 1970s, Premier PeterLoheed made it a point of pride.
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No sales tax, not now, notever.
That promise became politicalgospel.
Even in the early 1990s, whenPremier Ralph Klein was slashing
spending to balance the budget,he refused to consider a sales
tax.
And in 2021, Alberta enshrinedthat tradition into law, the
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Alberta Taxpayer Protection Act,requiring a public referendum
before any sales tax could beintroduced.
Today, Alberta remains the onlyprovince in Canada without a
provincial sales tax, a decisionthat still defines his identity
as the low-tax free enterpriseprovince.
So by the mid-20th century, aclear pattern had formed.
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Saskatchewan desperation, BCtaxed for social expansion,
Ontario taxed for modernization,Alberta refused to tax powered
by oil.
Each approach reflected aphilosophy.
Whether the role of governmentwas to stabilize, build, expand,
or stay out of the way.
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And each province discoveredsomething else.
Taxes that begin as temporarysolutions rarely end that way.
They become expectations, theybecome habits, they become
permanent pillars of how Canadafunds itself long after the
crisis that created them havefaded from memory.
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By the 1980s, Canada's taxsystem was creaking under its
own weight.
The federal government wasstill relying on a tax that
dated back to the Second WorldWar.
The manufacturer's sales tax,or MST.
It sounded harmless enough, buteconomists despised it.
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The MST was a hidden tax builtinto the price of goods long
before they reached the storeshelf.
It taxed companies at everystage of production on the
parts, the machinery, even theraw materials, meaning products
were effectively taxed multipletimes before a customer ever
bought them.
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The more you manufactured inCanada, the more you paid.
The more you imported fromabroad, the less you did.
In other words, it punishedmaking things here.
By the late 1980s, that systemwas dragging down Canadian
competitiveness.
Our exports were shrinking,manufacturing jobs were leaving,
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and business investment wasstagnating.
So in 1989, Prime MinisterBrian Mulroney and his
progressive conservativegovernment proposed a radical
fix to scrap the old tax andreplace it with a modern,
transparent goods and servicestax, the GST.
Finance Minister Michael Wilsonargued it was time for honesty
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in taxation.
He said in the House ofCommons, the manufacturer sales
tax is a hidden tax on jobs, ongrowth, and on investment.
The GST will make taxationvisible, accountable, and fair.
That was the economic argument.
And it was sound.
Tax consumption, notproduction.
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Reward companies for buildingin Canada and tax spending
instead of saving or investing.
But the politics was adisaster.
When Canadians heard new tax,they didn't hear modernization.
They heard more money out of mypocket.
The opposition liberals, led byJean Chrétienne, seized on that
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anger.
They called it a tax oneverything.
And they weren't wrong.
The GST hit nearly every goodand service Canadians bought,
from furniture to phone bills,groceries to gas.
Public outrage was fierce.
Protesters filled the streets.
The Senate tried to block it.
And in 1990, the battle reachedits climax when Mulroone used
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an extraordinary constitutionalpower, Section 26 of the
Constitution Act, to appointeight additional senators and
push the GST through the upperchamber.
It passed by one single vote.
The new 7% goods and servicestax officially took effect on
January 1st, 1991.
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Overnight, Canada had one ofthe most visible taxes in the
developed world, printed onevery receipt.
Mulroney defended the decisionas an act of long-term courage.
He told the House of Commons,leadership is not about doing
what's popular.
It's about doing what's rightfor the future of our country.
He was right about one thing.
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It was transformative.
The government of Canada's ownparliamentary research branch,
looking at a decade later,concluded that the GST's
modernized Canada's consumptiontax system, reduced distortions
in production, and improvedexport competitiveness.
But it also destroyedMulroney's political career.
His approval ratings dropped to11%, one of the lowest in
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Canadian history.
In the 1993 election, his partywas wiped off the map, reduced
from 156 seats to two.
Ironically, his successor, JeanChrétien, who had campaigned on
scrapping the GST, kept it.
It was too valuable to give up.
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Even after the rate was cutfrom 7% to 5% under Stephen
Harper in 2006, the GST stillbrings in roughly $50 billion a
year.
Nearly one-fifth of all federalrevenue.
Today, it's embedded in the DNAof Canadian life.
You see it on your bill, yousee it without you pay it
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without thinking, and it fundseverything from the RCMP to the
Canada Child benefit.
But its story is a perfectreflection of how taxation
evolves.
Introduced as reform, sold asfairness, hated by voters, and
impossible to repeal oncegovernments taste that revenue.
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The GST was never just a newtax.
It was a new philosophy, arecognition that in Canada,
governments can change therules.
But never the habit.
Once they find a way to collectmoney, they rarely let it go.
Now let's talk about propertytax.
If income tax was born in a warand sales tax in a crisis, then
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property tax is the oldest ofthem all, and the most grounded.
From the very beginning ofConfederation, property tax was
the backbone of localgovernment.
It was simple, tangible, andvisible.
A levy tied directly to landand what stood on it.
Municipalities used it to fundthings you could actually touch
roads, schools, water systems,and the local police and fire
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departments that keptcommunities running.
Unlike federal or provincialtaxes, property tax had a clear
logic.
You paid in proportion to whatyou owned and received the
benefits where you lived.
It was in many ways the purestexpression of the social
contract.
Contribution matched withservice.
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But as cities grew and housingbecame both an economic engine
and a political flashpoint, thatstraightforward system became a
pressure point.
By the 1980s, British Columbiawas in the middle of a housing
boom.
Vancouver's real estate marketwas surging, prices were
climbing rapidly, and theprovincial government was
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looking for a way to coolspeculation, or at least to
appear it was doing somethingabout it.
So in 1987, under Premier BillVanderzams, British Columbia's
introduced a new levy, theproperty transfer tax, or PTT.
The idea was simple (23:41):
a one-time tax paid whenever a property
changed hands.
Vander Zam's government sold itas a temporary fix, a way to
moderate a rapidly escalatinghousing market while generating
short-term revenue to fundhousing programs.
The rate was set at 1% on thefirst $200,000 and 2% on the
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remainder.
Modest by today's standards.
But like so many temporarymeasures in Canadian history, it
never went away.
The property market cooled,then it came back.
Governments changed, the taxdidn't.
By the 2000s, the propertytransfer tax was generating more
than 1 billion annually for theprovince.
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A revenue stream too lucrativeto give up.
And as housing prices explodedover the next two decades, the
amount of tax collected explodedwith it.
Today, BC's home buyers paidthe same tax at a far higher
price.
1% on the first $200,000, 2% upto $2 million, and 3% on
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anything above that, with anadditional 2% luxury tax on
properties over $3 million.
In practical terms, that meansa typical of $1.5 million home
in Metro Vancouver now carriesnearly $30,000 in transfer
taxes, before land title fees,legal costs, or insurance.
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And here's the irony.
A tax originally designed todiscourage speculation has
become one of the barriers tomobility for ordinary
homeowners.
It discourages people fromselling, downsizing, or moving
for work, locking them in placeand freezing an already broken
housing market.
As the West Coast FamiliesNetwork put it bluntly in a 2023
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report, the property transfertax no longer serves its
intended purpose.
It penalizes middle-classbuyers and first-time home
buyers while doing nothing tocurb speculation.
The PTT has become what manyeconomists call a friction tax,
a toll on movement.
It doesn't build homes orreduce prices.
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It just sits between Canadiansand the dream of ownership.
Meanwhile, property taxesthemselves have quietly risen
year after year, often outpacinginflation and wage growth.
In major cities like Vancouver,Toronto, and Calgary, municipal
budgets have ballooned to meetdemands for policing, housing,
and infrastructure, whilehomeowners foot the bill.
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Even renters feel the squeezeas landlords pass those costs
down the chain.
And so the oldest form oftaxation, one that was meant to
connect people to theircommunity, has become another
symbol of how disconnected thesystem now feels.
Canadians are paying more forthe privilege of staying exactly
where they are.
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Now let's talk about capitalgains.
By the early 1970s, Canada wasriding a wave of optimism, a
confident, expanding middleclass, strong unions, and a
belief that government couldshape a fairer society.
It was also a time when the taxsystem looked increasingly
outdated and unequal.
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For decades, working Canadianshad paid income tax on every
dollar they earned, whilewealthier Canadians, who made
much more of their money throughinvestments, real estate, and
capital gains were taxed farless, or not at all.
Dividends, stock profits, andland sales slipped through the
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cracks of the old system.
So in 1962, Ottawa struck theRoyal Commission on Taxation,
chaired by economist KennethCarter.
It would become one of the mostambitious policy reviews in
Canadian history.
The Carter Commission, as itbecame known, spent five years
studying how to make taxationfairer, simpler, and more
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efficient.
Its central conclusion wasrevolutionary and moral.
It declared, a buck is a buckis a buck.
In other words, all income,whether earned in working in a
mine, selling stock, or owningproperty, should be treated the
same by the tax system.
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Equal treatment of equalincome.
Carter's report was a directchallenge to the social
hierarchy of post-war Canada, acountry where wage earners bore
most of the burden, whilecapital owners found creative
ways around it.
When Pierre Trudeau becameprime minister in 1968, he took
up the cause.
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In the 1971 federal budget, hisfinance minister Edgar Benson
announced sweeping reforms basedon Carter's philosophy.
Starting January 1st, 1972,Canada would begin taxing
capital gains, the profits madefrom selling investments,
property, or other assets at ahigher value than the original
(28:46):
purchase price.
It was a seismic shift.
For the first time, Ottawatreated income from wealth the
same as it treated income fromwork, at least in principle.
Benson told Parliament, we areclosing the gap between those
who work for their income andthose whose income works for
them.
The initial inclusion rate, theportion of capital gains
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subject to tax, was set at 50%,meaning half the gain would be
taxed as ordinary income.
Over that time, that rate wouldfluctuate, rising to 75% in the
1990s before returning to 50%where it remains today.
The government of Canada'sDepartment of Finance later
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summarized the reform as one ofthe most important in modern
fiscal history.
Not just for the money itraised, but for the message it
sent that taxation could be atool of fairness, not just
funding.
Critics, of course, saw itdifferently.
Entrepreneurs and investorswarned it would punish risk
taking and stifle innovation.
(29:52):
Economist Milton Friedman,reflecting on similar U.S.
reforms, once said, you can'ttax the capital of tomorrow.
To fund the consumption oftoday.
Many Canadian business leadersagreed, but Trudeau and Benson
argued that without it, Canadawould risk becoming a country
where work was taxed heavily andwealth was not, a recipe for
(30:16):
inequality and resentment.
Half a century later, thatdebate hasn't gone away.
Every federal budget thattweaks the capital gains
inclusion rate, even by a fewpercentage points, triggers the
same philosophical divide.
Should government reward thosewho earn or those who invest?
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And that one line, a buck is abuck is a buck, still echoes
through every argument aboutfairness, class, and the role of
government in the economy.
Now let's talk about the carbontax.
Among all the taxes in Canada,none has divided this country
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quite like the carbon tax.
For some, it was a symbol ofmoral leadership.
Proof that Canada was takingclimate seriously.
For others, it became a symbolof everything wrong with modern
governance, a costly, top-downpolicy that punished ordinary
Canadians for simply livingtheir lives.
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It began so many Canadians'experiments do in British
Columbia.
In 2008, Premier GordonCampbell introduced North
America's first broad-basedcarbon tax, a move detailed in
the government of BritishColumbia's 2008 budget and
fiscal plan.
It was designed to be revenueneutral.
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Every dollar collected would bereturned to citizens through
cuts in personal and corporateincome taxes.
The idea was simple economics.
Make pollution more expensive,but make work and investment
cheaper.
It started small, $10 per tonof carbon dioxide, about two
cents a liter on gasoline, androse gradually each year.
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Campbell called it amarket-based solution to an
environmental problem.
And for a while, it seemed towork.
Between 2008 and 2012, BC's percapita fuel use dropped by
roughly 16%, even as theprovince's economy grew faster
than the Canadian average.
The OECD and World Bank praisedthe policy as a model for
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balancing growth withsustainability.
But politically, it was aminefield.
In rural and working classcommunities, people saw it as
not as an environmental nudge,but as a direct hit to their
wallets.
By 2011, public backlash was sointense that Campbell resigned.
His successor, Christy Clark,froze the tax rate and quietly
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dropped the revenue neutralpromise that had justified it in
the first place.
A decade later, JustinTrudeau's liberal government
took BC's blueprint national.
In 2019, Ottawa passed theGreenhouse Gas Pollution Pricing
Act, or GHGPPA, creating anational framework that would
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ensure every province had aprice on carbon.
Under the law, provinces coulddesign their own systems like
Quebec's cap and trade or BC'stax.
But if they didn't, Ottawawould impose a federal backstop.
That backstop started at $20per ton and was scheduled to
rise to $170 by 2030, accordingto the Government of Canada,
(33:35):
Environmental and Climate ChangeCanada.
The government framed it not asa tax, but as a price on
pollution.
Every dollar collected, theysaid, would be returned to
households through climateaction incentive payments.
Ottawa claimed that eight outof ten families would get back
more than they paid, throughthough economists like Trevor
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Toom pointed out that thoseestimates excluded indirect
costs such as higher food andtransport prices.
Still, Trudeau called it thecornerstone of Canada's climate
plan, proof that markets, notmandates, could drive
decarbonization.
But politically, the backlashnever faded.
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From the beginning, PierrePolyev made the carbon tax his
defining issue.
He called it a tax on food,fuel, and families, and built an
entire political movementaround ending it.
To Polyev, this wasn't just apolicy disagreement.
It was a moral one.
He argued that while Canadaaccounts for less than 2% of
(34:40):
global emissions, Canadians werepaying amongst the highest fuel
and food costs in the G7.
And unlike large polluters,ordinary families couldn't
simply opt out.
They still needed to drive towork, heat their homes, and put
food on the table.
In rally after rally, Polyevhammered a simple line.
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You don't fight climate changeby making life unaffordable for
working people.
His message resonated.
As inflation surged and foodand fuel prices climbed, the
carbon tax became a politicallightning rod, one that
symbolized not justenvironmental policy, but the
growing disconnect betweenelites and everyday Canadians.
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And then came Kearney.
Before becoming Prime Minister,Kearney was the governor of the
Bank of Canada, then the Bankof England, and later the UN
Special Envoy on ClimateFinance.
He was one of the intellectualarchitects behind carbon
pricing, arguing in his bookValues: Building a Better World
(35:42):
for All in 2021, the marketsneed to reflect moral truth.
A credible price on carbontells the truth about the cost
of pollution and the value ofsustainability.
That's a quote from his book.
For years, Carney championedthe carbon tax as essential to
Canada's just transition, abridge between the fossil fuel
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economy and a green one.
But after taking office in2024, something shifted.
The country was tired,inflation was biting, food banks
were breaking records.
And in March 2025, Kearney didsomething no one expected.
He removed the federal consumercarbon tax.
Effective April 1st, 2025,Ottawa set the fuel charge rate
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to zero, ending the nationallevy on gasoline, home heating,
and other household fuels.
In his announcement, Kearneysaid, Canadians need relief.
The fight against climatechange cannot come at the cost
of fairness and affordability.
The move didn't abolish carbonpricing altogether.
The output-based pricing systemfor large emitters still
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remains.
But for ordinary Canadians, thetax on daily life is gone.
The government's officialbackground or called it measured
reset to preservecompetitiveness while pursuing
emission cuts through innovationand investment.
Within days, Reuters reportedfalling fuel prices across much
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of the country.
Kearney's decision sentshockwaves through Ottawa.
Supporters praised it aspragmatic leadership in hard
times.
Critics called it proof thatthe carbon tax had failed
politically, even if itsucceeded economically.
For Polyev, it was avindication, the final chapter
in a fight he'd waged for years.
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The story of the carbon tax isreally a story about two
philosophies.
For the Kearney and theliberals, taxes can be a moral
instrument.
Tools to guide society towardslong-term goals like
sustainability and equity.
For Polyev and theconservatives, taxes should be
practical tools used to fundessential services, not reshape
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human behavior.
To one side, the carbon tax wasthe price of responsibility.
To the other, it was proof ofgovernment's arrogance.
And now, after 16 years ofdebate, BC has scrapped its
consumer carbon tax.
Ottawa has followed, and Canadahas quietly stepped back from
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one of its most ambitiousclimate experiments.
What remains is the questionunderneath it all.
Can a country still lead onclimate or anything when its
people no longer trust how theirtaxes are being used?
Now, a quick word on taxationand Indian reserves, because
this is one of the mostmisunderstood areas of Canadian
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law and too often weaponized inpolitical debates.
Under Section 87 of the IndianAct, the personal property of
status Indians or band situatedon reserve is exempt from
taxation.
That provision is not new.
It's been there in one form oranother since 1876, but its
(39:02):
meaning has evolved through morethan a century of case law.
Courts have consistently saidthat Section 87 includes income
earned on reserve and even acertain investment income, as
long as there's sufficientconnection to the reserve
itself.
The modern legal test comesfrom the Supreme Court of
Canada's 1992 decision inWilliams vs.
(39:23):
Canada.
In that case, the courtrejected a rigid geographical
interpretation of what onreserve meant.
Instead, it developed what'snow called the Connecting
Factors Test, a nuanced analysisof where income is earned, who
the employer is, and where thework benefits the community.
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The key question isn't wherethe money was made, but whether
it's connected to the reservelife and economic activity.
Two decades later, in BastionEstate versus Canada and Dubai
versus Canada, the Supreme Courtreaffirmed that principle,
holding that interest earned onreserve term deposits at an
(40:05):
on-reserve financial institutionwas exempt from tax.
The court emphasized thatSection 87 isn't a loophole or
privilege, it's protection.
And as the court explainedearlier in Mitchell vs.
Uh Pegu Indian Band, thepurpose of this exemption is to
shield the property and economicbase of Indian reserves from
(40:26):
erosion by taxation fromexternal governments.
It's not a blanket everywherefor everything exemption.
It's a constitutional safeguardto preserve the land-based
economic life of reserves.
So how does that play out dayto day?
For income tax, employment orbusiness income can be exempt if
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it's sufficiently connected toa reserve under that case law.
The Canadian Revenue Agencyapplies the connecting factors
test when determiningeligibility.
This includes where the work isperformed, where the employer
resides, and where the benefitsof that work are realized.
GST, HST, and PST purchasesmade by status Indians on bands
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on reserve or delivered to areserve are generally relieved
from federal and provincialsales tax under Section 87.
Provinces layer their own ruleson top of that.
For example, the government ofBritish Columbia provides motor
fuel and carbon tax relief foreligible First Nations purchased
on First Nations land.
For business on reserve,entities genuinely situated on
(41:34):
reserve with on-reserve offices,staff, and operations may also
benefit under the CRA'sguidelines.
But the rules are fact-specificand technical.
The CRA's guidance on businessincome makes it clear.
Simply having an office onreserve does not make a business
exempt.
It must be substantially tiedto reserve activity.
(41:55):
In other words, there's uhisn't a free pass.
There's a narrow constitutionalstatutory protection aimed at
preserving the economic base ofreserves, refined by the courts
over decades to balancefairness, self-determination,
and the unique legal status ofindigenous lands.
When people misunderstand thissystem, they often reduce it to
(42:17):
talking points.
Indigenous people don't paytax.
That's not true.
They pay GST and income taxesoff reserve like anyone else.
And their governments operateunder strict financial and
accountability frameworks.
Section 87 is not a modernexemption.
It's a historical covenant, onemeant to ensure that the
(42:37):
limited land and property stillcontrolled by Indigenous people
wouldn't be eroded by the samegovernments that once took
nearly everything else fromthem.
And when you zoom out, you cansee how it fits into this larger
story of taxation.
We have a wartime income taxthat was supposed to be
temporary but never went away.
Sales and property taxes builtto fund growing social promises
(43:00):
that governments now struggle tomeet, a capital gains tax born
from fairness that still dividesthe country by class, a carbon
tax that tried to turn climatepolicy into a market policy and
ended in retreat, and a reservetax system designed not to avoid
responsibility, but to preservesurvival.
Each of these taxes began witha clear justification.
(43:23):
Each was supposed to serve apurpose.
And the question we have to askas citizens and as taxpayers is
whether those original aims arestill being delivered, or
whether they've simply becomeanother way to take long after
the reason for taking has fadedaway.
The expansion.
(43:44):
What we're paying for now.
Canadians today live under oneof the most complex and layered
tax systems in the world.
Income tax, payroll deductions,GST and PST, property tax,
corporate tax, carbon tax,environmental fees, each stacked
quietly, one on top of theother, each taking a little more
before your paycheck ever landsin your account.
(44:05):
According to the OECD's 2024revenue statistics, Canada's
total tax to GDP ratio now sitsat around 34%, meaning the
governments, federal,provincial, and municipal,
collectively collect about athird of all economic outputs in
taxes.
That puts us roughly in linewith the OECD's average of
(44:27):
33.9%, but far above countrieslike the United States at 27.7%,
Australia at 39% or at 29.4%,and South Korea at 28.1%.
We're below the high-tax socialdemocracies like France at
43.8%, Denmark at 42.2%, andGermany at 39.3%.
But the difference is this: those countries deliver (44:50):
undefined
world-class infrastructure,affordable childcare, and
healthcare systems that actuallywork.
In Canada, we have the taxrates of Scandinavian welfare
state and the result of acountry perpetually under
construction.
The Fraser Institute's 2024Canadian Consumer Tax Index
(45:11):
found that the average Canadianfamily now spends 46% of its
income on taxes, more than onfood, housing, and clothing.
And yet, for all of that, mostCanadians don't feel like
they're living in ahigh-functioning country.
Our healthcare system, once apoint of national pride, is now
a story of endless wait timesand closed ERs.
(45:33):
In 2023, the Fraser Institutefound the average Canadian
waited 27.7 weeks before seeinga family doctor and receiving
treatment, the longest delayever recorded.
Our infrastructure is aging.
The Parliamentary Budget Officereports that major federal
projects are billions overbudget and years behind
(45:54):
schedule.
And our housing market iscollapsing under its own weight.
The Canada Mortgage and HousingCorporation estimates we need
3.5 million new homes by 2030just to restore affordability.
Meanwhile, public trust is atan all-time low.
Only 23% of Canadians say theytrust government to do the right
(46:15):
thing most of the time,according to the Edelman Trust
Barometer, 2024, down from 53% adecade ago.
So the question becomesunavoidable.
Are our taxes still fundingpublic goods, or are they
feeding a machine that's lostits purpose?
The original promises wereclear.
(46:35):
Income tax would win the war,sales tax would stabilize the
economy, property tax wouldbuild our communities, capital
gains would make the systemfairer, carbon tax would save
the planet.
But today, it feels like thesocial contract is broken.
Governments take more thanever, yet deliver less than
(46:56):
ever.
We pay for efficiency and getbureaucracy.
We pay for health care and getwaiting lists.
We pay for accountability andget slogans.
Maybe taxes were never justabout revenue.
Maybe they were about trust,the quiet understanding that if
can if citizens give, the statewill serve.
(47:18):
And maybe what's breaking inCanada isn't just our tax
system, but the faith that madeit possible in the first place.
The broken contract, when thepromise failed.
The social contract wassupposed to be simple.
Pay your taxes, and you'll geta functioning country.
Good roads, reliable healthcare, safe streets, fair
(47:38):
justice.
In return for giving up aportion of your income,
government would give backstability.
But Canadians don't seestability anymore.
They see decline.
We're told taxes are the priceof civilization, but
increasingly they feel like theprice of mismanagement.
We're paying more than ever,yet getting less with every
(47:59):
passing year.
In British Columbia, the sizeof the provincial public sector
has exploded.
According to the CanadianFederation of Independent
Business, since 2017, the numberof people working in BC's
public sector has grown by morethan 200,000, a 50% increase,
while the total cost of thatworkforce has doubled from about
(48:21):
$26 billion to over $53billion.
Nearly all the net job creationin the province between 2020
and 2023 came from thegovernment sector, not the
private sector.
The Fraser Institute found thatout of 111,000 new jobs created
during that time, 104,000 weregovernment funded.
(48:44):
The private economy added justover 7,000.
And yet, services aren'timproving in healthcare.
The problem isn't just ashortage of doctors or nurses,
it's bureaucracy.
The Fraser Valley Currentrevealed that the BC's health
authority boards quietly gavethemselves pay raises of more
(49:05):
than 50%.
Some directors now make up to$2,000 per meeting, while the
average rate across boards rosefrom about $900 to nearly $1,500
a day.
Although the total for thosedirectors across all health
authorities nearly doubled in asingle year, from lessly $1.3
(49:27):
million to $2 million.
Meanwhile, the province facesthe longest ER wait times and
staffing shortages in itshistory.
It's not just the healthcaresystem, the entire public
apparatus keeps growing.
Global News reported that thecore BC public service, the
people working directly forministries, has expanded from
(49:49):
around 29,000 employees in 2017to nearly 39,000 today.
A 32% increase.
The provincial government haseven ordered what it calls an
expenditure management andefficiency review.
A kind of internal audit whereevery ministry has to prove it's
still worth what it costs.
(50:10):
The fact we even have to havean efficiency review tells you
everything about where we aretoday.
Federally, the same pattern isthere.
The government of Canada nowemploys more than 274,000 public
servants, a 40% increase since2015, according to the Fraser
(50:31):
Institute.
Over that same period, totalcompensation for federal
employees rose nearly 37%, evenafter adjusting for inflation.
That's hundreds of thousands ofnew bureaucrats, billions in
new salaries, and no measurableimprovement in how fast
Canadians get a passport, a taxrefund, or an immigration
(50:55):
application processed.
This is what happens whentaxation becomes
self-referential.
When the system exists tosustain itself rather than serve
the people who fund it.
We've built a state thatmeasures success by the size of
its payroll, not by the qualityof its outcomes.
And when governments can'traise taxes openly without
(51:17):
backlash, they turn to theinvisible one, inflation.
Inflation is the tax no onevotes for.
It devalues your money withoutasking your permission.
Every time prices rise fasterthan wages, every time your
savings buy less, governmentdebts quietly shrink at your
expense.
As the economist FriedrichHayek wrote in The Road to
(51:40):
Serfdom, inflation is taxationwithout legislation.
His contemporary Ludwig vonMises called it a policy of
confiscation.
Because when money loses value,what's really being taxed isn't
your income, it's your time,your savings, and your trust.
Since 2020, the Bank of Canadahas increased the money supply
by more than 20%, while Ottawahas run record deficits, over
(52:05):
$315 billion during the pandemicyears alone, according to the
Department of Finance.
Those choices helped driveinflation to 8.1% in 2022, the
highest level in 40 years.
And that wasn't an accident.
It was policy.
(52:26):
Austrian economists like Hayekand Mises would say this is what
happens when governmentscontrol both money and debt.
When central banks createliquidity, governments spend it,
and citizens pay for it laterthrough higher prices and weaker
purchasing power.
And that brings us to the moraldimension of taxation.
(52:47):
Because taxation isn't justfinancial, it's moral.
It's built on trust.
The belief that when youcontribute, the system will give
something back.
But when citizens lose thattrust, the foundation begins to
crumble.
We start to see taxes not ascontributions, but as
confiscation.
We see governments not as aservice, but as a cost.
(53:09):
And once that shift happens,once people no longer believe
the system is fair, thelegitimacy of that system
collapses from within.
And that's where Canada is now.
We're not just debating howmuch to tax or where to spend.
We're debating whether thepeople running the system can
still be trusted to keep theirend of the deal.
(53:30):
The income tax began as apatriotic duty.
Sales tax were born fromcrisis.
Property taxes built ourcities.
Capital gains promisedfairness.
Carbon taxes promisedsustainability.
Inflation wasn't voted on, itwas imposed.
The story of taxation in Canadaisn't just about numbers, it's
(53:51):
about the quiet erosion oftrust, the sense that
governments keep finding newways to take without remembering
why people agreed to give it inthe first place.
If civilization really is theprice we pay for taxes, then
maybe it's time to ask whetherthe Czech's still clearing the
politics.
Competing visions of fairness.
(54:14):
And that brings us to thepolitics, because how a country
taxes says everything about howit sees itself.
On the left, people like MarkCarney and the federal liberals
still defend taxation as a moraltool, a way to build a fairer
country and correct inequality.
They've proposed lowering thelowest personal income tax rate
from 15 to 14% to give themiddle class relief, while
(54:37):
keeping higher rates for topearners.
They've promised to eliminatethe GST on new homes under $1
million for first-time homebuyers, expand tax incentives
for sectors like clean tech andAI, and keep pushing what they
call fair share policies, highertaxes on the wealthy, and fewer
loopholes for capital gains andstock options.
(54:58):
For years, the same philosophydrove their approach to carbon
pricing, what Mark Carney oncecalled a market-based solution
to a moral problem.
The idea was that if you pricepollution, people will change
their behavior.
But now, even the liberals havestarted to backtrack, facing
public backlash, they recentlyscrapped the consumer carbon
(55:20):
tax, as mentioned earlier, theso-called fuel charge, and
reframed their platform aroundaffordability and middle class
relief.
The NDP has taken a s a similarphilosophy.
They frame taxation as a toolfor justice, not just fairness.
Their message is that if youhave more, you should pay more
(55:41):
because government canredistribute it better than you
can spend it.
They've called for new wealthtaxes on ultra-rich Canadians,
higher corporate taxes onWindfell profits, and stronger
enforcement against offshoreavoidance in their tax in their
view.
Tax fairness means expandingthe public system, more housing,
more health care, more socialprograms, all funded by taxing
(56:04):
those at the top.
On the right, Pierre Polyev andthe conservatives see that as
moral overreach.
To them, taxes have becomepunishment for productivity, the
quiet theft of time and work.
Polyev's message is simple: bring it home. (56:18):
undefined
Bring home your paycheck, bringhome affordability, bring home
home con bring home control.
His platform calls for cuttingthe lowest income tax bracket by
15%, eliminating the carbon taxentirely, and introducing what
he calls Canada FirstReinvestment Tax Cut, letting
(56:38):
people defer capital gains taxesif they reinvest their profits
in Canadian businesses.
He's promised to cap governmentspending, balance the budget,
and shrink what he callsOttawa's bloated bureaucracy.
Critics point that out thatPolyev's tax cuts would
disproportionately benefithigher earners, but for many
Canadians, that's beside thepoint.
(57:00):
His argument isn't justeconomic, it's moral.
It's about fairness as freedom.
The belief that you should keepwhat you earn because you
earned it.
And underneath all of this is aregional divide that's become
almost philosophical.
Alberta, no provincial salestax, leaner public sector, lower
(57:21):
regulation, believes inself-reliance and market
freedom.
British Columbia and Quebec, bycontrast, lean into high tax,
high service governance,collective solutions, social
programs, and government as anequalizer.
These aren't just policydifferences, they're competing
definitions of what Canadashould be.
But beneath left and right liesa more uncomfortable truth, one
(57:45):
that neither ideology seemswilling to face.
No tax system can function ifthe public stops believing the
government deserves the money.
Libertarians have been warningabout this for a century.
They argue that taxation isn'tgenerosity, it's coercion
dressed up as a civic duty.
(58:05):
The late economist FriedrichHayek called it the road to
serfdom, the slow surrender offreedom in exchange for safety.
Ludwig von Mises said inflationitself was a policy of
confiscation, and modernlibertarians see both taxation
and money printing as symptomsof the same disease.
A state that keeps growingbecause it no longer knows how
(58:29):
to do less.
But even for those who don'tshare that view, the question
remains.
Because whether you're aliberal who believes in
redistribution, a new democratwho believes in justice, or a
conservative who believes inself-reliance, none of it works
without trust.
That's the foundation that'seroding in Canada today.
The left wants to expandgovernment, the right wants to
(58:51):
shrink it.
But what Canadians want, whatthey deserve is a government
that simply works, one thatearns the right to be funded
instead of assuming it.
If taxes are the price we payfor civilization, then the least
we can ask in that civilizationis to deliver a receipt.
Closing thought, the price ofcivilization.
(59:12):
Today, Canadians pay some ofthe highest taxes in the
developed world.
About 34% of GDP.
Yet we wait 27 weeks formedical treatment, face housing
prices 12 times the averageincome, and drive on roads that
crumble faster than they'rerepaired.
We're paying for the promise ofa Scandinavian welfare state,
(59:33):
but getting the delivery of abureaucracy that barely
functions.
Politically, the divide isclear and growing.
The liberals still see taxes asa moral tool.
Redistribution, fairness, andclimate responsibility.
They've cut middle class taxesslightly, but kept higher rates
for top earners, eliminated theconsumer carbon tax under public
(59:55):
pressure, and framed the resetas investing in the future.
The NDV.
NDP doubles down on thephilosophy, pushing for wealth
taxes, windfall taxes, andhigher rates on corporations.
To them, government is thevehicle of justice.
The conservatives, led byPierre Polyev, take the opposite
view.
They promise to bring home yourpaycheck, cut taxes, axe the
(01:00:19):
carbon tax, and reward producthave productivity over
dependency.
To them, every dollar taken bygovernment is one less dollar
spent by the people who earnedit.
And yet, beneath all thosedifferences lies one
uncomfortable truth.
The real crisis isn'tideological, it's functional.
It's not about how much we pay,it's about whether anyone
(01:00:41):
believes they're getting valuein return.
Trust is the real casualtyhere.
And when citizens stopbelieving their taxes lead to
tangible results, the legitimacyof the system itself begins to
erode.
Some provinces have tried todraw a line.
Alberta, for example, passedthe Taxpayer Protection Act, a
law that requires any new salestax to be approved by
(01:01:02):
referendum.
No backroom deal, no quietincrease, a direct vote of the
people.
Maybe that's something weshould talk about nationally.
Because for all the talk abouttax fairness and shared
responsibility, very fewCanadians actually get a say in
how much government takes orwhat it does with it.
There's no mechanism foraccountability, no requirement
(01:01:24):
for proof of value.
Maybe it's time that changed.
Maybe it's time for acomprehensive review of Canada's
tax system, a modern-day CarterCommission that looks at every
levy, every loophole, everysubsidy, and asks one simple
question (01:01:39):
what is this actually doing for the people who pay for
it?
How do we hold governmentsaccountable when taxes keep
rising but outcomes keepfalling?
How do we force politicians tojustify every dollar they take
the way the rest of us have tojustify every dollar we earn?
And what happens to a countrywhen people stop believing that
(01:02:01):
the system still serves them?
Because at the end of the day,this isn't a debate about left
or right.
It's about transparency, it'sabout efficiency, and it's about
trust.
Canada doesn't need highertaxes or lower taxes.
It just needs a governmentworth paying for.
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