FELDSTED: Central Canada has circumvented the ethics of confederation through a series of grants and supports, to Ontario and Quebec, which are not available elsewhere

Few Canadians are aware of the Tax Rental Agreements, which was in force in Canada between 1941 and 1977.

The Tax Rental Agreements were a system by which the provincial governments accepted to "rent", to give up, to the federal government the three standard direct taxes (personal and corporate income taxes and succession duties) for a limited period of time. In return, provinces received payment of certain fixed sums of money. 

The method to be used was reminiscent of the one suggested by the Rowell-Sirois Commission. 

The occasion for the introduction of the Tax Renting System was the Second World War, when it became necessary for the federal government to raise such a high level of taxes for the conduct of the war. Had an agreement not been reached, it is likely that the war effort would have been impeded, and provinces would have found themselves incapable of supporting fully provincial services. However, it would be difficult to consider that the war alone created such tax renting agreements ... the war merely precipitated an action that many in the poorer provinces, had been demanding for a period of time. 

The true source of the Tax Renting Agreements is to be found, on the one end, in the imbalance which developed in the period of 1920 to 1940 between the expenditures of provinces, and their capacity to levy taxes locally to meet such expenditures.  On the other end, the problem was magnified in some provinces, because of their relative poverty and their inability to provide to their citizens services equivalent to those offered by the richer provinces. 

Ultimately, the poorer provinces could only offer such services by imposing larger than average taxes on their citizens, thus lowering even further the standard of living of their local population. 

It became socially unacceptable to Canadians (especially in English-speaking Canada) for some citizens in the country, because they were born in a poorer region, to accept lower services than their counterparts in richer areas. It was apparent that the more fortunate provinces would have to contribute financially to the support of the have-not provinces. 

The role of the federal government would have to be that of a funnel, through which financial resources would be redistributed across the country. This new ethic of canadianism was doubly justified because many Canadians came to the realization that they had not shared equally, in the prosperity, that Confederation was supposed to bring to all. 

Prior to the 1930's, provinces had often complained and managed to extract some concessions from the federal government -- but always on the grounds that some promise at Confederation had not been fulfilled, or that the terms of the union had not been equitable enough. 

What developed, in the 1930's, was an entirely different kind of argument.

Norman McLeod Rogers

The new position was well summarized by Norman McLeod Rogers, before the Nova Scotia Economic Inquiry in 1934: "It is urged that Nova Scotia is entitled to relief and compensation, not merely in pursuance of the assurances given on the occasion of its entrance into the Canadian federation, but also on the broad equitable ground that a federation defeats its primary purpose, if through its constitutional arrangements or through policies instituted by the national government it accomplishes the gradual debilitation of one or more of the provincial communities of which it is composed." 

For full information: http://faculty.marianopolis.edu/c.belanger/quebechistory/federal/taxrent.htm

The struggle for equality of treatment of provinces, by the federal government, has been ongoing since Confederation. We seem to take two steps forward followed by one step back. The problems articulated respecting Nova Scotia in 1934 persist today. 

Block funding and equalization payments are not working. 

Central Canada has circumvented the ethics of confederation through a series of grants and supports, to Ontario and Quebec, which are not available elsewhere. And domination by central Canada continues in new guises.

Part of the solution is to get the federal government out of the compassion and corporate welfare business, and to change its focus to its constitutional responsibilities.

John Feldsted

Political Consultant & Strategist

Winnipeg, Manitoba