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 1 
 

No. 8. 
 
 INFORMATION FOR THE ELECTORS 
 
 
 R'l^l 
 
 
 DIRECT TAXATION 
 
 .VK -^aS 
 
 There is one obstacle at which the Liberals always balk in 
 their advocacy of unrestricted reciprocity— the revenue question. 
 How under the proposed policy can the public revenue be raised 
 otherwise than by direct taxation, is a question the Liberals have 
 never been able to answer and which they endeavor most stu- 
 diously to evade. But the question is one which eveiv elector 
 should propound to the disciples of unrestricted reciprocity, and 
 should insist upon a straightforward answer, because if the tax- 
 gatherer is to go about every year among the farmers and work- 
 ing classes and levy tribute upon them to meet the expenses of 
 government, the "fad" will have small chanwes of surviving the 
 shock with the ballot-box. 
 
 There is no difficulty whatever in ascertaining almost to a 
 dollar how much revenue will be lost under the Wiman- 
 Cartwright trade policy. We will certainly lose every dollar of 
 duties now collected on imports into Canada from the United 
 States, because the proposition is to throw down the Customs 
 wall between the two countries. Then along the seaboard Canada 
 is to impose the United States' tariff, not a tariff of our own 
 making, mind you, but such duties as the American Congress 
 enacts, to wit, that symbol of protection-run-mad, the McKinley 
 
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 tariff. Being thus placed on identically the same plane as our 
 neighbours in the matter of a tariff against the rest of the world, 
 it follows as certainly as that water will find its own level, that 
 the per capita import trade of the two countries will become 
 equalized. What that implies to Canada in the way of loss of 
 revenue a few figures will serve to illustrate. v^jti aro ;.?■ 
 
 The value of imports into the United States, except coin and 
 bullion was, in 1888, $723,880,000 ; last year it was $800,000,000, 
 which, for a population of 63,000,000, represents $12.70 per head. 
 The value of imports into the Dominion last year was $121,860,- 
 000, or, on the basis of a population of 5,200,000, $23.40 per 
 head. Our foreign trade, therefore, is very nearly double 
 that of the United States, relatively to population, and if we are 
 to be put under the same fiscal conditions as that country, the 
 consequence must be an immediate shrinkage of nearly 50 per 
 cent in our import trade. Take the case of our import trade 
 from Great Britain. In 1880 it amounted to $43,390,240, or 
 $8.30 per head; in 1889 it was $42,317,390, or $8.25 per head; 
 and in 1888 it was $39,298,700, or about $8 per head. On the 
 other hand, the United States imports from Great Britain only 
 to the value of from $2.75 to $3.00 per head. Under unrestricted 
 reciprocity, therefore, our purchases from the Mother Country 
 would immediately decline to less than one half their present 
 dimensions, with a corresponding loss of Customs revenue. 
 Another source of loss has to be faced, viz., the duties on sugar, 
 which under the McKinley bill are to be removed from the 
 after January 1, 1892, and which, therefore, would necessarily 
 disappear in Canada if free trade between the two countries 
 prevailed. We may, therefore, sum up this approximate loss of 
 revenue under unrestricted reciprocity as follows : — ' 
 
 REVENUE LOSS. '.';'.'''.' 
 
 ' > -■ 
 
 Duties on imports from United States.. ..*'..:f $ 8,220,-300 
 
 «* " " " Great Britain 4,788,500 
 
 ^* *' Sugai*, fruit, etc 3,000,900 
 
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 $16,008,800 
 
These figures are based on the official revenue returns for the year 
 ended June 30th. 1890. They show, not a problematical or possible, 
 but a certain, loss of income to the tune of $16,000,000 annually. 
 How is this to be made up ? Some unthinking Liberals prattle that 
 such economies in the general administration can be practised as 
 will enable the reduced revenue to defray the charges on the 
 treasury. Let us see as to that. The expenditure in 1890 was 
 $35,994,000, but inasmuch as the year gave a surplus of nearly 
 $4,000,000, or to be exact $3,885,893, it follows that a retrench- 
 ment of say $12,000,000 in the expenditure would leave income 
 and outgo about balanced, on the basis of last year's returns, 
 under the operation of unrestricted reciprocity. But the fixed 
 charges of the Dominion exceed the whole revenue possible to be 
 derived by indirect taxation under the conditions of free trade 
 with the United States. Look at the figures : — 
 
 *fOq OS Eevenue, 1890 '..'.'. $39,880,000 JiH>^«0' 
 
 oi-Ait h- Loss under U. Eeciprocity 16,000,000 '^i >sf^^' 
 
 ,^- ' "^^ Balance of revenue.. ..t. ...?.:: $23,880,000 ' "'"* 
 
 Against which the following fixed charges have to be 
 
 put : — 
 
 Interest on debt ..$9,887,250 ^' '- 
 
 K'ii::,. Subsidies to provir.ces 3,905,000 
 
 ,tj.v..vrrT Sinking fund 1,887,230 ' 
 
 Collection of revenue 9,183,000 «=^^'' 
 
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 oiU c;o-ii: Total $24,862,480 
 
 Already, therefore, there is a deficit of a million dollars annu- 
 ally staring us in the face, and that without having made provi- 
 sion to the extent of a single sixpence for such services as civil 
 government, legislation, administration of justice, public works, 
 militia, Indians, mounted police, lighthouse and coast service, 
 ocean subsidies, agriculture, penitentiaries, and a host of other 
 services absolutely indispensible. Why, if the Liberals cut down 
 the expenditure for such items as these to the figure of 1876, 
 namely, $8,570,000, there would still be a deficit of nearly 
 ten millions in the revenue only to be overcome by direct 
 taxation. 
 
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 TESTIMONY OF A LIBEEAL. 
 
 • 
 
 Upon this point we have the testimony of a prominent Libe-' 
 ral, long associated with the leaders of the party in the promul- 
 gation of the doctrine of unrestricted reciprocity. We refer to 
 lir. E. W. Thompson, for several years chief editorial writer on 
 the Toronto Globe. Mr. John Charlton, M.P., having, in the 
 couree of an address at Toronto last January, sought to make it 
 appear that ample revenue can be had under unrestricted reci- 
 city, without recourse to direct taxation, Mr. Thompson addressed 
 a letter to the press, in which he said : — 
 
 " May not the reverses of the Federal Opposition be due to the 
 apparent indisposition of Sir Eichard and Mr. Charlton to nail 
 Direct Taxation on a Great Scale to the masthead, when it flut- 
 ters visibly enough ? Up to the moment of reading Mr. Charl- 
 ton's demonstration, I liad supposed it safe to accept an estimate 
 often editorially made by the Globe itself that the loss of revenue 
 by unrestricted reciprocity would amount to fully $14,000,000. 
 Perhaps you will be kind enough to state whether the Globe's 
 calculation now agrees with Mr. Charlton's. He admits that 
 over $7,000,000 annually collected on American importations 
 would disappear. But he seems to ignore a consideration that 
 the Globe used to say could not be honestly ignored, i.e., the dis- 
 placement of British and other old world goods by American 
 goods. If American goods, which now compete advantageously 
 here with European goods, could enter free of customs taxes, 
 while British and other European goods could not enter without 
 paying 30 or 40 per cent., would not American goods displace all 
 others to so great an extent, that other $7,000,000, or say $14,- 
 000,00 ' in all, would be lost to the Federal trejisury I I cannot 
 think the Globe was wrong in that reckoning ; yet Mr. Charlton 
 did not seem to agree with it in the fine figuring he did before 
 the Young Liberals. It may be true that the private gains of 
 Canadians from unrestiicted reciprocity would amount to vastly 
 more than the loss of public revenue, but if $14,000,000, or, to 
 split the difference between the Globe's and Mr. Charlton's esti- 
 mates, even $10,000,000 would disappear from custom's income, 
 what sense, to say nothing of honesty, could there be in asserting 
 that Direct Taxation on a Great Scale would not be a necessary 
 incident of unrestricted reciprocity." ,, 
 
 The truth is direct taxation is as certain to follow immediately 
 upon the adoption of unrestricted reciprocity as night is to 
 follow day. 
 
 
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MR. BLAKE'S VIEW OF IT. 
 
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 Exactly what the ex-leader of the Libei*al party thinks of the 
 new trade policy, there is no means of knowing at the time of 
 writing, he having preserved a studious silence on the subject. 
 We do know, however, that he regards direct taxation as imprac- 
 ticable in Canada, and the party advocating the system as utterly 
 fatuous. Speaking~*at Malvern, Ontario, in January, 1887, Mr* 
 Blake thus referred to [those fiscal policies, like free trade and 
 mnrestricted reciprocity, which destroy the revenue from cus- 
 
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 toms : — 
 
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 ** No man, I care not how convinced an advocate of absolutely 
 free trade for Canada he may be, has yet suggested : — no man, I 
 believe, can suggest — a practicable plan whereby our great re- 
 venue needs can be met otherwise than by the continued imposi- 
 tion of very high duties on goods similar to those we make,or can 
 make, within oui" bounds, or on the raw materials. I invite the 
 most ardent free trader in public life to present a plausible 
 solution of this problem, and I contend that he is bound to do so 
 before he talks of free trade as practicable in Canada. I have 
 not believed it soluble in my day, and any chance of its solubility, 
 if any chance there were, has been destroyed by the vast increase 
 of our yearly charge, and by the other conditions which have 
 been created. The thing is removed from the domain of practical 
 politics." 
 
 In that utterance is a sweeping condemnation of the new fad, 
 unrestricted reciprocity. 5 a challenge to its advocates to ex- 
 plain how the necessary p :c revenue can be raised otherwise 
 than by direct taxation — whicn Mr. Blake pronounces impractic- 
 able — when the customs duties against American goods are 
 swept away. '^^ ^^""'^,>^^; '''"' ^''' ' "^ '''^';' ^^ ' ''''' 
 
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 '>^ OBJECTIONS TO 
 
 DIRECT TAXATION. '^>i' -J*^ i> 
 
 Free traders of the Cobden school favor the imposition of direct 
 taxes, and perhaps the wealthy classes will not seriously object 
 to that form of taxation, because universal experience has de- 
 monstrated that the poor always sutler under it. The men of 
 large means, of great jpaonied interest, never pay in anj^thing like 
 due proportion, while the wage-earners, the farmei'S and 
 
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 6 
 
 mechanics, arc taxed to the full extent under the direct taxation 
 system. The foUowiDg extract bearing upon the subject, is 
 taken from the report of a Commission of the State of New York, 
 appointed to enquire into the operation of the direct taxes, of 
 which Commission Mr. David A. Wells was chairman : — 
 
 " They would also recall the opinion authoritatively expressed in 
 the constitutional convention of 1868, that thirty citizens of the 
 State could be named whoso aggregate wealth (mainly personal) 
 was very considerably in excess of the valuation for that year of 
 all the personal property of the entire state. But without again 
 entering into details, the Com'missionors would now say that 
 another year's experience has led them to this general conclusion, 
 that the authorities of the state, under a law (professedly execute 
 ed) requiring the assessment of all personal property at its full 
 value, do not, in fact, succeed in assessing a proportion equal to 
 thirty per cent, of the recognized low valuation of the real 
 estate ; or more than fifteen per cent, of the real and true value of 
 all such property immediately located within the state, and as 
 such subject to the state authority." 
 
 Direct taxation prevails in the United States, and as a result 
 the farmers are everywhere in revolt against the system. Not 
 a year passes without the farmers of New York meeting in con- 
 vention to devise means of removing the inequalities of taxation, 
 which are found to press heavily and often ruinously upon the 
 poorer classes, while the rich escape with a payment altogether 
 insignificant in proportion to their wealth and income. If the 
 policy of unrestricted reciprocity were to go into operation an 
 army of tax-gatherers would almost immediately thereafter be 
 appointed, whose salaries would greatly increase the public ex- 
 penditure, and who would go about the country every year exact- 
 ing a payment in hard cash from every male adult. The capi- 
 talist with an income of 810,000 a year would not begrudge giving 
 $50 out of it to the Government, but the farmer, the mechanic, 
 and other wage-earners with an income of $400 or $500 a year, 
 would be pcround into misery and distress if he had to pay $50 of 
 his earnings into the public treasury. " 
 
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