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Grant Brown reflects on American Independence Day

No taxation without representation

Grant Brown - July 4, 2008

Prior to independence, the American colonies paid taxes to the British Crown, but were not allowed to elect members to the British Parliament. Understandably, this lead to what many colonials felt were onerous levels of taxation for little or no return.

In those days, most government revenue was raised from taxes on the import/export trade, since personal incomes were difficult to track while seaports could be policed relatively efficiently (i.e. inescapably for the tax payer). The tipping point came when the British Parliament increased the import tax on tea. New Englanders revolted by plundering ships in Boston harbour and throwing cargo overboard rather than pay the tax–hence the famous "Boston Tea Party."

Thus one of the main rallying cries for American independence was: "No taxation without representation!" (Central and Eastern Canada ended up with most of the American colonials–the Loyalists–who evidently didn't mind paying onerous taxes to an unrepresentative government. That legacy probably helps explain why Ontario and the Maritimes still send tax-and-spend Liberals or Red Tories to Ottawa to plunder the West with NEPs and carbon taxes–while resisting parliamentary reforms that would give the West closer to proportionate representation.)

Today, "no taxation without representation" is an entrenched principle of democracy the world over, but it remains imperfectly implemented. There are two noteworthy exceptions: corporations and future generations.

Corporations are legal persons. They pay taxes, but are not allowed to vote. You might argue that corporations in effect vote through the votes of their stakeholders, but that would be much like denying women the vote on the ground that families vote through the vote of the husband. If corporate stakeholders have to pay taxes twice–once through the corporation and once through individual income taxation–why shouldn't they likewise get to vote twice? (Better: why not abolish corporate taxation, and tax only individuals? The argument that corporations exist only through their stakeholders cuts both ways.)

Future generations pay taxes without representation whenever governments indulge in deficit financing for lengthy periods of time, or create unfunded liabilities. The baby boomers who voted themselves the Canada (or Quebec) pension plan and universal health care are really making their children and grandchildren pay for it. The principle of "no taxation without representation," applied consistently, would entail balanced budget legislation–indeed, a constitutional requirement that governments balance budgets, at least within their term in office.

Of course, we aren't likely to see the discipline in taxation these measures entail. The democratic ideal of "no taxation without representation" is destined to be imperfected.

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