Starving the Beast moves north

What does it mean?

The message is clear: If given the chance, this government will get out of the social policy business, restricting most of its active policy-making decisions to matters strictly under its jurisdiction. Later, that approach is further fleshed out - the government stating that "excess federal revenues [will] be used primarily to reduce federal taxes rather than to launch new policies in areas where the federal government is not best placed to design or deliver programs."

Then the paper gets really ambitious. "There have been many calls over the years for structural realignments of tax policies that would have the effect of reducing or eliminating joint occupancy of particular tax fields," it proclaims, specifically citing the recommendation that Ottawa scrap the GST altogether, reduce transfer payments and leave sales tax entirely to the provinces. Similar measures, it suggests, could also be undertaken to some measure with income or corporate taxes.

Ultimately, of course, Canadians wouldn't be taxed less; they'd just be taxed differently. By collecting directly, instead of relying on the feds, the provinces would gain even more autonomy than they presently have.

And there's a number of key points here:

1. Different provinces will respond differently. Alberta is nearing the point (if it isn't past) where it can be indifferent to the fiscal repercussions of ignoring the Canada Health Act's dictates. Granted, the public backlash would be bad, even out there, but it can do it. Giving more tax points (rather than tied cash) to all the provinces will mean that each region will have the freedom to experiment with new and different policies. It will also mean that each province will have less and less resemblance to each other over time.

2. Despite the nonsensical talk about the impact of Ottawa's presence, this won't help Quebec's economy. At all. They already have more tax points than anyone else. Giving them more room to tax means, well, that they'll take up the offer - and drive away more investment dollars.

3. It would be more permanent than most decisions. It's impossible to call any taxation policy permanant. However, Ottawa would have a very hard time going back on this move. Which is why Martin & Chretien thought it was a bad idea.