Then and Now—A Historical Perspective on the Politics Of

canadian tax journal / revue fiscale canadienne (2018) 66:2, 363 - 74

Policy Forum: Then and Now— A Historical Perspective on the Politics of Comprehensive Tax Reform

Shirley Tillotson*

Précis Dans cet article, Shirley Tillotson analyse quatre types de contingences qui déterminent les possibilités en matière de politique fiscale, premièrement par rapport aux réformes Carter-Benson de 1962 à 1971, et deuxièmement relativement aux perspectives actuelles d’une réforme fiscale complète. Comparant les deux moments, l’auteure conclut que la situation n’est pas propice à la mise en oeuvre d’une réforme fiscale complète mobilisant l’opinion publique.

Abstract In this article, Shirley Tillotson analyzes four kinds of contingencies that determine political possibility in tax matters, first in relation to “the Carter-Benson moment,” 1962-1971, and second in relation to present-day prospects for comprehensive tax reform. Comparing the two moments, she concludes that we are currently not well situated for a comprehensive tax reform process that engages public opinion. Keywords: Tax reform n reviews n royal commissions n politics n public

Contents Introduction 364 Configuration of Taxpayer Interests: Changes in Tax Law and Practice Generate New Tax Publics 365 Intersection with Other Kinds of Politics: Cold War Oppositions and Incipient Populism 367 Kinds of Expertise: Macroeconomics, Meet Micro-Politics 368 Means of Political Communication: The Expansion of Group Politics 370 Impact 372 Current Implications 372

* Of the Department of History, Dalhousie University, Halifax (e-mail: [email protected]).

363 364 n canadian tax journal / revue fiscale canadienne (2018) 66:2

Introduction Canada has had no golden age of tax politics, when public opinion was well informed, fair minded, and inclusively representative of all interests. We are not in one now. And yet, though history can make us cynically despair, it shouldn’t. History prompts humility, to be sure, and usually counsels against panic; but most usefully, it requires us to see politics and policy choices as contingent on circumstances. Different per- iods afford different opportunities and threats. What can’t be done in one period may be done in another. In this brief article, based on some of the research reported in my recent book,1 I suggest that we should consider in our current moment the historical context of the Carter-Benson period, 1962-1971. I provide some selected examples of how that context shaped what was then possible and what was not. On the basis of this comparison, I suggest why 2018 is probably not a propitious time to launch comprehensive tax reform, at least not by means of a reform process that will engage public opinion. Building political consensus around broad and transformative tax reform faces formidable barriers, now as then. In speaking of the “Carter-Benson” moment, I use the names of two men—the prominent and publicly minded accountant Kenneth Le Mesurier Carter and Finance Minister Edgar J. Benson—to refer to a process of comprehensive tax review in which both played a leading role. Carter was the chief of a Royal Com- mission on Taxation that was launched in 1962 and reported in 1966-67.2 Benson helmed a subsequent process of public consultation on the 1969 white paper on tax reform3 that led to a new federal income tax statute in 1971.4 My analysis of their historical moment is organized around four kinds of contin- gency that determine political possibility in tax matters:

1. Configuration of taxpayer interests. Though always broadly organized around property and poverty, interests realign as markets, demographics, and non- tax institutions change. 2. Other aspects of electoral politics. Alignments ranging from sectarianism to regionalism to feminism complicate the strategic ground for political actors, and often connect to taxpayer interests.

1 Shirley Tillotson, Give and Take: The Citizen-Taxpayer and the Rise of Canadian Democracy (Vancouver: UBC Press, 2017). 2 Canada, Report of the Royal Commission on Taxation, vols. 1-6 (Ottawa: Queen’s Printer, 1966-67) (herein referred to as “the Carter commission”). 3 E.J. Benson, Proposals for Tax Reform (Ottawa: Queen’s Printer, 1969) (herein referred to as “the white paper”). 4 Income Tax Act, SC 1970-71-72, c. 63. A related and significant change was the termination of the Dominion Succession Act and the parallel measures that gradually eliminated provincial succession duties, until they were all gone in 1985. This process is described in David G. Duff, “The Abolition of Wealth Transfer Taxes: Lessons from Canada, Australia, and New Zealand” (2005) 3:1 Pittsburgh Tax Review 71-120. policy forum: then and now—the politics of comprehensive tax reform n 365

3. Kinds of expertise. Changes in economics as a discipline and the nature of the data available shape the kinds of imaginable options for tax policy and administration. 4. Means of political communication. Not only the kind of knowledge that is available but also how that knowledge is disseminated change over time, affecting the actors and relationships of policy change.

In the Carter-Benson moment, then as now, historically specific contingencies of these types set limits on tax reform.

Configuration of Taxpayer Interests: Changes in Tax L aw and Pr actice Generate New Tax Publics To understand the Carter-Benson moment, we need to consider its past. In a period stretching from the late 1940s through the 1960s, new publics were forming in tax politics.5 The result was both wider engagement on income tax questions and increasing alienation and conflict. Among the new tax publics was a cohort of low- income wage and salary earners. In their number also figured the small-business owners who, in the 1948 Income Tax Act,6 first enjoyed a special lower corporate income tax rate. Another increasingly anxious population of income taxfilers during the 1950s were the owners of substantial investment property, for whom the non- taxation of capital gains was a valued means of countering the impact of marginal tax rates that had been reduced only modestly from their wartime levels.7 Both the lower-income and the wealthy taxfilers would shape the politics of the Carter- Benson moment. By 1962, when the Carter commission began, there were proportionately more low-income taxpayers than there had been in 1949. Slow but fairly steady inflation, spiking after 1965, had reduced the purchasing power of the basic exemption, which remained unchanged from 1949. This growing class of low-income taxpayers were told from the 1940s onward that their many small income tax contributions funded social security, though in fact specific charges such as provincial health taxes and unemployment insurance premiums played a large part. In the background, the federal sales tax made a healthy contribution to the general revenue.8 Still, paying “their share” through the new federal personal income tax (new in its mass scope of incidence in peacetime) became the foundation of claims to federally funded social

5 Tillotson, supra note 1, at 210-37. 6 SC 1948, c. 52. 7 J. Harvey Perry, Taxes, Tariffs, & Subsidies: A History of Canadian Fiscal Development, vol. 2 (Toronto: University of Toronto Press, 1955), at 411 and 692, table 34. 8 Stated as a percentage of gross national product, the federal sales tax was a close third by size among the sources for federal fiscal requirements (aside from debt). See W. Irwin Gillespie, Tax, Borrow, and Spend: Financing Federal Spending in Canada, 1867-1990 (Ottawa: Carleton University Press, 1991), at 288, table C-3. 366 n canadian tax journal / revue fiscale canadienne (2018) 66:2 services. Opposition to this exchange of tax for services found a political home only among the Créditistes, a rural and working-class populist party in Quebec. In 1962, the Créditistes were calling for the married breadwinner’s personal exemption to be raised to $5,000, which would have ended the mass income tax.9 In spite of its otherwise broad basis for consent, the federal income tax after 1948 brought many Canadians into a fraught relationship with the state as the practices of tax administration slowly evolved. Once the 1948 Act was in place, the tax authority signalled a more vigorous enforcement program. In newspaper and magazine stories from the late 1940s through the 1950s, readers were told that “tricks” used to evade income tax were unlikely to work. For small-business owners, the threat of stepped-up enforcement was especially important. Along with owners of professional practices, they would learn that this better-staffed tax authority was prepared to teach Canadians that income tax reporting and paying were serious legal obligations. Pre-war habits of paying what seemed a “reasonable” amount on a roughly estimated income, rather than an amount based on solid accounts, were no longer acceptable. After the war, the tax authority actively pursued fraud prose- cutions, and investigations reached back into the war years. One rural Cape Breton merchant learned to his distress that, contrary to his own estimates, he had in fact made a taxable profit every year for the 10 years since 1936, and the tax bill on those profits was overdue. In 1950, a Saskatchewan farmer worried that the truck he had purchased with his veteran’s allowance would be seized for an income tax debt. In 1957, one judge described a physician’s wartime tax evasions as tantamount to trea- son. Frictions like these gave politicians such as the new Progressive Conservative (pc) Party leader, John G. Diefenbaker, material that they could use to woo voters.10 For taxfilers at the other end of the wealth scale, a particularly bitter war was fought over capital gains during the post-war period. As most readers of this journal will know, the partial inclusion of capital gains in taxable income was first introduced in the 1971 revision of the statute. But in the 1950s, when the gain from selling capital assets was usually tax-free, disputes flared between property-rich taxfilers and the tax authority over whether particular transactions generated a capital gain or income taxable under the Act. A tax adviser would provide one answer, and the tax authority would dispute the accounting involved. Shock. Horror. Surely tax obligations should not be so uncertain! Commenting on a 1950 case in which a sup- posed capital gain was taxed as income, the Globe and Mail’s editors struck an almost American note of tax outrage:

The very essence of tyranny is the levying, at the whim of officials, of taxes not clearly specified or intended by the law. Our national Government, as is its wont, is seizing with enthusiasm an opportunity to employ the tyrannical method.11

9 Tillotson, supra note 1, at 210-13 and 280-82. 10 Ibid., at 222-27, 243, and 279-80. 11 “Taxation by Stealth,” editorial, Globe and Mail, May 23, 1950, quoted in Tillotson, supra note 1, at 235. policy forum: then and now—the politics of comprehensive tax reform n 367

My tone of gentle mockery here is not meant to discount the real problem of uncertainty in tax incidence, a problem that would be addressed in successive revisions of the statute. But it must be acknowledged that in the 1950s accountants and lawyers specializing in tax were beginning to actively market methods of con- verting income to capital gains without it passing through the tax collector’s hands. Small wonder, then, that inclusions in taxable income were contested. Tax advisers and their clients constituted a greatly expanded element of public opinion in the 1950s and 1960s. Their avoidance practices signalled the limited consent to steeper and higher graduation of personal income tax rates at the upper reaches of the income scale.12 All of these are now mostly ordinary troubles, but they were new ones in the 1950s. As John Stuart Mill had predicted, a nation of income taxpayers could generate a fierce political wind.13

Intersection with Other Kinds of Politics: Cold War Oppositions and Incipient Populism Those who felt the frictions of post-war tax administration found a useful set of political tools in Cold War vocabulary. This early period of the Cold War, peaking in the 1959 Cuban revolution and the us reaction to Cuba, generated an intense polar opposition, succinctly expressed as “freedom versus Communism.” Tax complaint flowed readily into this form. Militant Catholic anti-Communism helped to fuel anti-tax feeling and opposition to social spending in rural and even urban working class Quebec, providing voters for the anti-statist Créditistes. In the early 1950s, Diefenbaker himself floated small-state rhetoric about “keep[ing] the tax collectors poor.”14 Tax cutting, especially for the vote-rich ranks of lower income earners, was part of the Diefenbaker pcs’ program after their 1957 election win. By the June 1962 election, Finance Minister Donald Fleming and Prime Minister Diefenbaker were pushing stories about personal income taxes being raised by “30 to 40” percent, or 50 percent, or even 60 percent if the Liberals were elected. The choice, Diefenbaker asserted, was between free enterprise and confiscatory socialism. Canada’s Chamber of Commerce joined in with its 1962 “Operation Freedom.” It aimed to fight high taxes and excessive social security (“excessive” before medicare, the Canada Pension Plan/Quebec Pension Plan, or student loans), and to overcome Canadians’ “apathy and indifference with respect to freedom.”15 Toronto’s Board of

12 Tillotson, supra note 1, at 214-16 and 233-35. 13 John Stuart Mill, The Principles of Political Economy, 7th ed. (Oxford: Oxford University Press, 1994), at 238-39. 14 Canada, House of Commons, Debates, December 10, 1951, at 1724-25, quoted in Tillotson, supra note 1, at 248. 15 “Face Threats to Freedom, Nation Asked,” Globe and Mail, July 10, 1961, quoted in Tillotson, supra note 1, at 283. 368 n canadian tax journal / revue fiscale canadienne (2018) 66:2

Trade firmly discouraged Operation Freedom, which was drawing accusations of John Birchism from the newly formed New Democratic Party (ndp). Calling the Chamber’s campaign naïve and suited only to small towns, Toronto’s business leaders misread its appeal. In the 1962 election, the weekly press of rural English Canada vigorously supported this anti-tax anti-Communism; and in Quebec, similar small towns and not so small ones gave the Créditistes enough members of Parliament (mps), along with four western Canadian Social Credit members, to hold the balance of power in the new federal Parliament.16 This was the election in which the pcs made comprehensive review of the tax system the main plank of their platform. Diefenbaker announced it in terms that spoke artfully to different audiences, audiences whose interests were not only dispa- rate but opposed. His government, if re-elected, would appoint a royal commission that would “examine anomalies in the existing laws, consider inequitable tax burdens, close loopholes that now existed and ease hardships now caused by some tax laws.”17 Canadians who loathed rich tax dodgers and thought that exemptions were too low could have heard that message as a commitment to do something for them. Tax practitioners and their clients who worried that capital gains were not reliably protected or that compliance costs were too high would also have heard a promise in “examine anomalies” or “ease hardships.” The comprehensive review was eventually delivered by Carter’s Royal Commis- sion on Taxation, but not before the Diefenbaker government was defeated in 1963—on its own failings, to be sure, but also by the Créditiste/Social Credit decision to vote with Lester B. Pearson’s Liberals. The dark energies of populism had given Diefenbaker two big victories in 1957 and 1958, with unprecedented voter turnouts, but in 1962 those same currents put the knife into the Créditistes’ hands, and they wielded it soon after, turfing the Tories. When comprehensive tax reform was proposed in 1969, a Cold-War-inflected populist public opinion was still present and ready to pounce.

Kinds of Expertise: Macroeconomics, Meet Micro-Politics Meanwhile, among the experts, on the eve of the move toward comprehensive tax reform, economists were feeling their scientific oats. In 1961, a group of economics professors challenged the governor of the Bank of Canada, James Coyne, to a show- down on macroeconomics. They exposed splits in the policy community that had been already made public by the report in 1957 of the Royal Commission on

16 See Tillotson, supra note 1, at 248-49 and 283-85. Many small town weekly newspapers published a syndicated column of the conservative journalist Ambrose Hills (pseudonym of Walter A. Dales). See, for example, “Of Many Things. Election Opportunities,” Kingsville Reporter, May 10, 1962. 17 “Will Review Tax Laws, Dief Says. Main Tory Plank Revealed by PM in Keynote Speech,” Winnipeg Free Press, May 7, 1962, quoted in Tillotson, supra note 1, at 285. policy forum: then and now—the politics of comprehensive tax reform n 369

Canada’s Economic Prospects (“the Gordon commission”).18 Some of the divisive questions were, how serious a threat was inflation; what level of unemployment was tolerable as “frictional”; and could fiscal and monetary policy be coordinated (the former a matter of politics; the latter, central banking)?19 Regarding the last question, the Gordon commission thought yes, but acknowledged that there were difficulties and “honest differences of opinion” among government, the central bank, and other agencies.20 The commissioners acknowledged that government intervention in the business cycle was still “a new art which [was] relatively untried.”21 And they con- fessed that the federal government’s economic interventions could be undone by the junior governments: this was “a real problem for the future” and one to which, they bluntly said, they saw no solution.22 As remedies for the other points of conflict, the Gordon commission called for a beefed-up, more rapidly reporting Dominion Bureau of Statistics, more economics research, and a permanent, non-partisan council of experts to work through differences, to educate the voting public, and to give voice to a credible consensus on economic questions.23 The commission acknowledged, in other words, that on key economic issues, ones in which tax was intimately involved, voters might well be unable (or unwilling) to take expert guidance, as then constituted, as their guide. This perception of a profession divided and as yet uncertain can only have been reinforced when economics professors and the governor of the Bank of Canada were so publicly at odds. Often, in the 1960s, when finance ministers were challenged on “high taxes,” they replied that the record of post-war prosperity surely meant that the level of taxation was doing no harm.24 But as economics, that argument was pretty thin. The Gordon commission had deemed tax to be too big a topic to include in its work. But the conflicts alluded to in its report foreshadowed the troubles that later beset Carter and Benson. The Carter commission’s report read as the work of mod- ernist men of economic science in white hats, cleaning up the fiscal chaos caused by the black-hatted politicians. While Carter’s broad program and later Benson’s narrower proposals offered something for every voter, there was no unifying macro good that would carry decisive weight in all circles, as price stabilization had during the Second World War. Instead, reactions fractured Benson’s every proposal into a promise for some and a threat for others, mostly at a microeconomic level. The

18 Canada, Royal Commission on Canada’s Economic Prospects, Final Report (Ottawa: Queen’s Printer, 1957). 19 Ibid., at 421-33. 20 Ibid., at 436. 21 Ibid., at 426. 22 Ibid., at 435. 23 Ibid., at 433-36. 24 Tillotson, supra note 1, at 299. 370 n canadian tax journal / revue fiscale canadienne (2018) 66:2 promise that income tax reform could reduce the economic vulnerability of the poor was compelling to some, but a sign of state socialism to others. One sector’s essential incentive—say, the small business tax rate—was to other taxpayers both ineffective and a pointless drain on the public revenue. Tax subsidies to mining and petroleum, offering a tax haven to investors and clearly distortionary in one view of taxation, from another perspective were an attack by Ottawa on a regional industry. Most radically, the proposed methods of taxing capital gains generated intense objections, even among some who acknowledged that it was probably time to include capital gains in taxable income.25 The breadth of the Carter commission’s vision and the subsequent Benson budget proposals meant a mobilization of equally unprecedented breadth from opponents of change. Neither the scale of the reform nor the scale of the reaction could have hap- pened earlier. Modern economics had been successfully represented as connecting taxation to a vast array of economic effects and even, by means of incentives, to economic behaviour that reached into the social and moral realms. Tax reform was no longer a matter of tweaking the tax structure to manage public finance and more fairly distribute the burden by region, sector, and class. It was about all of that, but it was now also about child care, home ownership, education, retirement planning, and the role of the state, not to mention Canadian control of the economy and the redistribution of wealth for a more just society.26 There were even a few ultra- Protestants still banging the drum about favours to Catholics extended through the non-taxation of priests’ incomes. For all that macroeconomics had enhanced the policy voice of economists, the breadth of macroeconomics and microeconomics combined also exposed tax policy to an enormous array of policy interests.

Means of Po litical Communication: The Expansion of Group Politics Many of these new connections between tax policy and other areas had found or would soon find organizational weapons. In a process that Paul Pross documented in Group Politics and Public Policy,27 governments since the 1930s had encouraged Canadians to form peak organizations for different social and economic interests, to facilitate interaction with the state. Labour, manufacturing, and farmers had long been organized, but in the 1950s and 1960s, civil society mobilized on a new scale.28 For example, Canada’s previously scattered pensioners’ organizations had formed the National Pensioners’ and Senior Citizens’ Federation (np&scf). Its member- ship of over 200,000 featured prominently in Justice Minister John Turner’s

25 Ibid., at 287-88 and 294-301. 26 Ibid., at 231-32, 259-75, 296-97, 298-99, and 303-4. 27 A. Paul Pross, Group Politics and Public Policy, 2d ed. (Toronto: Oxford University Press, 1992). 28 Ibid., at 38-60 and 64-68. policy forum: then and now—the politics of comprehensive tax reform n 371 representation to Benson of its policy wishes.29 The white paper debate was an accelerant to tax organization. To the left of np&scf, Canadian Pensioners Con- cerned would be formed to advocate on tax matters, especially for low-income seniors.30 Anti-tax activism flourished. The white paper prompted a Toronto man, John Bulloch Jr., to organize the Canadian Council for Tax Fairness, soon renamed the Canadian Federation of Independent Business. The somewhat shadowy Equit- able Tax Foundation would help to pay for the publication of a high-profile tax practitioner’s objections to the white paper in a book titled The Benson Iceberg.31 The Department of Finance used all of the now-abundant means of managing public relations to engage these many publics, and the better bankrolled of the white paper’s critics did too. National television broadcasts gave Finance Minister Benson’s message a wide reach, but also amplified his critics. One especially well- funded opponent was Colin Brown, an insurance executive from London, Ontario. He ran a massive newspaper ad series with clippable coupons for readers to use in letters to Benson. He also paid for a remarkably biased opinion poll to feed his story that everyone was opposed to the Benson reforms. Brown’s lasting legacy was the founding of the National Citizens’ Coalition shortly after the 1971 budget.32 Throughout the debates of 1969 to 1971, Benson argued, with reasonable numbers, that most taxpayers would be better off under the proposals and that the income tax burden would follow “ability to pay” more closely. But those who stood to lose from the reforms found in the mechanisms for achieving those good goals alarming threats, some perhaps real, some certainly imaginary, to the pocketbook interests of the mass public. Under the leadership of people such as Bulloch and Brown, a significant electoral force was mobilized. And the Liberals’ 1971 budget showed its impact. Many small tax expenditures served to allay at least some of the popular opposition, and a compromise version of capital gains taxation was achieved, blended with the end of federal succession duties.33 The newly complex statute launched a thousand tax-practice careers and, no doubt, a half-dozen research programs in the economics of taxation. Comprehensive reform had been minced into many pieces.

29 On the disorganized state of pensioners in the early 1950s, see James Snell, The Citizen’s Wage: The State and the Elderly in Canada, 1900-1951 (Toronto: University of Toronto Press, 1996), at 181-85; and Library and Archives Canada, Department of Finance fonds, RG 19, vol. 5222, Turner to Benson, February 25, 1971, “White Paper Tax Reform Proposals from the Public Generally.” 30 Kenneth Kernaghan and Olivia Kuper, Coordination in Canadian Governments: A Case Study of Aging Policy (Toronto: Institute of Public Administration of Canada, 1983), at 33. 31 I.H. Asper, The Benson Iceberg: A Critical Analysis of the White Paper on Tax Reform in Canada (Toronto: Clarke, Irwin, 1970). See Tillotson, supra note 1, at 299, 303, and 217-18. 32 Tillotson, supra note 1, at 293-94. 33 Ibid., at 305. 372 n canadian tax journal / revue fiscale canadienne (2018) 66:2

Impact The Carter-Benson moment was the first really comprehensive review of income taxation in Canada, and many have regarded it as a tragedy, a triumph of orches- trated public opinion against rational reform. But it served one really useful purpose: It provoked an unprecedented discussion of many important questions about tax fairness and the role of government in the economy and in citizens’ personal welfare, questions that had been quietly brewing since the mass-based, peacetime federal income tax was enacted in 1948. That discussion revealed that the post-war consensus on the role of the state was neither solid nor entirely inclusive.34 For all that the Carter-Benson moment exposed important facts about Canadian political opinion, the review failed to achieve comprehensive tax reform. It did not usher in a new era of effective, simple, economically rational, and socially just taxation. The reforms it produced were barely more than incremental, and there was much left on the tax policy docket, including what to do about the manufacturers’ sales tax, a question not addressed until the late 1980s. Beyond the important effect on group politics noted above, the review process may have had a short-term effect on party politics. In the 1972 election, the Liberals were reduced to a minority government, and the ndp, describing the tax reforms as a failure, increased its seats by just over 40 percent (though the Tories harvested the largest number of new mps).

Current Implications Our present contingencies seem likely to produce similarly lively conflict around comprehensive tax reform and to limit the range of achievable reforms. Certainly we are more rather than less likely to experience the damaging role of hidden sources of big money in any contemporary tax reform project. Worries on that score have only mounted since the 1960s. In 1981, at a Conference Board of Canada event, some high-powered public relations, public administration, and public opinion experts with an interest in Canadian democracy, along with a number of politicians, discussed whether to regulate private spending on public policy campaigns. The issue was framed as “Advocacy advertising: propaganda or democratic right?” One participant, Prakash Sethi, warned that paid “speech” by big business and big government could “overwhelm public communication space” and “drive out alterna- tive viewpoints.”35 He asked if there might be a need to “protect the public from messages that might be totally one-sided, inaccurate, deceptive, or misleading.”36 Those present solemnly agreed, in a mildly worried way, that substantial spending on advocacy advertising could make an issue important regardless of its “intrinsic merit.”37

34 Ibid., at 303-4. 35 Duncan McDowall, ed., Advocacy Advertising: Propaganda or Democratic Right? (Ottawa: Conference Board of Canada, Public Affairs Research Division, May 1982), at 65. 36 Ibid. 37 Ibid., at 99. policy forum: then and now—the politics of comprehensive tax reform n 373

With the personal computer revolution just beginning in 1981, these would-be custodians of Canadian democracy could not have known that their misgivings about the communications environment for tax politics were about to be confirmed on a new order of magnitude. Today we are all aware that the management of public opinion on policy questions is a big-budget enterprise and that some of those spending money to shape public opinion are acting out of private rather than public interests. An added wild card is the use of low-cost Internet campaigns, whose viral effects are unpredictable. Manipulative mobilizations exaggerate and distort the consequences of proposed tax reforms, and recruit to partisan purposes potential voters who generally do not, and with the information available to them probably cannot, discern the real consequences of those proposals. Tax publics in our historical moment resemble those who were emerging in the 1960s—skeptical of expertise, battered by unexplained (or difficult to understand) macroeconomic events, readily recruited on ideological lines, and then covertly (now more openly) manipulated by persuaders with deep pockets. Incremental changes might make it possible to avoid the atmosphere of overheated crisis that accompanies complex and far-reaching changes and that creates opportunities for manipulators. Comprehensive tax reform now would attract at least as wide an array of political mobilizations as the Benson white paper did. Both income taxation and sales taxation are thoroughly folded into the tissue of incentives that shape economic and social behaviour. In the age of behavioural economics, we mostly accept that “the economy” is not a realm of straightforwardly rational actors. Powerful commit- ments, whether moral or cultural, shape our perception of taxes, not only as means but also in relation to purposes, both private and public. About purposes, citizens may vigorously disagree. We argue from situated standpoints whose reconciliation entails tough emotional and political work, not just reason and evidence.38 In this respect, some voices in tax today resemble the voice of nationalism in the tax reform politics of the Carter-Benson moment: motivated by economic goals but weighty in public opinion, partly because of deep engagements around identity. Although economic nationalism (until recently) has lost its political weight, one might argue that the tax treatment of families inherits its role as a tax question that mixes culture and economics. The Carter-Benson moment highlighted a primary schism—the class politics of a welfare state—but our political schisms have since gone fractal. Inter- ests configure in complex ways. If reforms can be introduced in stages, then the work of engaging the relevant tax publics might be simpler, and less likely to produce a massive pile-on. The duration of the Carter-Benson “moment” is something else to consider in weighing the contingencies that determine what is politically possible. From man- date in 1962 to legislation in 1971, the tax reform project of the 1960s was buffeted by events, including, notably, us tax reform, inflation driven by the Vietnam War, and a Canadian constitutional crisis rising to a boil. By 1971, Finance Minister Benson could no longer point to a stable economy to defend taxation practices.

38 Tillotson, supra note 1, at 296-99 and 302. 374 n canadian tax journal / revue fiscale canadienne (2018) 66:2

Inflation worries, a point of macroeconomic controversy in 1961, were by 1969-70 a powerful factor in mobilizing opposition to full taxation of capital gains.39 Events overtook policy. How much more likely would that be now in a comprehensive tax reform process that would probably take at least as long as Carter, given the now much larger volume of research and data that commissioners would have to engage with? Perhaps, like the Macdonald commission of the mid-1980s, a vast and expen- sive research effort would fairly quickly produce, with only a bit of manufactured dissent, expert conclusions toward which the commissioners were already predis- posed.40 But that would surely be no more satisfactory as a democratic process than would prolonged and transformative deliberation by a commission whose results might be overtaken by economic or political events that altered the stakes and prompted realignments, as did the Créditiste surge of 1962-63 or the inflation of the late 1960s. And the effect of a pitched battle for 5 or 10 years over a big tax reform project risks exacerbating the problem of inflamed and distorted political communication that we face in the fragmented state of our present world. Though my analysis of the Carter-Benson moment has emphasized the risks attached to comprehensive tax reform, we may truly need such reform—a well thought out vision of improvement that considers tax policy in relation to both economic and social development and draws on solid evidence. In the framing of that vision, I must defer to others. But in comparison with the Carter-Benson moment, today the prospect of having adequate evidence seems better: we now have more economic and taxation data, and much greater data-processing capacity. The recent decision of the Canada Revenue Agency to release tax gap data to the parlia- mentary budget officer is promising. We have a deeper base of scholarship on tax, not only in economics but also in history, law, sociology, accountancy, politics, and philosophy. Our experts are more socially diverse, making it more likely that the expertise they develop will be responsive to the real complexity of our world. All this is hopeful. But the political work of proposing tax policy to the public has never been more difficult. Of all the factors shaping the evolution of tax politics, the recent changes in the means of political communication represent the single most distinctive aspect of our historical moment. The changing business model of journalism and the uncurated world of social media pose known dangers and worrying uncertainties. In this context, it is hard to be confident that major tax changes can be presented in ways that will be understood and will command consent. Absent those conditions, tax changes may compromise compliance, exacerbate avoidance and evasion, and ultimately undermine any real process of accountability. Incremental change, responsive to the contingencies of the moment, seems to me most likely to avoid those risks.

39 Ibid., at 300-1. 40 Gregory J. Inwood, “Of Leaps of Faith and Policy Change: The Macdonald Royal Commission,” in Gregory J. Inwood and Carolyn M. Johns, eds., Commissions of Inquiry and Policy Change: A Comparative Analysis (Toronto: University of Toronto Press, 2014), 113-29, at 122 and 127-28.