Download Some Basic Facts About Government in Canada

Some Basic Facts about Government
Expenditures and Taxation in
Canada
Econ 525
Revenues and Expenditures in Canada
• Since we’re studying the role of government in
this course it is worth considering some
measures of government activity
– How big is government?
– What does government spend money on?
– How does it collect taxes?
– At what level of government do different activities
occur?
– How does Canada compare to other countries?
– What are trends in government size?
Where does what get done?
• As you think about any policy in this course,
one question you should ask is “Which level of
government should do this?”
– e.g. Does it make sense for businesses to be taxed
at the local level? Should the federal government
decide where to site a local park? Should local
government handle redistribution? Management
of externalities? Should local schools be funded
locally? Or provincially?
– Answers to these questions can be complex
Why do certain activities occur at certain
levels of government?
• Often an interesting question
– Subject of research on fiscal federalism
• As we’ll see
– Externalities and public goods often best handled by
higher levels of government
– Redistribution best handled by higher levels of
government
– Local governments may better cater to specific demands
of local population
– Legal constraints play role
Other interesting questions
• Why do different countries do things
differently?
– e.g., some rely much more heavily on consumption
taxes than income taxes
– Some have larger social insurance system
• What do effective *systems* of government
look like?
– e.g., combinations of taxes or expenditure
programs within and across levels of government.
Some General Trends
• Revenues
– Federal revs come primarily from income and
consumption taxes
– Provincial revs come primarily from income taxes,
consumption taxes, and federal transfers
– Local revs come primarily from property taxes
Some General Trends
• Expenditures
– Federal spending high on protection of persons and
property, health, social services, and transfers to
provinces
• Little direct Federal spending on education
– Provincial spending high on health, social services,
and education
• Spending on health and social services encouraged by large
federal grants
– Local spending high on protection, education,
transportation, and environment
• Little spending on social services
ShareofTotalGovernmentExpenditures,2008
Federal
Provincialand
Territorial
Local
ShareofTotalGovernmentRevenue,2008
Federal
ProvincialandTerritorial
Local
Consolidated Federal,Provincial,andTerritorial
ExpendituresbyCategory(% totalexpenditures,2009)
Generalgovernment
services
Protectionofpersonsand
property
Transportationand
communication
Health
Socialservices
Education
Resourceconservationand
industrialdevelopment
Environment
Recreationandculture
Foreignaffairsand
internationalassistance
Debtcharges
Other
ConsolidatedFederalProvincialandTerritorialRevenueby
Source (%totalrevenues,2009)
Incometaxes
Propertyandrelatedtaxes
Consumptiontaxes
Healthinsurance
premiums
Contributionstosocial
securityplans
Othertaxes
Salesofgoodsandservices
Investmentincome
Otherrevenuefromown
sources
FederalExpendituresbySource(% totalexpenditures,2009)
Generalgovernment
services
Protectionofpersonsand
property
Health
Socialservices
Education
Resourceconservationand
industrialdevelopment
Foreignaffairsand
internationalassistance
Generalpurposetransfers
Debtcharges
Other
FederalRevenuebySource(% totalrevenue,2009)
Incometaxes
Consumptiontaxes
Othertaxes
Contributionstosocial
securityplans
Salesofgoodsand
services
Investmentincome
Otherrevenuesources
ProvincialRevenuesbySource(% totalrevenues,2009)
Incometaxes
Consumptiontaxes
Propertyandrelatedtaxes
Othertaxes
Contributionstosocial
securityplans
Salesofgoodsandservices
Investmentincome
Otherrevenuefromown
sources
Generalpurposetransfers
Specificpurposetransfers
ProvincialExpendituresbyCategory
(%totalexpenditures,2009)
Generalgovernment
services
Protectionofpersonsand
property
Transportationand
communications
Health
Socialservices
Education
Resourceconservationand
industrialdevelopment
Debtcharges
Other
LocalGovernmentRevenuesbySource
(%totalrevenues,2008)
Consumptiontaxes
Propertyandrelatedtaxes
Othertaxes
Salesofgoodsand
services
Investmentincome
Otherrevenuefromown
sources
Generalpurposetransfers
Specificpurposetransfers
LocalGovernmentExpendituresbyCategory
(%totalexpenditures,2008)
Generalgovernment
services
Protectionofpersonsand
property
Transportationand
communication
Socialservices
Education
Environment
Recreationandculture
2006(orclosestyearavailable)
1995
OECD29
Mexico
Switzerland
Australia
UnitedStates
Spain
Canada
Norway
Greece
CzechRepublic
Germany
Portugal
Finland
Italy
Hungary
Sweden
GeneralGovernmentExpenditure(alllevels)as%GDP
70%
60%
50%
40%
30%
20%
10%
0%
Deficit as a % of GDP
4.0
2.0
0.0
2007
2008
2009
2010
2011
2012
-2.0
Canada
-4.0
Japan
-6.0
UnitedKingdom
-8.0
UnitedStates
-10.0
Euroarea(15
countries)
OECD-Total
-12.0
-14.0
Central Govt Debt as a % of GDP
200
180
160
Canada
140
France
120
Germany
100
Greece
80
Japan
60
UnitedKingdom
40
UnitedStates
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Is Government Bigger in Canada than in
US?
• While it’s commonly assumed that Canada has
“bigger” government than the US, this point is
disputed
– Ferris and Winer (2007) argue that cross-country
differences in national income and product accounting
drive much of the apparent difference between Canada
and the US
– They argue that as of 2004 (the end of their data series)
the size of government relative to GDP was
approximately the same for the two countries.
• After making appropriate adjustments to the data
HowProvincesRaiseRevenue
BC’sRevenueSources
Revenues2011/12:
41.3billion
BCexpenditures
2011/1241.9billion