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
Share of Total Government Expenditures, 2008 Federal Provincial and Territorial Local
Share of Total Government Revenue, 2008 Federal Provincial and Territorial Local
Consolidated Federal, Provincial, and Territorial Expenditures by Category (% total expenditures, 2009) General government services Protection of persons and property Transportation and communication Health Social services Education Resource conservation and industrial development Environment Recreation and culture Foreign affairs and international assistance Debt charges Other
Consolidated Federal Provincial and Territorial Revenue by Source (% total revenues, 2009) Income taxes Property and related taxes Consumption taxes Health insurance premiums Contributions to social security plans Other taxes Sales of goods and services Investment income Other revenue from own sources
Federal Expenditures by Source (% total expenditures, 2009) General government services Protection of persons and property Health Social services Education Resource conservation and industrial development Foreign affairs and international assistance General purpose transfers Debt charges Other
Federal Revenue by Source (% total revenue, 2009) Income taxes Consumption taxes Other taxes Contributions to social security plans Sales of goods and services Investment income Other revenue sources
Provincial Revenues by Source (% total revenues, 2009) Income taxes Consumption taxes Property and related taxes Other taxes Contributions to social security plans Sales of goods and services Investment income Other revenue from own sources General purpose transfers Specific purpose transfers
Provincial Expenditures by Category (% total expenditures, 2009) General government services Protection of persons and property Transportation and communications Health Social services Education Resource conservation and industrial development Debt charges Other
Local Government Revenues by Source (% total revenues, 2008) Consumption taxes Property and related taxes Other taxes Sales of goods and services Investment income Other revenue from own sources General purpose transfers Specific purpose transfers
Local Government Expenditures by Category (% total expenditures, 2008) General government services Protection of persons and property Transportation and communication Social services Education Environment Recreation and culture
General Government Expenditure (all levels) as % GDP 70% 60% 50% 40% 30% 20% 10% 0% Sweden Hungary Italy Finland Portugal Germany Czech Republic Greece Norway Canada Spain United States Australia Switzerland Mexico OECD29 2006 (or closest year available) 1995
Deficit as a % of GDP 4.0 2.0 0.0-2.0-4.0-6.0-8.0-10.0-12.0-14.0 2007 2008 2009 2010 2011 2012 Canada Japan United Kingdom United States Euro area (15 countries) OECD-Total
Central Govt Debt as a % of GDP 200 180 160 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Canada France Germany Greece Japan United Kingdom United States
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
How Provinces Raise Revenue
Revenues 2011/12: 41.3 billion BC s Revenue Sources
BC expenditures 2011/12 41.9 billion