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Letter No. 7 by Joseph R. Smallwood on Confederation



Editor Daily News,

Dear Sir


I make no pretence at being able to set down exact figures showing precisely what Confederation would cost us.


Clearly, the people of Newfoundland would have to pay taxes to the Dominion Government, as all the people of Canada do, and at the same rates. If we were in now, we would be paying what the Canadians are now paying. If we had been in before the war, we would have been paying what the Canadians paid then. If we are in two years hence, we shall pay at the rates then prevailing.


At the present moment the Dominion rates of taxation are high, because Canada 's stupendous war effort has been financed by the Dominion Government. I do not pretend to know how much longer these present rates will continue.


But we must keep this point in the very forefront of our minds, namely: no matter how high Canada 's rate of taxation is, no matter how great her public indebtedness is, it is just silly to compare these rates with ours. J.P. Morgan or Henry Ford can afford to owe a hundred million dollars for every dollar I can afford to owe: they can afford to pay a hundred million dollars taxes to every dollar I can afford.


It's not what taxes you pay, but what you have left after paying the taxes.


And here is another point which we must bear in mind: it doesn't matter to Newfoundland what Public Debts or taxes the Provinces have. That is their own business, just as it would be our own business what indebtedness our Province had or what taxes we had. Provincial and Municipal indebtedness throughout Canada does not touch us in Newfoundland, and would not if we were in Confederation.


Our concern is with the Dominion Public Debt because the size of that debt largely determines the rate of taxation the Dominion must impose. This latter is what concerns us, and nothing else.


And after all the talk about Canada's Dominion Public Debt and rates of taxation has been uttered, after it has all been said, the stupendous fact remains: namely, after paying those taxes, the people of Canada are still left with a higher standard of living than we have in Newfoundland: are still able to have more of the good things of life than we can.


If we do pay more taxes under Confederation than we do now, it will be a marked gain for Newfoundlanders if they are left with a higher standard of living than they had before Confederation.


The people of Newfoundland should be eager to pay higher taxes, if after paying them they are left with a higher standard of living than now.


In the year 1943-44 the Newfoundland people paid our Government $7,637,245 in Income, Corporation, Business Profits and Excess Profits taxes. If we had been in Confederation that year, we would have paid the Dominion Government around $13, 365,145, because their rates are between fifty-per-cent and one hundred-per-cent higher than ours. I have struck an average and made it 75-per-cent higher than ours.


But note this: if that year we had been in Confederation, and had had to pay that additional amount, we would have been getting Canadian rates of pay for our work and our cost of living would have been much lower. You wouldn't have had Canadians and Newfoundlanders working side by side at the same work in various parts of Newfoundland as you did, with Canadians getting half and twice as much again as Newfoundlanders.


The fact that a man came from across the Gulf would not have got him more pay than a Newfoundlander then, for the Newfoundlander would have got the same rates.


We would have paid higher Income Tax that year but we would have been left better off than we actually were with lower Income Tax.


It's not what taxes you pay - it's how much you have left over after paying them.


Standard of living is everything in this matter.


And take note of this fact: it's how the taxation burden is spread over the people, that's what counts. Is the taxation burden so arranged that those with the broadest financial shoulders bear the heaviest part of it? That's how they do it in Canada .


I don't know how much Income Tax we paid in 1944-45, but the Estimates planned to collect $6,835,000 from us. If we had been in Confederation we should have paid $11,962,650 or 75-per-cent more.


In the current year it is Estimated that we shall pay $8,430,000 in Income Tax. Under Confederation it would be $14,752,500 - and it would be fairly distributed amongst those best able to pay.


Besides Income Tax, the Dominion Government would collect Customs Duty from us, but only upon such goods as we might import from non-Canadian sources. That would be as little as possible, for of course we would get everything we could from Canada then, as they would come in duty-free. On any such goods, from non-Canadian sources we would pay duty at the Canadian rate, which runs fifteen-per-cent. to twenty-per-cent. lower than our present tariff. We might pay as much as half a million dollars Customs duty, as against $15,000,000 we pay now, not to speak of the profit on that fifteen million.


Besides these two main taxes we would pay at the outside another million dollars taxes to the Dominion. We thus recapitulate: Taxes That Would Be Collected By Dominion Government:


Income, Corporation, Business, Profits



Customs Duty


Other Taxes






In case you are suspicious about that third term "Other Taxes," let it be added that this does not refer to taxes on your land, your house, your boat, your garden, your livestock or anything else of that kind. The Dominion Government does not tax such items. Nor would anyone else. These "Other Taxes" are internal revenue or excise tax, Federal sales tax, luxury tax and the like.


Well, there it is, $16,252,500 or something like it. That is what it would cost us to be in Confederation. This is the amount we would have to deduct from what we would get from the Dominion. Let us do that:


We Would Get From the Dominion


Family Allowances


Old Age Pension


Dominion Performance of Various Functions at Present Performed by our own Government


Dominion Government Subsidies, Grants, Compensations, etc. to Provincial Government


Labrador Award


Newfoundland 's Share in various Dominion Health, Education, Scientific, Labour, Aviation, Fishery, Agricultural, Commercial Services


Veterans' Benefits


Unemployment Relief






This is without counting what we would get from those two last items on the list, for frankly I do not know how to compute these. The first of the two would probably run up to well over a million a year; and the second would depend upon the number of unemployed we might have.


The balance is strongly in our favour.


The Dominion Government would take from us $16,252,500 in taxes this current year and would give altogether (to our Provincial Government, thousands of our young and old people, and to Newfoundlanders employed as Dominion Civil Servants in Newfound­land) at least $27,014,939.


We would be at least $10,762,439 better off this current year, not counting veterans' benefits or un­employment relief.


That is all from the immediate standpoint of the straight cash transactions between us and the Dominion.


But that tells only the financial side of the story - it does not include that other mighty point about the lower cost of living and higher standard of living amongst our people generally.


Under Confederation we would be better off in pocket, in stomach, and in health.


But it would not be a one-sided bargain. Canada, too, would gain.


Canada would gain a new country - Newfoundland, with her 320,000 fine, sturdy, industrious people.


Canada would round off the Confederation.


Canada would get Labrador : and once she did you'd begin to see what real development of a pioneer country means.


Canada would get a big new slice of trade, for under Confederation whatever we imported would be imported from Canada , in so far as Canada could supply the goods. That would run up to sixty or seventy millions a year.


It may be retorted that Canada already gets a large slice of our trade, and so she does. But that is now, when it is very hard to get goods anywhere else and exchange rates drive us to Canada. When the world settles down, Newfoundland would be able to get her goods anywhere; and it would be then, under Con­federation, that Canada would benefit by getting practically all our trade.


One final point remains to be covered in this installment.


The reader may have noticed it. I have shown that the Dominion Government would collect $16,252,500 in taxes from us; and that the Provincial Government would collect another $5,000,000 in taxes from us - a total this current year of $21,252,500. It sounds like a lot of money, until you remember that it is about $8,000,000 less than we are actually paying in taxes this year.


But if we were in Confederation this current year, besides paying $8,000,000 less in taxes, our cost of living would be much lower than it is, and we would be facing the future with much greater confidence than we actually do feel today.


If we were in Confederation today, we would feel that whatever happens Newfoundland would not go down unless the whole Dominion of Canada goes down; that so long as that great nation survived and prospered we would survive arid prosper, too.


Source : Joseph R. SMALLWOOD, Letter to the Editor, The Daily News , March 9, 1946.


© 2004 Claude Bélanger, Marianopolis College