Making Governments Compete for Our Dollars
By having the option of giving tax dollars directly to our local
hospitals, schools and community groups, we would not only cut out
government as a “middleman,” we would develop a genuine incentive for
governments to “earn” our tax dollars.
One criticism the political left often makes of big business is that it tends towards monopoly. Small
businesses compete with one another, keeping prices low and services high. But as businesses
increase in size to take advantage of economies of scale, competition becomes less and less.
Oversight mechanisms—anti-collusion laws and review bodies of various kinds—exist to help
guarantee that the public interest is served, but almost everyone agrees that these mechanisms are
not as efficient as direct competition.
Although it is often overlooked, this same point can be made about governments.
Governments form the largest monopolies in the world today. Not only do they have sole control
over their jurisdictions, they also have the legal right and physical force to back up their
monopolies. For anyone concerned about the evils of monopolies, governments represent the
How do we limit the effects of government monopoly? One way is by electing, not just a
government, but an official opposition as well. Another is by keeping the legislative, executive,
judicial and monarchical functions of government separate from each other. Yet another is by
splitting government into several separate levels: federal, provincial and municipal.
But as Canadians know all too well, these checks and balances are all too often ineffective.
The federal Liberals have just recently passed an election funding law that outlaws all significant
political donations from corporations. Instead, tax dollars are to be distributed to political parties in
proportion to their placing in the last election, thus almost guaranteeing the winning party’s
political dominance into the foreseeable future. In much the same spirit, governments over the past
decade at both the provincial and federal levels have attempted several times to outlaw third-party
election advertising, making it more and more difficult for public opposition to governments to be
expressed at election time.
Power, once concentrated, always tends to further concentrate itself. This by itself should
serve as a warning that governments—especially large and powerful governments—have the
potential to become unrepresentative and, at times, corrupt.
Even more significant is that, as governments have expanded their role during the 20th
century, they have done so without sufficient regard for future generations. Two unwelcome
consequences are especially worth emphasizing.
The first concerns finances. By amassing huge deficits and debts, governments have placed
a large and intractable tax burden upon future generations.
It is important to recognize that in no other case would we think it morally permissible to
tax people without their permission. The slogan “No Taxation without representation” even served
as the rallying cry for the American Revolution during the 18th century.
Against this fundamental principle of democracy is the simple fact that it is always easier
to take money from those who have no voice than from those who do. By living beyond their
means, large governments not only take money from people who won’t directly benefit from its
expenditure, they also take money from those who have no say in how this money is to be spent.
When Adam Smith wrote The Wealth of Nations in 1776, he identified four things
governments were to be responsible for: defence, the judiciary and public safety, education, and
public works. Today, in contrast, governments are temped to become responsible for everything
from relieving poverty to advancing regional development.
In response to this temptation, Canadians need to insist, not only that all governments not
slide back into deficits, but that they also all adopt balanced-budget legislation.
The second unwelcome consequence is that, as government jurisdictions continue to grow,
other institutions—the family, businesses, religious institutions, community charities—all become
less and less significant. The growth of what Margaret Thatcher used to call “the nanny state”
means that, psychologically, we and our children have become more and more dependant upon
government. Like any large business, large government means that there will be economies of
scale, but it also means the existence of greater inefficiencies and less individual initiative.
How can these problems be resolved? One way is to deny governments a monopoly role in
health care, education, infrastructure and the like. By continuing to allow the private sector to
participate in these areas, either on their own or through public/private partnerships, the burden of
government to be all things to all people is reduced.
But an even more promising response would be to rework Canada’s policies regarding
charities, making charitable donations 100% deductible against individual income tax.
By having the option of giving tax dollars directly to our local hospitals, schools and
community groups, we would not only cut out government as a “middleman,” we would develop a
genuine incentive for governments to “earn” our tax dollars. Under this plan, the amount of money
being spent in the public sphere would remain constant, it’s just that, as in any other competitive
environment, governments will need to convince taxpayers that they can do a better job of feeding
the hungry and healing the sick than can their competitors.
To guarantee the viability of government ministries, such as defence, that really must
remain the exclusive jurisdiction of government, we may want to cap the amount of discretionary
taxation that any individual taxpayer can give to other sources at, say, 50%. In addition, in order
that services not be disrupted, this change could be phased in gradually over many years.
But for anyone concerned about government monopolies, this is the kind of tax change that
could not only rid Canada of government inefficiency. It would also mean that Canadians would
have real power in determining exactly how and where their tax dollars were to be spent.
Victoria Times Colonist
Andrew Irvine, “Making Governments Compete for Our Dollars,” Victoria Times Colonist, 14
July 2003, A7.