In Chapter 16 , we saw some of the reasons the scope of government is
so extensive. Taxation is needed to finance government expenditures and
also plays a policy role in its own right. Both taxes and government
expenditure affect the distribution of income—some people are taxed
more than others and some people benefit more from government
programs than others. Moreover, taxation and public expenditure
influence the allocation of resources. In some cases, government policy is
carefully designed with such effects in mind; in other cases, the effects are
unintended by-products of policies pursued for other purposes.
In this chapter, we examine the various sources of government tax
revenues and the various types of government expenditures. We examine
how to evaluate a tax system, emphasizing the distinction between equity
and efficiency. The types of public expenditures in Canada are examined
along with the important concept of fiscal federalism. Finally, we briefly
discuss Canada’s main social programs, which account for approximately
two-thirds of the total spending of governments in this country.