perspective, the ideal taxes are user fees, such as those that would be
charged if private firms provided the government services.
The benefit principle is the basis for the excise tax on gasoline, since
gasoline usage is closely related to the services obtained from using
public roads. The benefit principle may also explain high taxes on
cigarettes, since smokers tend to require more healthcare services that, in
Canada, are mostly provided by government. Although there are other
examples, especially at the local level, the benefit principle has
historically played only a minor role in the design of the Canadian tax
system. But its use is growing in Canada and elsewhere as governments
seek new ways to finance many of their expenditures. For example, two
decades ago Statistics Canada supplied data for free to anybody who
wanted it. Now, Statistics Canada charges on a “cost recovery basis” for
any data other than the most general data, which it makes available on its
website. So instead of covering the cost of producing the data from the
general taxpayer, some costs are recovered from those who use it. The
benefit principle can be easily applied to some government-provided
goods and services, such as water use, garbage pick-up and disposal, and
use of local recreation facilities. But it is difficult to see how the benefit
principle could be applied to many of the most important categories of
government spending. Who gets how much benefit from national
defence, interest on the public debt, the judicial system, or environmental
protection?
How Progressive Is the Canadian Tax