RELATIONS IN CANADA
THE revenue and expenditures on current account of the provinces on the eve of federation are shown in Tables1 and 2, which have been constructed from the comparative figures compiled for the Royal Commission on Dominion- Provincial Relations. The figures of gross revenue and expenditure of the Post Office, which were included in the statistics used by the Commission, have been omitted here, and only the net profit or loss included. This is not the only case of duplication, of course; most of the revenue from the sale of commodities and services is balanced by payments of debt charges--the Nova Scotia and New Brunswick railways earned only about a tenth and one-seventh of their respective interest charges in the eight years 1859-66--but it is only in the case of the Post Office that the operating costs and gross revenue were entered without deduction one from the other.
The outstanding features of the revenue systems of the provinces at this date are the heavy reliance on customs and excise duties and the almost complete absence of direct taxation. Although all the provinces had experienced budget deficits in one or more of the years between 1860 and 1867, none of them had imposed a direct tax on incomes, to which there were strong political objections, and only two, British Columbia and Prince Edward Island, had imposed a land tax. That opposition to direct taxation was deeply rooted was made clear in the negotiations and debates on the financial settlement. 'Our friends in Lower Canada . . .', declared George Brown in the course of these debates, 'have a constitutional disinclination to direct taxation. . . .' The objection, however,