Yes, income tax is constitutional

The National Post profiles an Ontario man and his quixotic battle with the Canada Revenue Agency:

Jack Klundert, a Windsor optometrist, has been on an arduous, 20-year protest against paying income tax, claiming it is his “moral obligation” to fight against its unconstitutional collection. The Canada Revenue Agency, and every court in the land, has so far disagreed.

If the tax agency is seen as unyielding, however, the same might be said of Mr. Klundert.

His latest plan to avoid turning over more than $1-million has been rejected, a bid to use money seized from his bank accounts to pay off his criminal fine for tax evasion rather than his tax bill. The government said doing that would allow him to declare bankruptcy and avoid the civil obligation of paying his tax debt.

Last week, the Federal Court of Canada sided with the government but Mr. Klundert remains unbowed and is still fighting the tax assessment in the Tax Court of Canada.

After multiple trials for tax evasion — with a jury twice acquitting him — several appeals, a criminal conviction, jail time, lawsuits and more, he continues to press his anti-tax crusade.


Up until 1993, Mr. Klundert properly filed and paid his income tax each year.

Then he read a pamphlet questioning the constitutional validity of the federal government enforcing taxation. Soon after, he attended a lecture in Chatham, Ont., by Murray Gauvreau, an Alberta anti-tax crusader who was popular in the 1990s when he went on a cross-country speaking tour spreading his anti-tax message.

Mr. Klundert then read Canada’s tax laws, studied the British North America Act and became convinced it was unconstitutional for the federal government to impose and collect personal income tax.

“I studied it for quite a while. When they wrote the BNA, they did not want direct taxation coming under the laws of the federal government, but under provincial governments,” Mr. Klundert said.

The Canada Revenue Agency, unsurprisingly, says Klundert is wrong.  But even the anti-tax Canadian Taxpayers Federation rejects the argument – which, interestingly, springs from a case involving Halifax’s landmark Lord Nelson Hotel:

Sections 91 and 92 of the Constitution Act, 1867 (formerly called the British North America Act) list subject matters over which the federal and provincial governments can exercise legislative jurisdiction. Section 91 sets out the federal powers; section 92 the provincial powers. Each level of government is stated to have exclusive jurisdiction over its own particular subject matters, which means the other level is excluded from legislating on those subjects. Since each level of government imposes taxes, it is not surprising that under the Constitution each is given a specific taxing power. The federal taxing power is contained in clause 3 of Section 91 which reads, “The raising of money by any mode or system of taxation.” One would find it difficult to devise a comparable set of words which could convey any clearer the intention to make the taxing power of the federal government all embracing in scope.

The provincial taxing power, on the other hand, is contained in clause 2 of Section 92 which reads, “Direct taxation within the Province in order to the raising of a revenue for provincial purposes.”

The argument saying the federal income tax is illegal goes something like this. Since each level of government is afforded under the Constitution exclusive jurisdiction on the subject matter listed to the exclusion of the other (true) and since income tax is direct taxation (true), then only the provinces can impose income tax (false).

The fallacy lies in not reading fully what the provincial taxing powers says. It does not say the provinces have the exclusive right to impose direct taxation. What it does say is that the provinces have exclusive right to impose direct taxation to raise “revenue for provincial purposes.” By contrast, when the federal government imposes an income tax it does so for federal purposes (obviously) and therefore it cannot be said to be infringing upon the provincial taxing power. The provincial taxing power, i.e. direct taxation for provincial purposes, must be looked upon as carving out a small chunk of the ample federal taxing power described above. It means the federal government cannot impose direct taxation (including income tax) for “provincial purposes”, but why would it want to?


This leads us to a consideration of the Lord Nelson Hotel case. What did it really decide and how is it that over the years it has become the Holy Grail of those who claim that federal income tax is unconstitutional?

The case concerns an attempt by the government of Nova Scotia to provide by enabling legislation the delegation of certain of its exclusive legislative powers to Parliament in Ottawa and also to provide Ottawa the power to delegate certain of its powers to the legislature of Nova Scotia. The Bill was passed in the Nova Scotia legislature in 1947 and because doubts immediately arose as to its constitutionality it was referred to the courts for an opinion. Both the Supreme Court of Nova Scotia en banc and the Supreme Court of Canada found the legislation to be unconstitutional on the grounds that one level of government could not delegate its power to legislate on matters within its jurisdiction to the other level of government and vice versa. The subject matters over which Nova Scotia sought inter-government delegation dealt with employment in industries, works and undertakings. The legislation also attempted to delegate certain indirect taxation power to Nova Scotia.

Those claiming federal income taxes are illegal state that this case decided that one level of government cannot delegate its law-making power to the other (true). They then take a giant leap by declaring that since only the provincial government can impose direct taxes (false because of reasons previously cited) it is unconstitutional for the federal government to impose the ultimate direct tax — income tax (false).

The Lord Nelson Case is one of the leading authorities on the question of interdelegation of legislative powers between the two levels of government, but it has absolutely no application to the question of whether the federal government can impose income tax. [emphasis added]

Complain about your federal income tax all you want – heck, I’ll join you! – but you have to pay it.  Period.