Think back ten years and you may recall some slight agitation on the part of Canadians about a new tax that was about to be imposed. The Goods and Services Tax (known by a variety of other less flattering names in bars and on bumper stickers,) was a replacement for the 13.5 percent Manufacturer's Tax that Canadians paid but never saw, a tax also less widely applied.

When the GST was imposed in 1991, then federal Finance Minister Michael Wilson promised that "we will ensure that all GST revenues are allocated solely to the effort to bring the public debt under control."

Nice thought. Didn't happen. Instead, after the GST was introduced, spending continued to grow and was only finally pruned in the mid-1990s. Meanwhile, Canada's debt hit $583 billion in 1997 and will, by March 2001, only have receded to $570 billion.

But what if that budget promise had been met What if GST revenues (and the growth in GST revenues) had been reserved first for getting to a balanced budget, and then paying down the debt as opposed to new spending For starters, the growth in the national debt would have been slower and would have peaked at $492 billion in 1996, and then would have declined to an estimated $384 billion by the end of this budget year. Instead of having a national debt that equaled 57 per cent of our economy, Canada's obligation to bondholders would be only 38.5 per cent of our annual output.

So what those numbers mean to our federal budgets Annual interest payments on the debt would be smaller (under the they-kept-the-GST-promise-scenario.) Federal taxes could have been lower. For example, Ottawa will collect $75.9 billion in personal income tax and use $42 billion of that to pay interest on the federal debt. 55% of your federal income tax burden exists because of past borrow-and-spend policies of successive governments. Had the debt and interest payments been smaller, less of your tax money would now be required.

Given that debt reduction and tax relief are both necessary though, and given the existence of both the GST and income taxes, which one should get the priority for reductions The answer is quite clear if one looks back a few decades. Back in 1961, Personal Income Tax as a percentage of GDP was 5.1%. In 1997, PIT equaled 13.3%. General sales taxes (not including liquor, tobacco, and fuel taxes) equaled 3.3% of GDP in 1961 and 5.0% in 1997. (Corporate taxes rose from 2.9% of GDP in 1961 to 3.1% in 1997.)

Put another way, most taxes rose during the last four decades. Out of the ones that rose, personal income taxes jumped the most, especially during the last two decades. While the GST appeared to be a new tax, it was in fact a replacement, albeit one that allowed governments to collect revenue from sectors previously untouched.

Meanwhile, on the income tax side, federal and provincial governments bumped basic rates and added middle and high-income surtaxes, and also used inflation to push taxpayers into higher brackets (bracket creep). Bracket creep was killed in February, but before it died it extracted $90 billion in extra taxes over a decade, and has left many Canadians permanently in higher tax brackets.

Should Ottawa cut the General Goods and Services tax or income taxes Given the historical rise in income tax burdens (never mind the competitive argument for lower income taxes,) it is income tax rates that should be cut.