What are taxes? Let's start with a basic definition: "a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions". The government levies these taxes and in return provides services to the people like military protection, court systems, road maintenance, emergency rescue and so on.

We get taxed primarily from 3 different sources, the Federal, Provincial and Municipal governments.

The Federal government taxes your income and your transaction (more on this later) to provide you with services on the larger federal level. For instance it makes the most sense that Canada have one army instead of the provinces each having their own so the Federal government taxes for that. It makes sense because of the scale of operations and the benefit delivered. In this case the cost of one large army is more affordable than several smaller ones and on top of that we all equally benefit from the military's protection.

The Provincial government taxes your income and your transactions (yep more on this later too) to provide you with services on the slightly smaller provincial level. For instance it makes the most sense that the Province of BC develop it's own provincial highways opposed to the Federal government because people from BC will access them the most and because there is no benefit to scale of operation in this case.

Lastly the Municipal government taxes your property (more on this later) to provide you with services on the most local level. For instance it makes the most sense that the your municipality/city provide fire rescue services for your city. The local government is most in-tune with this need and the people most impacted by this service are the local residents. Picture it this way. If a city in another province was notorious for making straw homes and those homes often caught fire. It makes more sense that the residents of that city burden the cost of their decisions as it creates the right incentive for that city to make changes.

Taxes and fees pay for all government provided services. This covers a large range of services from Health Care to Public Libraries. As a taxpayer and a voter it is important to know how your tax-dollars are being spent by the people we've entrusted with those dollars and how you can access those services. We'll discuss how to access these services/benefits in a future lecture in more detail. In this section we will talk about the services that tax-dollars typically provide, the legal obligations that accompany paying taxes, and small look at the economic implications of taxes.