Taxation is one of the oldest functions of government. It is also one of the least personalized.
A student beginning university, a couple raising young children, a worker approaching retirement and a retiree in their seventies may earn similar incomes while requiring very different things from the government. Yet income taxation generally treats their contributions according to income and deductions rather than the public services they are likely to need at different stages of life.
That arrangement developed for good reasons. Taxes allow societies to share risks and finance services that no individual could reasonably purchase alone but modern governments possess administrative capabilities that did not exist when today’s tax systems were designed.
That raises a question: Could part of the tax system evolve from a single pool of social spending into a series of flexible social-service subscriptions, allowing citizens to align part of their contributions with the services they need while preserving a universal public system underneath them?
From Grain to Income Tax
There is no single identifiable moment when taxation was invented. Taxes existed before modern money and long before income could be measured electronically. Ancient governments collected grain, animals, labour and other goods from the populations they governed. Canadian government educational material on tax history similarly describes early taxation as payments made in products such as grain, fish, minerals and animals.
Surviving Egyptian records demonstrate how developed these systems became. A taxation papyrus from the reign of Ramesses XI, dating to approximately 1106–1077 BCE, records government officials collecting grain from communities in Upper Egypt and transporting it to state granaries.
Early taxation was therefore not simply a percentage removed from someone’s paycheque. It was a mechanism through which governments obtained the resources needed to maintain the state, support rulers and officials, construct infrastructure, maintain armies and perform public works.
As economies grew more sophisticated, so did taxation. One important transition came with income taxes. Britain introduced an income tax in 1799 under Prime Minister William Pitt to help finance the war against Napoleonic France. It was already graduated: income below £60 was exempt, while rates increased with income until reaching 10% above £200.
Canada’s federal income tax arrived much later. For roughly the first fifty years after Confederation, Ottawa relied primarily on customs and excise taxes. The First World War changed the government’s financial requirements, and the federal Income War Tax Act was introduced in 1917.
It was supposed to be temporary, it was not. By 1948, the wartime legislation had been replaced with the permanent Income Tax Act. The change represented something larger than a new way of collecting revenue. The purpose of taxation itself was changing.
From Financing Government to Financing Society
For much of history, taxation primarily funded the operation of the state. Modern governments increasingly use taxation to fund social insurance as well. The Great Depression accelerated that development.
In the United States, the Social Security Act of 1935 established national old-age insurance, unemployment insurance and several forms of public assistance. The Depression had demonstrated that local governments, charities and households could not independently absorb an economic shock of that scale.
Canada underwent a similar transition. A constitutional amendment in 1940 gave Parliament authority over unemployment insurance, and Canada’s federal Unemployment Insurance program came into effect in 1941.
Social insurance expanded further during the twentieth century. Pensions, unemployment benefits, publicly funded healthcare, education, social assistance and numerous other services increasingly became collective responsibilities.
Taxation had evolved from primarily financing government itself toward financing a much broader system of shared economic and social protection. That development required increasingly sophisticated tax systems.
The Modern Income Tax
Canada today uses progressive income taxation. For 2026, federal personal income-tax rates range from 14% on the first $58,523 of taxable income to 33% on taxable income above $258,482. Provincial or territorial income taxes are added to those federal rates.
Contrary to the common description of “tax season,” most employment income tax is not actually collected once a year. Employers deduct income tax, Canada Pension Plan contributions and Employment Insurance premiums from employees throughout the year and remit those amounts to government. The annual tax return reconciles what was already paid with what the individual ultimately owes.
Canada is not unusual in using progressive taxation. The United States has seven federal marginal income-tax rates in 2026, ranging from 10% to 37%, with state taxation added in many jurisdictions.
China also operates a progressive individual income-tax system. Comprehensive personal income is subject to rates ranging from 3% to 45%, while some other types of income are treated separately.
The differences between modern countries are therefore less about whether progressive taxation exists and more about what is taxed, which deductions are available, which level of government collects the money and what governments ultimately do with the revenue.
The Problem With the General Pool
In Canada, taxpayers do not normally purchase specific government services with particular portions of their income tax.
Federal public money flows through the Consolidated Revenue Fund. Parliament then authorizes expenditures through the budget and appropriations process. The federal government also transfers substantial amounts to provinces through programs such as the Canada Health Transfer and Canada Social Transfer.
Pooling money has major advantages. A person does not know whether they will develop cancer next year. A family cannot know whether someone will become disabled. A worker cannot perfectly predict unemployment. A community cannot know when it will need emergency infrastructure or disaster assistance.
Pooling allows everyone to contribute while only those who require a particular service at a particular moment need to use it, but the system also creates distance between taxation and service delivery.
Citizens know approximately how much tax they pay but they have considerably less ability to identify what their individual contribution purchases or communicate which public services they value most.
The result is a political system in which governments attempt to infer millions of individual priorities through elections held every few years. There may now be room between those two extremes.
The Subscription Model
A subscription-based tax system would not eliminate ordinary taxation. Instead, it would divide taxation into two broad layers.
The first would remain compulsory taxes that would finance services that depend upon universal participation or serve society collectively: basic healthcare, emergency services, defence, courts, essential infrastructure, primary and secondary education, public health, basic income assistance, debt obligations and other services that cannot reasonably operate as individual subscriptions.
The second layer would contain social-service baskets. These would allow citizens to direct a defined portion of their income-based contributions toward services that correspond more closely with their current stage of life.
A young adult entering university might select an education and skills basket. Parents could move toward a family and childcare basket. Someone facing an unstable industry could select stronger employment-transition protection. Older workers might gradually shift contributions toward retirement, home-support and elder-care services.
The overall system would remain progressive. A person earning substantially more would still contribute more. What changes is that a portion of the contribution becomes more directly connected to the person’s expected use of government services.
The tax system begins functioning partly as social insurance chosen across a lifetime rather than simply revenue collected each year.
Healthcare Shows Where the Limit Must Be
Healthcare also demonstrates why the subscription principle cannot apply to everything.
Allowing healthy people to completely opt out of healthcare taxation would initially appear attractive. Someone in their twenties might prefer lower taxes and agree to pay if they later became sick.
The problem is that healthcare insurance depends upon precisely the opposite behaviour. Healthy people contribute while their costs are low so that resources are available for people whose costs are high.
The World Health Organization identifies broad risk pooling as a core principle of health financing and specifically recommends larger, more diverse and compulsory pools rather than fragmented voluntary ones.
Canada’s current system is similarly built around universality. Eligible residents receive publicly funded medically necessary hospital and physician services through provincial or territorial systems funded largely through taxation.
Core healthcare should therefore remain inside the mandatory tax base but healthcare can still contain elective components. Supplemental services, expanded home care, preventative programs or benefits outside the universal core could form part of broader life-stage packages without undermining catastrophic medical coverage.
That distinction is crucial. Subscription taxation should personalize services whose demand can reasonably be anticipated. It should not dismantle the risk pools that exist specifically because individual needs cannot be predicted.
Solving the Free-Rider Problem
Education presents the opposite problem.
A university student might require substantial public support while earning little income. Ten years later, that same person may earn considerably more because of the education society helped finance. Charging the largest education contribution while the student has the least income makes little sense.
Allowing the graduate to immediately leave the education system without contributing back creates the opposite problem. A subscription model could spread the obligation across time.
Someone selecting a post-secondary education basket could receive greater assistance while studying in exchange for a small, income-linked contribution after graduation once their earnings exceed a predetermined threshold.
The individual would not be repaying the exact cost of their own degree. They would be contributing to the next generation using the greater earning capacity that education was partly intended to create.
The subscription would therefore have two stages: receive support when the service is needed; contribute back when the capacity to pay is greater. This principle could extend to other predictable life transitions. The contribution does not necessarily have to occur at exactly the same time as the benefit.
Tax Baskets
The system would quickly become impossible to understand if citizens had to individually select among hundreds of government programs. The solution is to group complementary services together.
An Education and Skills Basket could combine post-secondary assistance, apprenticeships, retraining and adult education. A Family Basket could incorporate childcare, parental supports and related family programs.
An Employment and Transition Basket could provide enhanced unemployment protection, retraining and job-placement support. A Retirement and Aging Basket could gradually emphasize retirement support, home care and services associated with aging.
These would not replace universal government. They would create a more adaptable layer above it. Citizens could move between baskets at defined intervals rather than continuously changing their contributions whenever they expected to need a service.
Waiting periods, minimum participation periods and future contribution requirements would prevent people from simply subscribing immediately before receiving an expensive benefit and cancelling afterward.
The Danger of Too Much Choice
There is another problem, governments need flexibility.
If every dollar collected for education could only be spent on education, governments could eventually have excess money in one program while another essential service faced a shortage.
This problem is well known in public finance as earmarking. Earmarking can make taxation easier to understand and may strengthen the perceived relationship between contribution and benefit. But extensive earmarking can also create rigid budgets in which revenue allocated to one service no longer reflects what that service actually needs.
A subscription system therefore should not allocate the entire tax burden. Only a limited portion should become citizen-directed. The remainder must stay flexible enough for elected governments to respond to recessions, disasters, demographic changes and unexpected national priorities.
This creates a compromise between two principles: governments require flexibility, but citizens benefit from greater visibility and control over how some of their contributions are used.
A New Form of Democratic Feedback
Subscription taxation could also create something governments currently struggle to obtain: continuous information about public priorities.
An election forces citizens to select between entire political platforms. A voter may agree with one party on housing, another on healthcare and neither on taxation. That makes election results a poor measurement of support for individual policies. Service baskets could provide an additional source of information.
If participation in an education basket increased rapidly in one region, governments would have direct evidence of changing demand. If rural residents consistently selected different service priorities than residents of Toronto, public policy could reflect that distinction without assuming either community represented the entire province.
This concept already has a limited parallel in participatory budgeting. OECD research describes systems in which citizens directly influence the allocation of a portion of public spending, and its 2026 work on public budgeting argues that clearer fiscal information and meaningful citizen engagement can strengthen both legitimacy and public understanding of difficult budget decisions.
A subscription system would take that principle further, it would make citizen preferences part of the fiscal system itself.
Measure the Results
More direct participation should also create more direct accountability. Every basket could have a public scorecard.
An education basket could report graduation rates, program costs, employment after training and average waiting times.
An employment basket could report how quickly recipients returned to employment and how their earnings changed.
A family basket could track childcare availability, costs and service capacity.
Politicians would still determine policy but their performance could increasingly be judged against measurable results attached to the resources citizens had allocated. That creates a different relationship between taxation and elections.
The debate becomes less about whether a government “supports education” or “cares about families” and more about what the government accomplished with the resources entrusted to those programs.
The Next Evolution of Taxation
Taxation has never been static. Ancient states collected grain and labour. Industrial governments developed customs and excise systems. Wars produced modern income taxes.
The Great Depression and twentieth-century welfare state helped transform taxation into a mechanism for social insurance.
Modern progressive taxation then became capable of collecting different amounts from millions of citizens according to increasingly detailed financial circumstances.
The next development does not necessarily need to be another tax. It could be a change in the relationship between the taxpayer and the services taxes finance.
Modern governments now possess the computational capacity to maintain individual tax accounts, administer complicated credits and benefits, track contributions over decades and communicate directly with citizens.
That makes a system possible that would have been administratively unrealistic for previous generations but personalization cannot replace solidarity.
Healthcare demonstrates why some risks must remain collectively financed. National infrastructure, courts, defence, emergency response and basic social protection benefit society regardless of whether an individual expects to use them this year. Those services belong in the common pool.
Beyond that foundation, however, there is room to experiment. A portion of income taxation could become flexible. Citizens could move between broad service baskets as their lives change. Benefits received early in life could create modest contribution obligations later when incomes rise.
Regional subscription patterns could help governments identify local needs and each basket could give taxpayers a much clearer view of what their money is intended to accomplish.
The purpose would not be to turn the government into Netflix. It would be to recognize something the existing system largely ignores: people’s relationship with government changes throughout their lives, while the tax system remains comparatively static.
A young student, a new parent, an unemployed worker and a retiree do not require identical forms of social support. They can still contribute to the same society without requiring every portion of that contribution to be structured in exactly the same way.
The history of taxation has largely been a history of governments becoming more capable of measuring what citizens can contribute. The next step may be learning to measure more carefully what citizens need in return.
Political Solutions 