STFC Committee Meeting

SUB-COMMITTEE ON TAX EQUITY FOR CANADIAN FAMILIES WITH DEPENDENT CHILDREN OF THE STANDING COMMITTEE ON FINANCE

SOUS-COMITÉ SUR L'ÉQUITÉ FISCALE POUR LES FAMILLES CANADIENNES AVEC DES ENFANTS À CHARGE DU COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, May 14, 1999

• 0956

[Translation]

The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Good morning. Pursuant to the motion adopted by the Standing Committee on Finance, dated March 17, 1999, the Sub- Committee resumes its study on Tax Fairness for Canadian Families with Dependent Children.

This morning we are pleased to welcome two people who will make individual presentations. They are Ms. Helen Lambrinakos and Mr. Gérard Croteau.

Usually witnesses have from five to ten minutes to make their presentations and state their point of view. This leaves enough time for the MPs to ask questions and receive your replies.

On their behalf, and personally, I would like to welcome you to this committee. We started our hearings Monday in Vancouver. We then travelled to Calgary, Toronto and Halifax, and today we are in Montreal, in order to prepare a report which will be tabled within two weeks.

Thank you for having agreed to appear before us.

I shall ask Ms. Lambrinakos to start her presentation.

[English]

Ms. Helen Lambrinakos (Individual Presentation): Good morning. My name is Helen Lambrinakos and I am a stay-at-home mother with four daughters aged 5, 7, 10, and 12 years old. I started to work at age 14 and worked part-time through my years in high school, CGEP, and university. Upon graduation from university, I worked full-time until two weeks before the birth of my first child, approximately four and one-half years.

The reason I chose to stay home with my child was because I am a perfectionist and I did not believe anyone else could raise my child as well as I could. Children are a big commitment and they deserve the best we have to offer them.

My children all have a great sense of morals and values. They are respectful of others and are very responsible despite their young ages. They are very conscientious and have been on the honour list at their elementary school every year. They are successful, competitive figure skaters, and the two oldest are competitive classical ballet and folk dancers and possess brown belts in Karate. All four are excellent swimmers.

Aside from devoting my time to my children, I also volunteer a great many hours—

The Chairman: Ms. Lambrinakos, could you speak a little bit slower because we have interpreters?

Ms. Helen Lambrinakos: I'm sorry.

The Chairman: It's very difficult for them if you speak too fast.

Ms. Helen Lambrinakos: Actually, I usually talk faster than that.

The Chairman: They have to come up for air from time to time.

Ms. Helen Lambrinakos: I thought I had slowed down. Okay.

The Chairman: Thank you.

Ms. Helen Lambrinakos: Aside from devoting my time to my children, I also volunteer a great many hours every week to various non-profit organizations. I am the president of the Brossard Figure Skating Club, co-president of the annual ice show, president of Les Jardins de Brossard nursery school, and a member of the parents committee of my daughter's elementary school. I'm also the committee's voting delegate to the central school committee.

I find it very offensive that in the eyes of the revenue department of the Government of Canada I am considered a non-working parent. Let there be no mistake: I work. I just don't get paid for it. Hence, my work has absolutely no value, it seems, to the Canadian government, and, by extension, the message from my government is that my work is not worth anything. It is important to note that I am not passing judgment on working parents, just on the inequity of the way the revenue department treats dual-income families versus single-income families.

It is an arduous task to instil values, morals, and self-esteem in children. Someone who is there only at supper time and on weekends cannot possibly do this to the same extent as a parent who is there all the time. I know that my children could never have accomplished all they have had they been placed in day care.

• 1000

The principal, school secretary, and numerous teachers have commented to me about how responsible and polite my girls are. My youngest daughter, at the age of three, once chastized my mother for yelling at me by saying “You should treat others like you want them to treat you, and I don't think you would want my mommy yelling at you, so stop it and say you're sorry”. This seems like such a simple statement, but I challenge you to find me a three-year-old who has spent much of his or her young life in day care centres who has such a clear sense of values.

Our children are tomorrow's society. Why do you think the rate of crimes committed by young offenders has risen so drastically from the 1940s and 1950s? Ironically, the rate of working mothers has also increased as well. I am not trying to pin all of society's woes on working mothers. Of course, many other factors come into play, neglect and abuse being among them. You cannot, however, downplay the significance of stay-at-home parents. The sense of security these babies have, knowing that mommy or daddy is always there for them, is irreplaceable. As they get older, the knowledge that mom or dad is very involved in their lives allows the lines of communication to remain open during their critical adolescent years.

I know that not all women want to stay home and I maintain that not all women should. The government, however, should be making it easier for parents who are willing to sacrifice that second income to undertake this arduous task, not punishing them with fewer tax breaks than dual-income families.

My five-year-old is in nursery school. My husband cannot claim the fees we pay for this, but the working mothers whose children attend this school four mornings a week can indeed claim the fees and the babysitter's fees as well. Why is it that a dual-income family's contribution to society is considered to be more or better than a single-income family's? I know what the answer is. It is money. They supposedly have more expenses. By stating that, though, the inference is that stay-at-home parents provide no value because they have no income. If this is truly what we believe, then the work women have done for centuries has had absolutely no value.

Do you really believe day care is the answer to all our woes? Just try to imagine a society where every parent is in the job market and everyone sends his or her children to day care. The chaos this would create is unimaginable. The unemployment rate would skyrocket and the shortage of day care spaces would be intolerable. I shudder to think how this would affect the ongoing breakdown of the family and the effect on our society as a whole.

Why does the government continue to encourage dual-income families by providing them with tax breaks that single-income families do not have access to? Why not treat them both equally and let each individual family decide what is best for them? By continuing this discrimination, the government is sending out the message that a stay-at-home parent is not as productive to society as a working parent is. That message is unfair, offensive, and downright wrong.

As I mentioned before, I am president and a member of several organizations. Most of the parents involved in these committees are indeed stay-at-home parents for obvious reasons. They have the availability because the time they give to these organizations is not the only time they have to spend with their children. In other words, because they do not work outside the home, they have time for both the children and their volunteer work.

Stop and think where our society would be without these volunteers. Volunteers run most sports organizations, preschool activities, and school committees. Hospitals, nursing homes, charitable organizations, food banks, and so on all rely on volunteers to allow them to function. None of these people get paid, yet they provide an invaluable service to society. Surely everyone would agree that this work is indeed worth something.

This issue involves more than a simple matter of tax credits. It concerns the message that the Canadian government sends out concerning our society and what is to be valued. The message for many years has simply been that stay-at-home parents are not worth very much. They have been considered an unnecessary luxury, much like a fancy second car. If you choose to buy one, good for you, but you're not about to get a tax break for it.

The decision to stay at home is not a selfish one; rather, quite the opposite. I could own a much larger home and travel more often if I went out to work. But my husband and I have chosen to sacrifice these things for something far less tangible. We have made the decision to invest my time in our children rather than in the workforce. Yes, I have less money, but I have acquired something money cannot buy. I have well-adjusted, responsible, value-conscious children who have great confidence in themselves and in their future.

• 1005

I am very proud of my daughters and I am very aware that many others in my community realize what wonderful, decent, bright little girls they are. I believe I deserve the same treatment as a mother who has made the decision to invest her time in a job or career.

Businesses often receive tax breaks because they provide employment and are thus an integral productive part of our society. Stay-at-home parents also help provide employment, because when they leave the workforce it provides jobs for other people, thereby reducing the unemployment rate. Stay-at-home parents are an integral productive part of our society, as we are responsible for raising our children, who are in fact Canada's future. Surely this is worth something.

You must keep in mind that a family is a family. Why should children be penalized because a parent cares enough to stay home to care for them? Ultimately, less after-tax family income does penalize the children.

Day care was never an option for me. That would have been like dropping off the laundry at the cleaners in the morning and picking it up at 6 p.m. My children deserve better, and we were willing to sacrifice all the extras to allow me to stay home.

The Canadian government should not be discriminating against these single-income families. By treating single-income families the same as dual-income families, you do not take anything away from the dual-income families. You are, however, acknowledging that these parents provide an invaluable service and are indeed a very important and integral part of Canadian society.

This whole issue reminds me of the time when women were demanding the right to vote. Giving women the right to vote did not affect the men's right to vote, though many protested against this change. In much the same way, treating single- and dual-income families equally does no harm to the latter, but rather puts them both on an equal footing.

I urge you to correct this discrimination and illustrate to our society as a whole that stay-at-home parents are indeed a necessary and precious part of Canadian life.

Thank you.

[Translation]

The Chairman: I shall now ask Mr. Croteau to make his presentation. Welcome to our committee.

Mr. Gérard Croteau (Individual Presentation): Thank you. First of all, I would like to thank you for having given me the opportunity to appear before this committee. I would like to point out that I am delighted to see that there are finally some people who realize that there is a problem, and who are willing to take remedial action.

I would like to take this opportunity to greet Mr. Serge Cardin, the MP for Sherbrooke, the city where I was educated.

[English]

George Baker is apparently not here. I would like to salute him, since I was in his riding for two years.

[Translation]

I presume that other people will present eloquent figures. Therefore, I shall simply provide an example to illustrate some problems that are linked to the situation. I think that my point of view is not very different from that of a large part of the Canadian population.

My wife has a bachelor's degree in education sciences. She worked in a day care until we had our first child. At that time, she decided to stop working in order to look after the children and raise them herself.

We knew very well at the outset that the fact of having children would increase our expenses and the fact that she was staying at home would limit our disposable income. However, other factors subsequently arose, and these have made the final situation much more disappointing than we expected at the outset.

At the present time, my wife has no income and cannot invest in an RRSP, has no pension fund and, particularly, has no benefits. It's as though she were involved in an activity that was only slightly more tolerated than simple possession of marijuana.

She is, for all practical purposes, treated like a third-class citizen. The unemployed are entitled to some consideration. There are statistics about them and programs for them. People on social assistance are covered by certain programs. There is no program for stay-at-home mothers. They are treated like non-beings, as in George Orwell's novel, 1984.

Furthermore, for the same total amount, we pay more tax than a similar family with two incomes. In my case, we are talking about approximately $3,600 for 1998. We also note that the federal income tax return puts children on almost the same footing as a boat or trailer.

We are not apologizing for the choices that we made, nor are we asking anyone to assume our responsibilities for us. However, a little common sense would be welcome.

In recent years, the federal tax deduction was transformed successively into a credit for children and then into a non-taxable allowance which then became indirectly proportional to the total family income. In other words, although great care was taken to avoid saying so openly, the tax deduction for children has been reduced.

• 1010

In our case, our last child was born one and a half years ago. A few months later, the family allowance was reduced. At the present time, this allowance for the period that finished at the end of May is $422 less than the additional tax that I pay because we have a single income instead of two.

This decrease in the allowance increases the frustration felt by single-income families. However, since the allowance was reduced in relation to total family income, why, in all fairness, would the same logic not apply to calculating the income tax, to lumping the income of both parents together, rather than treating them separately? According to what principle should we agree that total family income is used to limit family benefits, but is completely ignored in the calculation of allowable tax deductions? We can even ask ourselves the question: would this stand up before the courts if someone decided to challenge this procedure?

On the other hand, we can see that same-sex partners are on the verge of being entitled to lifetime survivor benefits. What advantage remains for the stay-at-home parent who cannot even contribute to a pension fund at the present time? What was the basic idea behind the principle of survivor benefits if not to meet the needs of widows who did not have their own savings?

In the old days, women had no choice and had to, for all practical purposes, stay at home. That has changed, and I think it's a very good thing. But the old choice should remain an option. It should not be something illegal, as it seems to be becoming. Why penalize this choice by making it so expensive?

To improve tax fairness for stay-at-home parents and at the same time, to improve the recognition of this traditional role, a certain number of measures could be examined. First of all, the income tax should be calculated on the total income of both parents rather than separately. There are possible alternatives: the stay- at-home parent could receive a real wage, for example, an amount comparable to what it would cost for day care. In one sense, rather than creating a network of subsidized day cares, why not simply make parents directly responsible for their children and let them decide what they want to do with the money, either arrange day care or look after the children themselves and use the money for other purposes?

Another solution would be to allow the working parent to pay the stay-at-home parent, as though he were paying for day care. My wife is a qualified educator. Why couldn't I pay her to look after our two young pre-school-age children who are presently at home? These solutions could be examined. They are food for thought.

However, there are some things that could be done quickly. The stay-at-home parent should be allowed to invest a minimum in a pension fund, for example, an RRSP, separately from the contributions allocated to the other spouse. Obviously, it is very likely that the spouse would make deposits to such an account. That would at least provide some recognition for the stay-at-home parent. The person's pension fund should not be penalized by tens of thousands of dollars if she ever decides to return to work.

Finally, the tax rules should give greater consideration to the importance of children in a sound society, and should not try to eliminate all financial compensation when income increases.

As I have said, these points are food for thought and discussion. I believe that my last two suggestions could be implemented quite quickly. I certainly hope that all of this will yield positive results, and I am eager to see the conclusions. Thank you very much.

The Chairman: Thank you, we will now move to questions.

Mr. Forseth, you have five minutes.

• 1015

[English]

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much. Thank you, Helen and Gérard. As an underlying pillar of what you're saying, the word “recognition” comes to mind. Among other things, you're really saying you want recognition, on behalf of society at large, of what is to be valued in our society for children, not necessarily looking at the parent activity, but focused on a concern for children.

You're asking us to find a way, separately from what is offered to other parents who have other situations, without necessarily taking away from what others have, but in addition to it. You're saying to give at least some recognition to the category of direct parent child care, as compared to purchased child care. I think we've heard that message from many, and we've had a variety of suggestions. That is something we will have to deal with as a committee.

One of the big problems is in the language around comparing one wage earner to two wage earners. If we remove children from the equation and just compare a one-earner family to a two-earner family, the income tax bill is different because of the progressive tax system. In a two-income family, one income earner may be paying taxes at the lowest rate of 17%, while the other one is paying at a higher rate, whereas if you combine them into one earner, it would be taxed at the highest rate. So you can't confuse the progressivity side of the tax system with all the elements around children. There are two elements to this question.

The larger issue of solving the front end of progressivity would be, say, a flat tax rate for everybody and maybe a high basic personal exemption. That would involve a fundamental reworking of the whole tax system, which may be beyond the ability of this committee at this time.

But to look more at the provisions, when we try to focus on issues for children themselves, I hear your message very clearly. It's not so much a dollar issue as a societal recognition one about the category you referred to as who you are as folks, and you don't see how you fit into the overall scheme of things. I hear you. Do you have any specific recommendations on how you could get that recognition from the tax system or the benefit system that is not currently there?

Maybe you could entertain that with just a brief comment. What would be even a token in getting at that recognition issue?

The Chairman: Mr. Croteau.

Mr. Gérard Croteau: I think the dollar matter is just one part of the problem—and a big one actually. It's not something you can just brush aside and say recognition is the only thing. Money is part of the problem and it's part of the recognition.

I wouldn't brush aside too happily the matter that we want to see progressivity and see differently parents who may not have children. I think there is something there. The fact still remains that whether or not we have children, we still have one family, and with one income, I am paying close to $2,000 more than another family that would have been in the same situation when those children were gone. After all, the family itself is important, and it's a good starting point.

I realize that—

[Translation]

The Chairman: Is the difference due to the children or to the system? That is what Mr. Forseth wanted to know.

• 1020

Mr. Gérard Croteau: I think that the problem is at two levels. I believe that children add a dimension that makes the problem even more critical.

[English]

Sorry.

Mr. Paul Forseth: It's okay.

Mr. Gérard Croteau: I think children add a dimension to the problem, which makes it more critical. Ideally, for any family, the total income should be considered for the family instead of considering them separately, but this may be the ideal situation. I would be willing to recognize as an acceptable compromise that we start dealing with this from the time there are children. I would be willing to consider that.

Ms. Helen Lambrinakos: When you mentioned recognition and the dollar, I don't think they're mutually exclusive, because when you put them on an equal footing dollar-wise, the message by extension is that they're the same. I've had so many people ask me, “Do you work?”. I get so offended by that. I say, “Yes, I do. I just don't get paid for it.”

The government, by extension, sends out value messages to society as to what is important and what is not. As I said before, stay-at-home parents have really been considered an unnecessary luxury. It's like buying a fancy second car. I think there's the impression that all we do is sit at home and watch soap operas all day.

Mr. Paul Forseth: Given all of that, after you've said all that, what do we actually do to change the message?

Ms. Helen Lambrinakos: Quite frankly, I like your idea of a flat tax and a high exemption. I think that's a good start.

Mr. Paul Forseth: Okay, yes.

The Chairman: Do you want to quit while you're ahead?

[Translation]

Mr. Serge Cardin, five minutes, please.

Mr. Serge Cardin (Sherbrooke, BQ): Ms. Lambrinakos and Mr. Croteau, thank you for being here.

Mr. Forseth's question is similar to one I wanted to ask, but there are other important elements. Mr. Croteau, in your second suggestion or recommendation you say that a stay-at-home parent should receive a real wage. What does that mean in practical terms? How do you envisage that?

Mr. Gérard Croteau: There are different ways of seeing it. It's an idea to be explored. For example, as soon as someone has children, particularly pre-school-age children, she could receive an amount to be used for day care or she should consider it a salary to look after her children herself. It would be up to her. It could be called an allowance or a wage.

Mr. Serge Cardin: I was making a direct link with your third recommendation, which suggests that the working parent have a significant additional exemption in order to take into account the stay-at-home parent, and recognize the non-paid work. This would give some value to this work. I am always speaking about a family with children. Some people say that there are single-person families, but when I use the term family, it means a family with children.

So, the stay-at-home parent would benefit from a substantial supplementary exemption that would recognize the work done at home. It would naturally be a set amount, and that amount could also be used as a basis for calculating RRSPs and the Quebec Pension Plan. So there would be a genuine recognition.

As for the exemption for children, it could also be a refundable credit. Any family credit or exemption or any measure related to the stay-at-home parent could be paid to that person. The amount of the exemption, adjusted to reality, as well as the exemption for children also adjusted to the reality of the cost of children, would enter into calculating the spouse's contribution to an RRSP and to the QPP.

Mr. Gérard Croteau: I would prefer the third option. If I had the right to pay my spouse, that would solve many problems. She would have an income and could consequently invest in an RRSP. I, myself, would pay less tax and that would solve all the problems.

• 1025

The second option might be more advantageous for other people. Single-parent families might like this solution, namely, to have the choice of sending their children to day care or using the money to look after them at home. The second option may be more general, in some way. Personally, the third option would please me greatly and suit me. If it could be implemented next year...

Mr. Serge Cardin: It would nevertheless be within reasonable parameters. That represents a cost. The amount would be set and would have to be assessed as objectively as possible. We would not want to create income splitting between two spouses.

Mr. Gérard Croteau: Why not?

Mr. Serge Cardin: If you consider the family as a business, there may be income splitting. You know that in a business, income splitting is nevertheless related to certain standards. A service has to be provided. If someone says that the fact that businesses can do so is unfair, this is not necessarily true. A business has to have an employee with no relationship of dependency.

You were also mentioning married childless couples. The taxation rate is what makes the difference. If you alone earn $60,000, the inequality would apply if you could say that two of you would have the choice of earning $60,000. If your spouse were working, you would probably not split your income. You would earn $60,000 and your spouse would perhaps earn $20,000, $25,000 or $30,000. The decision to work or not would depend on the net income that would remain in either case.

Without that, there might be associations. Some people would go so far as to say that any person living with another person, be they married or not, could divide their income. In that case, there would be no end to it; there would be an infinite possibility of groupings.

In my opinion, families should not be considered as a business. There are other values that underlie the family and children.

Mr. Gérard Croteau: I will take it, therefore, that you like the third option as much as I do.

Mr. Serge Cardin: Yes, services are being provided and this should be recognized. I fully agree with that.

The Chairman: Are there any other comments?

Ms. Dockrill, go ahead please.

[English]

Mrs. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): Thank you, Mr. Chair.

First I would like to say welcome, and thank you for being here this morning.

Helen, I have to say, I don't even want to attempt the first part of your last name, so if you don't mind, I'll just refer to you as Helen.

In going over your brief I read some assumptions, and I just want you to clarify those assumptions for me. In one section of your brief you say just try to imagine a society where every parent is in the job market. In that light, it's important to point out that for a lot of parents in this country, being in the labour force is not a choice. I think that's really important.

In another section of your brief, you say your husband and you have made a decision to invest time in your children rather than in the workforce, and what you've received are well-adjusted, responsible, value-conscious children who have great confidence in themselves and their future. Again, I'm getting a sense that's not the case for parents who are working. From personal experience, I believe I also have well-adjusted, responsible children, and I've worked all my married life.

• 1030

I'm concerned we're getting into saying if a mother decides to go into the workforce or has no choice, she is less of a mother or a parent because of that. I certainly hope that's not what you're saying.

I think you also referred to children being penalized because a parent cared enough to stay at home for them. I'd argue the point that the lone parent who is forced into the workforce also cares for their children because they want to ensure they are fed and clothed. The only way they are able to do that is by entering into the workforce. Given the fact that I think—correct me if I'm wrong, Paul—16% of parents in this country are in lone-parent families, that's really important.

Your final point—and this kind of touched a nerve—was day care was never an option, which I understand, but you referred to it as being like dropping off laundry at the cleaners in the morning and picking it up at 6 p.m. I have to say that any time I dropped my daughter off at day care, I did not feel like I was dropping off the laundry. That statement really concerns me because there's an assumption there. Again, going back to my original point, there are a lot of parents who do not have that choice.

Having said that, I think we all agree there has to be some recognition for the parents who stay at home. We've heard testimony over the course of the last few weeks and people have come to us with some very good suggestions.

My question is, how would you feel about a universal program, something that went to all parents with children?

Ms. Helen Lambrinakos: First I'd like to comment on what you said. I know that not all people have the choice. My own mother didn't have that choice, and I think I'm a well-adjusted, responsible, value-conscious person. I said right at the end of that first page that I was not passing judgment on working parents. But you have to understand, I had ten minutes. In my ten minutes I wanted to show you that there is value in a stay-at-home parent. So that was it. I have many members of my family and friends who work, and I certainly don't think they're any less parents.

What I'm saying is I would like to see us both put on equal footing. The inference is that when you give something more to one than the other, one is worth more than the other. Even if that's not what you really think, that's the message we're sending out.

The Chairman: What is given more to one than the other?

Ms. Helen Lambrinakos: A perfect example is the nursery school fees my husband cannot claim because I do not work.

Mrs. Michelle Dockrill: Okay, just as an example, we'll go back to the scenario of the lone parent who has to go into the workforce to make sure her children are looked after. She has no choice, and in order to enter the labour force to care for her children, she has expensive child care.

Ms. Helen Lambrinakos: That's fine. I'm not telling you to take her child care away from her. I'm just telling you to allow me to have the same thing.

Mrs. Michelle Dockrill: Okay, that's what I'm saying, but my point is—

Ms. Helen Lambrinakos: Equally, you're not taking anything away from working parents.

Mrs. Michelle Dockrill: But my point is, if those individuals who don't have the choice didn't have to enter the workforce, they wouldn't incur that expense.

Some presenters have said to us the child care expense deduction is an employment expense. It is incurred when a parent, presumably a mother—

Ms. Helen Lambrinakos: And I'm telling you I don't think it should be. I think this is more than just a simple tax question. I'm saying that by this tax example, you are sending a message out to society, and that's what scares me. These children are Canada's future.

Mrs. Michelle Dockrill: I'll use an example Mr. Forseth or the chair used, I think in Calgary, when he talked about men. I don't want this to be a girl-guy thing, but mechanics that have jobs and need specific tools are able to claim them.

The Chairman: Artists are able to claim their musical instruments as a legitimate business expense.

Ms. Helen Lambrinakos: I don't want to be disrespectful, but artists' supplies or mechanics' tools are nowhere near as important as our children.

Mrs. Michelle Dockrill: We're not talking about important here. What I'm talking about—

Ms. Helen Lambrinakos: We are talking important. We are talking about a value dollar amount we're putting on our children.

Mrs. Michelle Dockrill: No. What I'm—

Ms. Helen Lambrinakos: Don't treat children like you do businesses.

Mrs. Michelle Dockrill: No, and that's my point. Maybe it's the phrase of child care expense deduction that is being....

• 1035

Ms. Helen Lambrinakos: I personally don't care what you call it. The point is, it exists and it should exist for both.

Mrs. Michelle Dockrill: It exists if you enter the labour force.

Ms. Helen Lambrinakos: I work. I put in more than 40 hours a week on my volunteer work. As a matter of fact, the week before our ice show, I went to bed every day at 5.30 a.m. and got up at 7 a.m. to send my kids to school, because after I had done all my work that I needed to get done for the show, I still had my laundry, my kids to take care of, and everything else. So I find it very offensive. I incur expenses. I have hired babysitters to watch my children while I go to meetings, because my husband travels and he's not home. None of this is taken into account anywhere in your tax system, and that's what I'm saying is wrong. It's inequitable.

Mrs. Michelle Dockrill: To go back to my question about universality, we've had some people who have said they don't have the answers, but whatever is done, make sure we do it for all families with children.

Ms. Helen Lambrinakos: Exactly! Treat all families the same, whether or not that $60,000 comes from one parent or from two. That should be irrelevant. We're talking about children. As I said before, ultimately, less after-tax family income penalizes the children. It affects what you can do with them, what you can do for them, where you can send them to school.

The Chairman: Thank you very much. I'd like to now move on to Mr. Herron, please.

Mr. John Herron (Fundy—Royal, PC): Thank you, Mr. Chair.

[Translation]

Mr. Chairman, I apologize, but it is easier for me to speak in English.

[English]

I understand where Helen Lambrinakos' concern really comes from, some aspects of it, and I'm sensing an element of frustration. We've heard this from a number of different circumstances across the country in that regard. I can see where some mothers may say they don't want to be perceived as less of a mother because they work. But I know there are some women or men who work inside the home, not stay-at-home but work inside the home, who don't want to be perceived as being less of a person because they work inside the home. I think that's one of the principal issues we're trying to address in that regard. In the 10 minutes you had for your presentation, that element of frustration, I think, was important to illustrate, because if it doesn't have that edge to it, we may not recognize it in that short period of time you were allotted.

It's one thing for us to recognize it, I guess, from a philosophical perspective, but also, at some point in time we have to address it from a numerical perspective and in a monetary way as well. Then it comes down to choices of what we can really do within the box of money we actually have in that regard. So the question that a couple of my colleagues have touched on is if a nominal amount of money were to be allocated toward a work-at-home parent, is it possible that...?

Sorry, I've got a buzzer here that's going to distract me till it stops. That's going to be in Hansard too.

Mrs. Michelle Dockrill: It sounds very good.

Mr. John Herron: Anyway, if that were allotted to you, say $1,000 or $700—that's kind of the box we're working with in that regard, because on the child care expense deduction, even though you're allowed to declare as high as $7,000, the average claim is about $2,600, which translates into about $700 into the person's pocket. Say $700 or $800 cash, versus the child care expense deduction. It would recognize the work that's inside the home. We'll never be able to provide the money it's worth, but is that an acceptable trade-off?

Ms. Helen Lambrinakos: Actually, more than looking for recognition for me, which I would love to have, my concern is for my children and what I can offer them. You said the maximum is $7,000. Well, my personal feeling is that stay-at-home parents should get that $7,000, because if you did that—

• 1040

The Chairman: On average they claim $2,600.

Ms. Helen Lambrinakos: That's okay. But I'm saying if you gave them the maximum, would that not allow more people to stay home?

I think it was Michelle who said—maybe it was Serge—that the average income of the second parent who goes out to work is between $20,000 and $30,000. If you take away their expenses and everything else, maybe at the end of the day, if you did give them that $7,000 credit, they wouldn't really come out much more ahead of the game. That would enable them to stay at home with their children too, which I'm sure a lot of people who have to work would love to be able to do. I think that's where we should be going with this. We should be making it as easy as possible for a mother who wants to stay home not to have to go to work.

When you speak about that box of money, I can't say it often enough: these children are our future. They are the most important commodity Canada has. We give grants to people who make pornographic films. We spend money frivolously in many different places. I think if you look at the Auditor General's report, you can find many examples. I think if you really took the time, you would be able to find the money to do this, even if it's—

The Chairman: Can you make some suggestions? That's what we're trying to get at.

Mr. John Herron: On that point, if I may, and if you want to continue, I don't want to—

Ms. Helen Lambrinakos: No, no, go ahead.

Mr. John Herron: You're the boss here, so....

Ms. Helen Lambrinakos: No, go ahead.

Mr. John Herron: Suppose it was $7,000. If $700 translates into about $1 billion to the treasuries, to the taxpayers, then $7,000 would be like our gross domestic product of the country.

The Chairman: A $1,000 tax credit to everybody is $7 billion.

Ms. Helen Lambrinakos: I don't know if I could find you $7 billion. I certainly don't have access to all these documents.

Mr. John Herron: Neither do I. But I'm on the side of trying to do something. I'm just saying that at some point in time there's a dollar amount—

Ms. Helen Lambrinakos: There's always a way. I just restructured our skating club's entire budget and the way we do it in order to enable us to continue to give these children bursaries and reimbursements for their costs, and yet.... You know, there's a way to rework it all. I certainly can't tell you what it is. I don't have access to these documents. If you'd like me to work on a committee, I'd love to.

Mr. John Herron: My last question, and I'll try to get this in really quickly, concerns income-splitting. It's something that on a personal level I'm more comfortable with because our deductions are based on family income but our taxation system is based on individual income. So my concern is that income-splitting could potentially benefit those individuals on the higher end of the income level than it would, potentially, benefit those on the lower end. Primarily, the concern is that 16% of parents in the country are lone parents, and they are usually on the margins. If there were a dual system, again, from a flexibility perspective, where we had income-splitting but the government chose to make an intervention on that 16% at a different level, is that something you could accept?

Ms. Helen Lambrinakos: What do you mean by “on a different level”?

Mr. John Herron: I don't know, but suppose they were to provide an extra deduction or something of that form, to recognize the fact that it is our children who are important and the pressures of lone-parent situations are very difficult. Essentially, it's because we don't want to only give more of a tax break or tax incentive to people on the higher end. We also want to recognize those people on the lower end. I think we have to be cognizant of the lone-parent situation.

The Chairman: Thank you, Mr. Herron.

Would you like to respond, Monsieur Croteau or Madame...?

Mr. Gérard Croteau: I had a small comment. You mentioned the word “frustration”. I think I made a fairly cool presentation. But I can tell you, if my wife had come here you would have felt the frustration much more than you can from me, with much less diplomacy probably.

About this $7,000 you mentioned, that would amount to $7 billion. In my case, I was talking about close to $4,000. Just at the federal level, I pay more than one family with two incomes for the same total. This has been going on for nine years now. My eldest was nine years old last week, and there are still three more years to go before my wife can even think of going to work if she wants to take care of the preschoolers. We have five children. So we're talking $4,000 a year, just at the federal level, for 12 years. That's $48,000 that I think I've paid more in tax than other families with the same income for the same period of time. So I think I've done my share in the $7 billion already, in a way.

• 1045

The Chairman: Thank you, Mr. Herron. Thank you, Mr. Croteau.

Mr. Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you both. I think your message is very clear about the social and economic recognition of the contribution made by a stay-at-home parent, a direct parental caregiver. Your dialogue sort of touched on the dilemma we are faced with. This thing started when people started to compare a $60,000 salary to two $30,000 salaries. If you work out the tax burden of those two circumstances, you understand there is a differential of maybe $4,000. That has nothing to do with whether or not there are any children. It has to do with the progressivity or the marginal tax rates we have in our system.

I believe, in my own view, and you may want to comment, that the real economic comparison is not between family A and family B. It is what happens in a family where two people, are working in the paid labour force, both having an earned income, and then a child comes along. They now have two choices. One is to engage third-party child care and pay for it and get a child care expense deduction. The other is to have one of them withdraw temporarily from the labour force and provide direct parental care. That provides, really, the ballpark for the decision-making for a family.

People have told us that if you have two people working, you get this child care expense deduction. That costs the government money to give that tax break. We would like to have some level playing field where those who withdraw from the workforce, forgo an income and provide community services, etc., be recognized and get some equivalent benefit. In other words, so we have a level playing field.

Our dilemma is that nobody has been able to tell us yet, and they won't be able to tell us, what the value of the child care expense deduction is, because it varies depending on how much child care service you buy, what tax rate you're at, whether you're a lone parent or dual parent. I mean, you'll not get a number. You will only get a range of benefits, and it's very difficult to make a stay-at-home benefit equal to something that is a range. That's the dilemma, and we understand that.

Really, the point is that how we deliver a benefit or how we get a level playing field has to be driven by principles of policy development. I'm going to give you principles or guidelines or attitudes that we should take with regard to approaching this question and I'd like to ask whether or not you agree or disagree. The first one is that our policies should be child-centred, for the best interests of the children.

Mr. Gérard Croteau: Yes.

Mr. Paul Szabo: The second is that parents are in the best position to determine the best possible care arrangement for their own children, given their circumstances and opportunities and the options.

Mr. Gérard Croteau: Yes.

Mr. Paul Szabo: The third one is that our policies should provide as much flexibility, options or choices to make it feasible for either parent to be in the paid labour force or to provide direct parental care.

Mr. Gérard Croteau: Yes.

Mr. Paul Szabo: Fourthly, our policies should be as inclusive and responsive as possible to the social realities, i.e., lone parents, circumstances and preferences of the parents and children.

Mr. Gérard Croteau: Yes.

Mr. Paul Szabo: Our policies should be fair and equitable and neither compel nor penalize specific caregiving choices.

Mr. Gérard Croteau: Yes.

Ms. Helen Lambrinakos: I agree.

Mr. Paul Szabo: So we don't want to pit one choice against another. We want to respect parents' assessment of their own situation and their choice. If possible, all children should get a level benefit regardless of what choice was made.

Mr. Gérard Croteau: Yes.

You mentioned that when the child comes along parents have two choices. Well, the problem is that right now many people don't have the choice because it's too costly to stay home for some of them. That's one of the problems that I think we both raised already.

• 1050

You mentioned the word “flexibility”. That's something that's missing right now. To me, the big picture is that there have been lots of policies put in place to help parents with children go to work, and maybe a few problems have been addressed directly, but this traditional role has been left aside and there's a big gap there that has to be taken care of. To me, the fair and equitable way to give children final priority above all else is just not there at the moment with this gap in the big picture.

Ms. Helen Lambrinakos: My point is that there was a range. I know nobody liked my idea, but as I said before, if you give the stay-at-home parents the maximum that is allowed right now by the revenue department, it would be equal for everyone. Even a single working mother would probably make the same or a little bit more than if she stayed home, and I—

The Chairman: Could we have a response?

Mr. Paul Szabo: Let me see if I can respond. Presently—

Ms. Helen Lambrinakos: I just want to add to that. My husband would have a spousal benefit even if we had no children.

If I didn't work, if I stayed at home and did nothing but watch TV all day—

The Chairman: You would have a spousal benefit.

Ms. Helen Lambrinakos: —he would still get that spousal benefit.

The Chairman: If you don't work, you get the spousal benefit.

Ms. Helen Lambrinakos: That's right. That's what I'm saying.

The Chairman: So that's supposed to compensate.

Mr. Paul Szabo: It has nothing to do with children.

Ms. Helen Lambrinakos: It has nothing to do with children, though.

Mr. Paul Szabo: With regard to that, I think it's important, because you have raised here probably the most difficult question that we have to address.

Under the current tax system, if you assume one child, for a preschool child, the lower-income-earning spouse gets a $7,000 deduction, but it is limited to two-thirds of the earned income of the lower-income-earning spouse. So if the lower-income-earning spouse is only making $5,000, they're only going to get to claim $3,000 of the $7,000 they spent. So there's a problem there. On top of that—

Ms. Helen Lambrinakos: But they have the money they made.

Mr. Paul Szabo: Hang on for a second. The foregone net income...absolutely.

But in terms of the numbers, if the lower-income-earning spouse makes $65,000, the $7,000 deduction that is received by that person is worth $3,500 in their pocket, basically, at a 50% effective marginal tax rate averaged over all the provinces. If the lower-income-earning spouse is at the lowest tax rate, roughly $30,000 or less of income, the benefit in the pocket is only $1,750.

Ms. Helen Lambrinakos: I still maintain that they have the money they're earning that the stay-at-home parent doesn't.

Mr. Paul Szabo: So you understand that where two people are working, depending on what level of income the lowest-income-earning spouse has, the benefit could be twice as much for one person as the other. So there's a discrimination or an inequity for two-earner families.

If we were to extend the $7,000 deduction to a one-income two-parent family, the amount of the benefit in the pocket would depend on what tax bracket the paid parent is in. The $7,000 would be worth $3,500 for some people and $1,750 for somebody else, so somebody would still claim discrimination.

Ms. Helen Lambrinakos: Okay, but why don't you just apply the same rule then? If the one spouse is making that $60,000 a year, then you give them two-thirds of that $7,000.

Mr. Paul Szabo: No, it's not restricted to two-thirds of the—

Ms. Helen Lambrinakos: Didn't you just say two-thirds?

Mr. Paul Szabo: It's two-thirds of the earned income.

Ms. Helen Lambrinakos: Two-thirds of the earned income.

Mr. Paul Szabo: That would be $40,000, but the maximum builds up.

Ms. Helen Lambrinakos: That's exactly what I'm saying. You can still apply that same rule to it.

Mr. Paul Szabo: But you will understand that we have circumstances where probably about 30% of families with only one income only make about $30,000 or in fact the lowest tax rate. By granting the $7,000 deduction to the one-income-earner family, you would be giving much more money to high-income earners versus low, and I think that's one of the principles we talked about: trying to get a level benefit for all families, regardless of their choices and regardless of their income.

The Chairman: Thank you, Mr. Szabo.

Mr. Gérard Croteau: You mentioned the small increase in revenue that comes to some dual-income families when the income is rather low. I think it would be worth noting that benefits like pensions and chances for promotion are much higher for those who have twin incomes and still go to work than for those who stay home for a few years and start from scratch if they ever go back.

• 1055

Ms. Helen Lambrinakos: In the case of his wife and me...he has five children; I have four. It takes a long time for us to be able to get back out to that workforce.

Mr. Paul Szabo: Would you like to be able to participate in the Canada Pension Plan?

Mr. Gérard Croteau: Of course.

Ms. Helen Lambrinakos: Why not?

[Translation]

The Chairman: Could you give us some suggestions in order to promote spousal participation in RRSPs or pension funds? As you know, RRSP contributions are based on net income. When a spouse has no net income, how can he or she participate?

Mr. Gérard Croteau: As I said in my third recommendation, it would be advantageous to allow the working parent to pay the stay- at-home parent.

We could also give parents two options. For example, as soon as a woman has a child, whether or not she works outside the home, she should be entitled to invest in a pension fund. On the other hand, we could make this benefit available only to stay-at-home mothers and set a maximum contribution of $2,000 or $3,000 per year. Although this is not a large amount, it would already represent a marked improvement over the present situation. This would solve part of the problem of recognition and social status.

The Chairman: Thank you very much, Mr. Croteau, for having shared your suggestions with us and for having expressed your concerns.

[English]

It's not an easy solution, as you see, but we will endeavour to try to make heads or tails of all the testimony, and we've had some excellent testimony. I'd like to thank you on behalf of the committee again.

[Translation]

Again, thank you very much.

[English]

Ms. Helen Lambrinakos: Thank you.

The Chairman: Merci.

• 1100

• 1101

[Translation]

The Chairman: We would like to welcome the representative of the Confederation of National Trade Unions, Mr. Marc Laviolette, Vice-President, and Mr. François Bélanger, economist.

I would invite you to make a five—to ten—minute presentation, and then we will move to questions.

Mr. Marc Laviolette (Vice-President, Confederation of National Trade Unions): On behalf of the CNTU, I would like to thank the Sub-Committee for having agreed to hear our presentation this morning. We would have liked to table a brief, but we didn't have enough time to do so. I shall make a brief presentation and then Mr. Bélanger will give you our recommendations.

Today I am replacing Claudette Carbonneau who has been detained due to negotiations concerning Quebec daycares. As you know, we are part of a task force that is involved in intensive discussions. I am accompanied by François Bélanger, who is an economist in the area of labour relations at the CNTU.

The CNTU is the second largest union organisation in Canada, with 240,000 members and 2,300 unions that operate primarily in Quebec. I will not repeat the statistics that you already know about child poverty. You have had numerous discussions on this issue here, in this committee, and it received wide media coverage.

Nevertheless, we were struck by one study, at the CNTU. It was a study conducted by the National Council of Welfare, which used a measurement of low income that differed from the Statistics Canada method, which set the rate of poverty after taxes and transfers at 13.5%, which puts Canada among the countries that make the least effort to reduce child poverty. The rate in the United States is 21.5%, it's 14% in Australia, and in the United Kingdom, France, the Netherlands, Sweden and Germany, it is under 10%.

This measure allows us to examine the development of child poverty in countries and to make a judgment about the political choice that Canada made in going from a system of universal family assistance to targeted assistance to the poorest families. This choice has been a failure, since the rate of poverty is increasing rather than diminishing. Although a number of factors contributed to increasing child poverty, the government's intervention is reinforcing rather than curbing this trend.

• 1105

Although it was claimed that the reform of family policy focussed on helping the poorest families, the purpose of the reform was to generate budgetary savings and to provide a greater incentive for families on welfare to work. This objective did not create problems in itself, nevertheless, the result was that family policy was in some way linked to income security policy. Consequently, some middle- and high-income families receive no public support, or very little, but have to assume the additional costs inherent in having children.

So we do not take into account the ability of these families in relation to childless households with the same income, and this undermines the principal of horizontal equality. Overall, the family reform policy has greatly reduced the amount of money available to help families, since the amounts available in programs that existed before 1989 were not transferred to the Child Tax Credit, which is now the principle vector of the federal family policy.

As part of our assessment of the development of our family policies, we have developed six recommendations that François will outline.

Mr. François Bélanger (Economist, Confederation of National Trade Unions): Canada is one of the few countries that does not have a universal benefit or tax deduction for children. Since the government will henceforth achieve a virtual surplus of $10 billion annually, we believe that the state of public finances can no longer be used to avoid creating an adequate system of financial assistance for families.

The CNTU believes that households who are responsible for children should be entitled to receive an allowance indexed to the CPI, and that at least a part of this should be universal. This financial support should take into account the real costs involved in meeting children's basic needs in a family. Recent studies have shown that the cost of the first child in a single-parent family is approximately $6,200, while it is $4,125 for couples and approximately $3,000 for subsequent children.

We believe that the total transfers and federal and provincial assistance should allow families with an income lower than the low- income threshold set by Statistics Canada to meet these costs. There are a number of reasons for such an allowance. It would reestablish horizontal equity between households with and without children, since households with children have less disposable income than childless households, even when they have medium or high incomes. The existence of universal measures would strengthen social solidarity and would help to have the tax burden accepted since, in any case, it will not diminish very quickly in Canada, given the size of our debt and the related interest we pay.

A universal allowance would put an end to the inconsistencies and discrimination which inevitably result from allowances determined according to such criteria as family income and participation in the labour market. It would also resolve the problem of high marginal rates implicitly linked to the loss of tax benefits when one's income goes up. We feel that such an allowance would encourage economic growth in the long term because it would avoid the negative effects linked to targeted interventions and it would strengthen the human capital which our children represent. This is our first proposal, and I would remind you that a supplement would be designed to meet all the essential needs of our poorest children.

Our second proposal has to do with the question of child care expenses. We feel that this deduction should be changed to a reimbursable tax credit, with the valued decreasing as family revenue rises: this has already been done in Quebec since 1994. At the present time, families with high incomes benefit disproportionately from this deduction. For each $1,000 in child care expenses, a taxpayer earning less than $30,000 sees a tax saving of $170, whereas someone earning $60,000 will save $290 because of the higher marginal tax rate.

• 1110

Quebec families have been making less use of the child care deduction since the progressive introduction of $5-a-day child care spaces in Quebec, and we believe the federal government should transfer the savings achieved as a result of this to the government of Quebec. In other words, there would be a transfer of funds to Quebec in this area.

Along the same lines, Quebec has revised its proposed parental leave system in order to eliminate the irritants which up to now have prevented the federal government from agreeing to Quebec's requests. We would therefore expect a speedy settlement in this matter, because Quebec now accepts that the benefits as they see them would be taxable and the transfers would be calculated on the basis of the Canadian average.

If we understand correctly, Quebec would now agree to receive the equivalent of the benefits which it receives rather than the contributions which it pays to employment insurance. This is something which should be settled quite rapidly.

The fifth point has to do with general suggestions regarding the taxation system. The income level at which one starts having to pay tax has dropped quite considerably since 1980, in real terms. This situation is due in part to non-indexation and partial indexation of the tax system since 1985 and also in part to reforms which have reduced the progressivity of the federal taxation system.

It should be noted that changes introduced to the tax system since the 1998 budget, including elimination of the 3% surtax and an increase in non-taxable amounts, in no way make up for losses associated with the total or partial non-indexation of the system. This affects both households with children and without children. We are therefore proposing that the entire system of taxation and government benefits, particularly those for children, be indexed to the cost of living.

As well, again in the context of changing the general tax system, we would like to see the basic personal spousal exemption increased to $9,000, which corresponds to the minimum needed to meet the essential needs of a single person.

Finally, the non-refundable equivalent-to-married deduction which is claimed for the first child in a single-parent family should be changed to a refundable tax credit, which would be an advantage to poor families.

In closing, I would like to say a few words about transfers. In this regard, we think that single-parent families and two-parent families on welfare may be negatively affected by the new way of determining the Canada Health and Social Transfer. A change in the equalization program might be the answer.

In addition to making up for differences in the fiscal capacity of the provinces as it does at the present time, this program could also consider provincial expenditures resulting from a higher rate of poverty, as is the case is Quebec. This is essentially the suggestion made by Pierre Fortin after the federal budget. Those are the proposals which we wanted to make.

The Chairman: Thank you very much. We will proceed immediately to questions from members.

Mr. Forseth, you have five minutes.

[English]

Mr. Paul Forseth: Thank you.

In your presentation, near the end, you said you had six recommendations, and of course you went through them so quickly that during the English translation I didn't quite get them all, but I would hope that you would be able to submit all those proposals in writing to the committee so that we would have them in detail.

In consideration of all of these proposals, were you able to provide any cost estimates as to what this might imply to the federal treasury for each one of these measures?

• 1115

I understand that your effort here is to respond to what you say is overall child poverty. Am I correct to assume that this is more an effort to look at more transfers to individuals responsible for children—more welfare, more credits, more subsidies—rather than, say, an effort to create an economy where parents are able to earn more?

We say that kids are poor because the adults who are responsible for them are poor. There's a limit as to how to respond to child poverty by just giving a bigger welfare cheque. It's much more complicated than that. So it would be interesting to see what your proposals would be to boost the economy whereby there would be better paying jobs so that a parent can earn a good income instead of a welfare alternative.

I'll limit my question to just your contemplations of what the cost implications are of each one of your proposals.

[Translation]

Mr. François Bélanger: We received our invitation to come here rather late. We have tried to present a certain number of proposals on the taxation of child transfers, but we did not have time to come up with an overall figure.

We are aware that economic constraints would be involved. To finance it, we were considering a fair redistribution between households without children and households with children, but we of course did not have enough time to work out all the details of such a redistribution.

When we look at the list of 1998 tax expenditures published by the government, we see that many economic activities benefit from tax incentives of all sorts. The government willingly foregoes considerable revenue in order to encourage certain activities. We feel that some of these activities could probably be reorganized in order to provide greater support to families in Canada.

Canada is a member of the G-7, and we enjoy one of the richest economies in the world. It is inconceivable that the rate of child poverty should continue to grow as is the case at present. Nor is it conceivable that it would not be possible to adjust the tax system to eliminate this problem.

From a more general viewpoint, with regard to encouraging economic activity in Canada, benefits are certainly not the only way to improve the situation for low-income families and children, but on the other hand, we feel that they are still necessary. Even though macro-economic politics may work well to a certain extent, we do not feel they can solve this sort of problem.

Since inflation has dropped considerably over recent years and our economy has a very low interest rate, I see no advantage to calling for a drop in interest rates at a time when they are relatively low.

Macro-economic intervention has a certain effect, but it also has its limits. When interest rates are low, the fact of eliminating inflation completely does not result in a level of activity which would stimulate economic growth and eliminate poverty, particularly among children.

I think we have achieved all that can be achieved with macro- economic policies. In any case, we do not really believe in the strategy of paying off the debt which the federal government has been applying with the last two budgets.

• 1120

Of course, I admit that it is very important. By paying off $10 billion of our debt over the past two years, taking into consideration budgetary and non-budgetary operations, the federal government has perhaps succeeded in reducing the debt-to-GDP ratio significantly, but the actual payment has had a very slight impact on the drop in this ratio. The drop in the ratio is primarily due to an increase in the GDP in nominal dollars.

It is quite easy to work out. I do not remember the exact figures, but over the past fiscal year, the debt-to-GDP ratio would have fallen from 72% to 69% without repayment of the debt as opposed to falling to 68% with the repayment of $10 billion.

I feel that given the present state of the economy, money is really being badly spent, since our growth is not comparable to that of the United States and we must deal with social problems as a result of years of restructuring public programs. At the very least, it should be possible to recover the equivalent of the reserve, $3 billion, and to invest more of it in social programs, particularly those designed to eliminate the rate of child poverty in Canada.

The Chairman: I think that Mr. Laviolette wanted to add something.

Mr. Marc Laviolette: Looking at it from a broader perspective, we must not forget that we have a budget surplus. Our criticism of the evolution in Canadian family policy, moving from a universal system to targeted measures, is that today we find ourselves with a higher rate of poverty.

We are saying that this policy poses a problem and that we must turn the situation around by reducing the rate of poverty among children and single-parent families. We need incentives to get people back to work. We need to come back to more universal policies.

We must not forget that the social safety net is an automatic regulator of the economy. Money invested in this system is then paid back into the economy by the recipients. If poverty continues to rise, what incentive is there for single-parent families to depend less upon the social security net and get into the labour market? We end up with a vicious circle.

The Chairman: Thank you very much. I now recognize Mr. Cardin.

Mr. Serge Cardin: Mr. Chairman, do I have ten minutes?

The Chairman: No, you have five minutes, but that will also depend upon the answers because the questions are sometimes longer.

Mr. Serge Cardin: Gentlemen, thank you for coming today to take part in the work of the sub-committee.

First of all, I would make the same request as Mr. Forseth, who asked for something in writing, because your proposals were given very quickly. Some of them seemed very interesting and we have heard various arguments on this subject.

I would like to refer briefly to our terms of reference. It is true that there is some unfairness in the tax treatment of families with one and two incomes, but you talked about cases where there were children. In other words you are focussing on the family and children.

We also heard about child care and the choices made by parents either to stay at home and raise their children or to put them in day care, and the need for quality services. The emphasis is on the children, and it is a question of supporting people in their choice, not of directing them. Do you feel that had your recommendations been implemented, these objectives would have been achieved?

I was forgetting an important element. A great deal has been said about recognizing work done in the home by people who choose to stay at home. Do you think that your recommendations would meet the expectations of this group?

Mr. François Bélanger: We did not deal with this specific matter in our recommendations.

When I made a review of our presentation on the SNI CD-ROM, I realized a little late that this was one of the main reasons for these hearings. Unless I am mistaken, it is one of the questions at the very heart of these consultations. It is not something which was discussed in detail at the CSN. At first glance, I would not see any problem.

• 1125

Indeed the tax system should not favour the traditional family over a family with two breadwinners. I do not think it is the role of the taxation system to determine the evolution of households.

Mr. Serge Cardin: That is exactly what I was saying. We do not want to favour either one, but rather to facilitate choices for people; we want to allow more choice.

Mr. François Bélanger: Fine. I thought that the current criticism was that families with one breadwinner were treated less favourably than in the American system, for example. We have not really discussed this issue, but basically, tax policy should not pass judgment on the status of households.

Mr. Serge Cardin: Please elaborate a little more because there are some important points here. For instance, we are asking for the recognition of work done by a person remaining at home to raise children. You touched indirectly on this in one of your recommendations when you mentioned a $1,000 increase in the spousal tax exemption. To help low-income families, you recommend that the equivalent-to-married exemption be changed into a refundable tax credit for single parents. You said that you had not fully grasped our mandate at the beginning, but you are answering many questions that were put to us and that the committee must continue investigating. This is why I wanted you to give us more details.

Mr. François Bélanger: This may not be in the same perspective, but we went on to integrate this following discussions with citizens' groups in Quebec. We saw that single-parent families, among others, were living under very difficult circumstances and that one way of supplementing their income would be to take into consideration the increased cost of the essential needs of the first child which is $6,200 in their case. This would help to cover the added costs of having a child when only one parent is working.

Mr. Serge Cardin: During the consultations, people everywhere asked for access to a universal child care system. In one of your recommendations, you spoke of changing the tax deduction for child care into a tax credit so as to make it less lucrative for those with high incomes. There was another interesting point, and I will not hide this from the committee; it was when you mentioned transfer payments to Quebec. If the federal government ever set up a universal child care system, as Quebec already has a good head- start in this, it should get the money back through a transfer payment.

Mr. François Bélanger: Let us hope that the same thing does not happen as when the Quebec sales tax was implemented or harmonized, in a certain way. In Quebec, we did not benefit from any refunds whereas another province with more or less the same model did receive compensation.

Mr. Serge Cardin: That's a fact.

The Chairman: Perhaps you could elaborate on the program itself, on the weaknesses that you currently see and the problems that Quebec had to deal with. I know that our colleagues are very interested in the Quebec model and I would like to know from you whether we should suggest any changes.

Mr. Serge Cardin: Regarding current Quebec policies and their efficiency as compared—

The Chairman: I'm talking about the implementation of a national child care program. Some say that for $5, quality might leave something to be desired, etc.. We have heard all kinds of false information.

Mr. François Bélanger: As far as I know, spaces—

Mr. Serge Cardin: Excuse me, Mr. Bélanger. I would just like to let the chairman know that I am sharing my time with him.

The Chairman: Have you any comments?

Mr. François Bélanger: I am not the one responsible for the CNTU'S child care file, but I nonetheless know that spaces are developed within a managed child care system. The Office des services de garde à l'enfance was incorporated into Quebec family ministry, which ensures that standards are applied.

• 1130

I think that most of the new spaces that were developed are—

A voice: In a family environment.

Mr. François Bélanger: Yes, in a family environment. The private child care is not developing. There is some standardization of education programs, as it were, and of quality.

The Chairman: Mr. Laviolette.

Mr. Marc Laviolette: Ms. Carbonneau would certainly have been able to give you a better answer, because she is the one in charge of the file. I think that in Quebec, the problem of the number of child care spaces is a growth problem. Currently, we are expanding rapidly and doubling child care spaces in family environments. These are growing pains, and not problems with the quality of child care service in Quebec. I think that we have very high-quality child care service. Day cares in Quebec have been developing since the beginning of the 1970s, and our current problems are growth problems. The shoes are too small to fit the size of the feet, and must develop.

The other problem involves harmonizing the network and working conditions of child care educators, and we are currently doing this with the government. Unfortunately, in Canada, especially at the federal level, a great deal was said about a universal child care system, but the goods were not delivered, whereas in Quebec, we have a model that can serve as an example. I don't know of any place with child care quality problems as such; this certainly sounds like malicious gossip.

[English]

Mr. John Herron: Given that I may have used my time last time, I'll try to be more brief on this occasion.

Mr. Bélanger mentioned a situation where I think in the United States they are able to file a joint tax return as opposed to just taxation on an individual basis. Do you think that's something we should pursue in a Canadian context?

[Translation]

Mr. François Bélanger: As I said to Mr. Cardin, we did not study this issue specifically before coming before you. The official position of the central labour body we represent regarding taxation is that taxation must continue to centre on individual. We really must think this through. I can only give you my personal opinion and that is not what I'm here for.

We, too, will have to reflect on this. If this avenue led to taxation that does not favour families with a single income earner more than those with two income earners, we will certainly have to at least consider this in our deliberations.

[English]

Mr. John Herron: My last comment is that I think you're absolutely correct in that we shouldn't make a situation where we encourage one family over another in terms of how they actually care for their children. You remarked that we should encourage choice and provide that opportunity for choice where we don't penalize or compel one family structure perhaps over another.

You spoke about a universal benefit. Could you elaborate in terms of how you think that would be delivered, in terms of how you think that should be shaped so we don't penalize or compel one family structure over another?

• 1135

[Translation]

Mr. François Bélanger: First of all, we could envisage a system where all families would receive a universal federal tax benefit, using the same amount that is currently granted as a federal tax benefit to households with incomes below $20,921. They would be granted the whole tax benefit of $1,020, with an additional sum of $605. This would give us the magic figure of $1,625.

We could envisage granting this sum of $1,625 to all families. This would be a basic sum. The amount of $1,625 is the same as the current maximum benefit that a single-parent family can receive. Every family would get a child tax benefit of $1,625, in 1999 dollars. This would be a good start, given that provinces are also providing help.

In Quebec, the family allowance decreases much faster than the federal one; the income threshold is lower and thus the allowance vanishes more quickly. This would get lower-income families closer to an allowance of about $4,000. If family allowances were also increased, we could give nearly $4,000 per child everywhere in Canada.

Mr. John Herron: Thank you for your presentation.

Mr. François Bélanger: Thank you.

The Chairman: I wanted to congratulate you on your French; you're better than your leader was when he was your age.

Mr. Szabo, please.

[English]

Mr. Paul Szabo: Thank you for your intervention. You talked about the child care expense deduction and suggested it could be converted to a refundable tax credit—in other words, cash—without any tax consequences.

You probably are aware that all dual-income-earner families with children under age 17 are eligible to claim the child care expense deduction, which is $7,000 for each preschool child and up to $4,000 for school-aged children. But of those who are eligible, based on 1996 data, only about one-third of those families actually claim the child care expense deduction on their income tax form.

The total deduction claimed by all claimants was about $2 billion. That means the average claim on the tax returns of a family claiming this, or the lower-income-earning spouse claiming this, is about $2,600. The cost to the federal treasury was about $500 million. Therefore the average cash in pocket to these claimants, some 759,000 claimants in 1996, was a little under $700—cash in pocket.

However, we know, because of the structure and the rules related to the child care expense deduction and that a deduction benefits high-income earners versus low, that some people will have claimed, say for instance, for one preschool child, a $7,000 deduction, and if that's the highest marginal rate, their benefit could have been $3,500 in their pocket. Others will have claimed minor amounts. With one full-time worker and one part-time worker, the part-time worker maybe made $10,000 and claimed about $2,000 for the deduction at the low rate; they probably got a $500 benefit. That's quite a different amount, even though the same maximum benefit was available to that family.

• 1140

So I guess the question is, and our dilemma has been—and maybe you have some comment—if we were to convert the child care expense deduction program to a refundable tax credit, as you suggested, and a refundable tax credit would have to specify the number that would represent the cash going into pocket...answer me three questions. Should it be income-tested? Secondly, what's the number? Thirdly, do you need receipts to account for the child care expenses incurred?

[Translation]

Mr. François Bélanger: We think that receipts will be required. You asked me how much the refundable tax credit would be. We think that many families would claim the child care deduction if it did not involve a 25% cut in the basic tax benefit. When this basic benefit is calculated, it can be cut by 25% when you claim a deduction for child care costs.

[English]

Mr. Paul Szabo: No. The child care expense deduction only reduces the supplement in the Canada child tax benefit, and the supplement I believe is $213. Your child tax benefit is not reduced by the total amount or a percent of the child care expense deduction. The maximum reduction would only be $213.

[Translation]

Mr. François Bélanger: I'm not contesting that, but I thought I had understood that the benefit was a sort of supplement and was reduced when child care costs were claimed. I must admit that we have not looked closely at this possibility. We simply wanted to allude to the general principle of changing from a deduction to a tax credit. We were proposing that for each $1,000 of child care cost deductions, every household get the same advantage, for each $1,000 segment.

[English]

Mr. Paul Szabo: This is my second and final question. You raised the issue of child poverty, which is family poverty. It's very important to keep this issue before us. Statistics Canada reported a couple of years ago that lone-parent families account for 12% of all families in Canada, but also account for 46% of all children living in poverty, i.e., the family living in poverty.

The latest numbers on the lone-parent families have now risen to about 16%. One in six families in Canada now represent lone parents, and by extrapolation or conversion, that means more than 50% of all families living in poverty are lone-parent families. Lone-parent families can occur by, first, unwed mothers, never married or never equivalent-to-married, etc. They're very small in terms...only about 3% of the total. In fact, the vast majority of families in poverty being lone-parent families are as a result of family breakdown—divorce or breakdown of the common-law relationship. The divorce rate in Canada right now is about 40%. Common-law relationships break down twice as frequently as married relationships.

Those are the causes of lone parents. Lone parents represent children living in poverty. You've come to us and suggested we could transfer more money to raise broken families out of poverty. Do you have any suggestions on preventative measures or other things we could do, for instance, to invest in children to maybe strengthen or stabilize Canadian families?

• 1145

[Translation]

Mr. François Bélanger: For a single-parent family, the most significant investment that the federal government could make would certainly be creating a national child care service, as it had promised. This would allow women to accept working hours that—

[English]

Mr. Paul Szabo: But that's after you have the problem, after you're a lone parent. What do you do to reduce the number of lone parents in our society?

[Translation]

Mr. François Bélanger: I do not know if there is a program like that in Canada, but Quebec has a program deduct child support payments at source. This is certainly a good way to help single- parent families. Studies have shown that one out of three fathers who lose touch, for all practical purposes, with their child after separation are highly likely to suddenly stop paying child support payments. I think that in English Canada they are working on the issue, whereas in Quebec, we have already implemented a solution, and we have set up the day cares, even though these programs were rather difficult to implement.

[English]

Mr. Paul Szabo: Alimony issues occur after the family is broken down. I'm asking you if there is anything we might be able to do to promote healthy, strong, stable families in Canada.

[Translation]

Mr. François Bélanger: Are you talking about prevention?

The Chairman: Mr. Marc Laviolette.

Mr. Marc Laviolette: This is a societal issue. Just as love cannot be stopped by force, it cannot be imposed by force. No legislation or fiscal policy can encourage or discourage love. However, to fight poverty among single-parent families, we can resort to three measures, including support payments and fair wages for working women. Women are paid about 70% of what men are paid. This is unfair and must be corrected. The heads of single-parent families are mainly women. They must be allowed to earn income, and so we must offer them child care services that will facilitate their access to the job market.

Regarding your other question, I think that this is a societal issue involving cultural development and greater equality between men and women. It is to be hoped that when couples separate, this takes place as harmoniously as possible. Certain measures can help to ensure this. In Quebec, we tried to eliminate the legal aspect of divorce procedures and to offer conciliation services in order to avoid it. But you can't force love. If the love is gone, that fact must be accepted.

The Chairman: Thank you very much.

I'd like to emphasize that I recognize that the federal government has to assume its responsibilities, especially where the welfare of children and families is concerned. This is, indeed, the responsibility of each and every individual, and of every level of government.

Two weeks ago, all the provincial ministers responsible for this issue held a meeting, with the exception of the Quebec minister who refused to join his counterparts. It's very nice of you to pass your message along to us, and we accept it, but our message should also be passed on in turn.

I'd like to raise a question regarding child care services that you've already dealt with several times. I admit that in 1993, our party, and not our government, had made an electoral promise regarding the implementation of a national child care program. We had specified our intent, but we were aware of the fact that the federal government could not deliver. We had already reached agreements with Quebec regarding tax collection, immigration, labour and training. We were ready to negotiate with all the provinces, but when in 1995 our government wanted to follow up on this initiative, not a single province showed any interest, and they all said they had other priorities.

Now, thanks to our efforts, this issue can go forward. I am proud to say that we took that initiative.

• 1150

If the other provinces want to implement a program patterned after the one we have here in Quebec, I will take the necessary steps and we will participate. But this also requires co-operation from the provinces, and up to now, we have not had any.

Mr. Marc Laviolette: Apart from Quebec. This is the problem we're having in Quebec. We always have to ask everyone's permission before we can go forward, but—

The Chairman: Quebec had asked the federal government for permission, in order to know how to implement the program and what criteria to adopt. That's what it did.

Mr. Marc Laviolette: That is what it did. That's it.

The Chairman: Then, we will follow their model.

Mr. Marc Laviolette: Exactly. However, I hope that the other provinces will not wait too long because this issue is directly related to family poverty in Canada. Moreover, isn't this the problem with Confederation? When it's not the federal level, it's the provinces; when it's not the provinces, it's the federal level. But the population of Canada, it's working men and women, have to live with and suffer from poverty. I am pleading with you to take action. And the sooner the better.

The Chairman: We have got the message.

On behalf of my colleagues, I thank you for your presentation this morning.

Mr. Marc Laviolette: And our thanks to you. We will send you our notes so that you can have the CSN's propositions as a working document.

Thank you very much.

The Chairman: Our next witness is Mr. Peter Kirby. Mr. Kirby is a lawyer. He is well-known in the Montreal region.

I'd like to welcome you and especially to apologize for the delay. However you do see that this is a complex issue and that the members are keenly interested in it.

[English]

I want to thank you for being patient and ask you to make your presentation.

[Translation]

Mr. Peter Kirby (Individual Presentation): Thank you, Mr. Chairman.

[English]

My presentation will be in English. I can obviously accept questions in French, if you wish. I'd also like to point out to the members of the committee that I filed speaking notes, which I would like to have entered into the record of the committee.

Why am I here? I'm here because as an individual I am suffering under a tremendous tax load. As a member of Canadian society, I'm looking at what's happening in Canadian society and I'm very concerned.

Just to put you in the picture, in terms of personal tax load, I'm paying taxes in the region of, globally, 60% to 70%. I also have to consider that there's a massive tax clawback that has happened since 1995, where professionals who had been working on a year's deferral of tax have to pay back the deferral over a period of 10 years. So in addition to the marginal rates of 53% on anything I earn over $60,000, I also have to effectively pay an extra 10% tax, to pay back for that deferred period.

I mentioned I look around at what's happening in society and I'm concerned. I'd like to talk to the committee about two levels. One is on the macro level, and it responds in part to questions raised by Mr. Szabo with the last witnesses. Also on the micro level, what can be done?

Over the last 20 or 30 years, we've seen in Canadian society that the governments at each level have sought to become more and more involved in every single social activity. There hasn't been a question raised that there isn't a problem that can be solved by government. Programs have been developed. Politicians have sought simple wants and have tried to convert them into needs. We're creating, within Canadian society, an entire class of dependents. People are now conditioned to look straight to government for every type of assistance.

• 1155

The first reaction to any social problem is to look to government. What is the practical effect of that? The message going out to the average citizen is that you are not responsible. Your responsibilities are limited to paying your taxes and looking after your life. But you're not responsible for the homeless; that's a government problem. You're not responsible for child poverty; it's a government problem. You're not responsible for breakdowns in families; it's a government problem.

Just to make sure the message was clearly felt by the taxpayer, to pay for these social programs we've taxed people at a level that ensures that not only do they listen to the message, but even if they disagree there's nothing they can do. We have taken so much money out of the hands of the individual taxpayer that he or she is incapable of having any effect in society.

We're now walking over the homeless on our way to work. Why? We don't feel responsible for the homeless. We don't see that person as a neighbour, and in any event, we don't have any money to do anything about it.

Coming here this morning, I passed four people seeking funds on the street. I have to choose very carefully where I give to charity these days, because I am taxed to the hilt. I don't have a lot of disposable income. Once I've fed my family, sheltered them and clothed them, there isn't an awful lot left over. That's happening throughout society.

The individual is restricted in his areas of responsibility. With the extended family, it's now easier to stop paying your alimentary pension; the government will look after it. Parents will get a pension from the government and they'll get supplementary benefits. They're not my responsibility—my brothers, my sisters, my community. With all of this, I'm saying to the committee it's time to seriously rethink what we're doing.

I saw the beginning of this committee's hearings in Vancouver. You were faced with a request for an extra $2 billion to fund day care. It's time to say no. That $2 billion has to come from somewhere, and right now it's coming from the most productive citizens who are being pushed to the wall to fund them.

This committee is looking at equity. Even beyond equity is a question of morality. At what point do we say we're taxing the citizen at too great a level? Is it half of the citizen's productive output? Is it 60%? Is there any limit? Can we just simply keep taxing?

My suggestion is that we have reached a limit. Governments have to rethink. They have to rebuild Canadian society, instil a sense of responsibility in each individual, and give each individual the sense of being able to control his own life. They have taken away the choice from individuals. We no longer have the choice to do things we think are good. We cannot support the charities we want to support. Our ability to support our extended families is not there because we don't have the money.

You've taken away any number of different choices. Nowadays, for example, families cannot choose to raise a traditional family. They cannot choose to have the woman or man stay at home and the other person earn the money. They can't afford it. How does one get the choice back into the hands of the taxpayers? One does that by limiting how much money you take out of their pockets.

The first recommendation I'm making in my speaking notes is that the Income Tax Act be amended to impose an absolute limit on direct taxation per family of 35% of income, which will be reduced over five years to 20% of income—an absolute limit on direct taxation of families. That will allow families to regain control of their lives. It will allow communities to regain control of themselves.

• 1200

I'm going through this very quickly because I understand you're late.

If we look at the actual system itself and how it affects families, we see that there is no question that it discriminates against the traditional family where you have a single wage earner.

If $100,000 comes into the family unit by way of one parent instead of two, the one parent will be paying about 25% more tax than the two parents. I can provide the sources for that statistic, but clearly, one-earner families are being taxed at a disproportional rate if you make the assumption that the family is a unit in our society that we, the government, want to recognize. Right now the family is invisible to the tax authorities, and yet the family is the central unit of any stable society. Recognize the family, recognize that any money going into the family is shared by all the individuals within that family, and tax it on that basis.

My second recommendation is that you allow full income-splitting amongst all adult members of a family unit.

The Chairman: Whether or not they have children?

Mr. Peter Kirby: Whether or not they have children.

Why? At the moment, it's very common. In fact, there's a tax industry of consultants and advisers who will set up tax-splitting schemes, which are fairly complicated, but they work. They'll take money out of one earning stream and push it towards another family member. The case we hear of most often is the professional who will hire his or her spouse to work in the office and collect money as a manger of the office, or the children are perhaps working and getting paid for looking after the filing system. We know that's going on; however, that's only going on amongst a certain group in society. Employees don't have that ability. Employees can't engage in income-splitting. Professionals can—sometimes. Why not simply recognize that the family unit is something to be valued and permit income-splitting amongst all of the family members?

Finally, I would like to talk about measures you can take to foster family life. I think an extremely important measure is to recognize that home ownership is an important contribution to a stable society. Making mortgage interest payments tax deductible would be a major step forward in encouraging stability and the growth in a sense of community and family well-being. Our neighbours to the south have had mortgage interest deductibility for an awfully long time, and every time an American comes north of the border and looks at how many private homes there are in Canada, he's amazed that all of these homes are bought with after-tax dollars.

If one were to begin to implement these recommendations, what is it that you do? Would you have an effect on the growing number of one-income families, the broken families? I would suggest that you would. Why? Because right now, the tax system is the biggest financial burden facing any Canadian family. Financial burdens cause strain. In my case, the tax system tells me clearly that I would be better off being divorced. That's a message that I find unacceptable. I think the tax system should be built to encourage, not discourage, families; to encourage, not discourage, home ownership; to encourage, not discourage, choice.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Kirby.

We'll go immediately to questions from members. Could you limit it to four minutes, please?

Mr. Paul Forseth: Thank you very much.

• 1205

Mr. Kirby, you've certainly made some very thought-provoking statements, and it's interesting that many in society are increasingly thinking that way.

You talk about income tax limits. It's somewhat similar to the discussions I've heard about also trying to limit governments' ability to spend, such as balanced budget legislation, and so forth. Of course, government spending creates the need for high taxation, so it's six of one, half a dozen of the other.

We are hearing those kinds of discussions increasingly. But we need that debate in our society and our communities about the underlying principles upon which our present system is built. But would you not say, though, that there is a role for government to help those who cannot help themselves?

Mr. Peter Kirby: If you're asking me if I agree with motherhood and apple pie, I'd have to agree. Yes, there is a role for all citizens to help others.

Now, what is the role for government? My difficulty with the role for government is that when politicians decide to spend money, that decision is influenced not by what is necessarily good for the recipient, but to a greater or lesser degree by how many votes that will get: is this a project on which I can see a return in terms of an election year?

Mr. Paul Forseth: I think, of course, all public policy or government activity is about that.

You talked about income—

Mr. Peter Kirby: But that is precisely why the problems such as child welfare are not being resolved, because there aren't votes in child welfare. There aren't votes in poverty. But there are votes, perhaps, in building comedy museums in Montreal or canoe museums in the Prime Minister's riding. That's why I hesitate to say there is a role for government; yes, but it needs to be constrained by strict limits.

Mr. Paul Forseth: In converse to your proposal for income-splitting, we have three income tax rates. The lowest is 17%, the middle one is 26%, and the last one is 29%. So after you've determined what your taxable income is, you then get taxed at that rate on your taxable income. This is why a one-earner two-household family will pay a lot more tax than the same household down the street that happens to have two earners.

Mr. Peter Kirby: I understand.

Mr. Paul Forseth: One is paying at 17% and one is paying at 29%, for example. The other solution is to have a flat tax that avoids all the complications. But that's a fundamental review of the overall tax situation.

Mr. Peter Kirby: My first recommendation is to reduce the tax burden on families in five years to an absolute limit of 20%. That would accord with a flat-rate tax. I'm all for simplifying it, but the levels must allow choice in the taxpayer's life.

Mr. Paul Forseth: I'll end my comments by saying that consistently in the House, the official opposition has been making the broad-brush political point that taxes on individuals on earned income is far too high and that the government has to give much more comprehensive tax relief. That's the message I'm proposing.

The Chairman: Thank you very much, Mr. Forseth.

[Translation]

Mr. Cardin, please.

Mr. Serge Cardin: Good day, Mr. Kirby.

Mr. Peter Kirby: Good day.

Mr. Serge Cardin: I listened closely to your interesting presentation. When you tell the government to give people back their sense of family, of responsibility, you're asking a great deal, especially as we know that it is having trouble coming up with programs to help families. When the government has trouble preparing tax policies that are fair for everyone, it is difficult to ask it to restore moral sense or responsibility in the population.

Mr. Peter Kirby: But the governments themselves took this feeling of responsibility away from us when they told us to relax because they were going to take care of all the social problems. This is not a matter of giving citizens something that they did not have before; it is simply a matter of giving back to citizens something they already had, namely the feeling that they belong to a community.

• 1210

Mr. Serge Cardin: Then the government becomes an external authority that tries to guide individual actions; this is what you are decrying. I know very well that no one here would pay a politician from their own pocket, with their own money. The government is really an external authority that represses, for all practical purposes, individuals in the exercise of their right to free choice.

Mr. Peter Kirby: Yes. To the extent that the government imposes limitations on individual activities, it can impact individuals directly, and also their families and communities.

Mr. Serge Cardin: I understand that very well, but how could we turn this around? The taxation level is very high. In my opinion, the government grabs money and spends it on what I would call useless undertakings and pomp. If we were ready to make the sacrifice and identify the sums of money that are wasted, we could give some of it back to the citizens and lower the taxation rates. The government's financial management is in need of major house- cleaning.

On a very practical level, we also must think of the short term because some people have problems making ends meet; some do not have the option of staying at home to raise their children rather than working outside. In the short term, we must establish some fairness for families. The government must not direct the choices made by families, but it must provide support and help for them.

If we develop the sense of responsibility and leave that money in the citizens' pockets, there will always be people in need of help, those who are weaker economically and in other ways.

Mr. Peter Kirby: What you're suggesting is a bit like the case of an alcoholic who recognizes his problem and thinks he must find a solution: he has to solve his problem, but in the meantime, he goes on drinking. We have reached the point where citizens cannot pay anymore. We are no longer in control of our communities; we can no longer make any difference at all. We have to take care of the people who are really in need of help. Why is this? This is because all our money is squandered by Quebec City and Ottawa. This is not a revenue problem, but an expenditure problem. The government is spending too much. This problem must be cured right away.

Mr. Serge Cardin: What are you leading up to with your example of an alcoholic? Should we shut down all the provincial liquor outlets in Quebec to solve the problems of alcoholics? When comparisons are drawn, sometimes examples are inaccurate, but someone who wants to stop smoking and uses patches is doing so, although progressively.

But that is not the point. You say that we need a big change so that money is put back into the citizens' pocket and that citizens should be free to choose how to run their lives and those of their families and also to make sure that their children have—

Mr. Peter Kirby: I'm not saying that this can be done overnight, but the debate must begin. The government must publicly recognize the problem and say that society isn't really what it could be if people were just a little more involved. Getting people involved in society does not mean that we should impose astronomical taxes on them; it means, rather, means that people should be free to organize their lives as they see fit.

Mr. Serge Cardin: And to help those who are in a position of weakness. It is our responsibility as individuals. You might not personally go to help someone who is in need. You would want to get together with other people from your community. In fact, you probably do volunteer work in your community; you are involved with other people. At a certain point, you have to realize that you cannot personally address every weakness or request made of you, or meet every expectation; you have to involve yourself with other groups to do that.

• 1215

Mr. Peter Kirby: There was a good example in last Monday or Tuesday's edition of the Gazette. There was an article about a type of skelter or treatment centre, called Decision House, an organization with a long history in Montreal's anglophone community which has helped many people. Decision House may have to close because it does not comply with some federal or provincial government rules. This institution has literally saved hundreds of lives, and Decision House is run much more efficiently than other institutions, but it was told that because it does not follow certain rules it will not be eligible for funding anymore. So society is going to pay for all the work they have done and it will pay even more in the future.

Mr. Serge Cardin: Thank you.

The Chairman: Mr. Jean Herron, please.

Mr. John Herron: Thank you, Mr. Chairman.

[English]

Some of your overall message is something the smaller official oppositions also concur with. Right now on a day-to-day basis we're seeing debate on the tax burden the country is now facing and its effect on our productivity level. It's not only a growing burden on Canadian families but on the economy and society as a whole. It's restricting our capacity to grow. So I want you to know that I think that has to be more of a guiding fundamental in our public policy-making in general.

Having said that, I want to go into a couple of specifics.

Mr. Peter Kirby: If I may make a comment, it's not a growing burden; it's a burden that is in full bloom and sitting on the backs of a lot of productive citizens. It can't grow any more, I would hope.

Mr. John Herron: Unfortunately, King Kong is still getting bigger sometimes.

What I wanted to touch upon, one, is to make a comment. I don't want to spend too much time on this part of it, but the home ownership issue you flag I think is a public policy debate. In contrast with the Americans, although they can claim the interest on their home, in Canada we don't have to pay tax on any kind of profit we may make from actually selling the home. In the United States they have to pay tax on the profits.

Mr. Peter Kirby: My understanding is that in the United States, if you sell the home but rebuy another principal residence within a period of six months, you don't pay the tax; you simply roll it into your next principal residence.

Mr. John Herron: Profits—but maybe that's a poor first question for debate.

The Chairman: Are there profits now on your house, Mr. Kirby?

Mr. Peter Kirby: No, because I'm still paying for my house.

The Chairman: The government would be paying for everybody's house also if they introduced that program.

Mr. Peter Kirby: Very clearly. I understand, but my perspective is that—

The Chairman: It's a question of priorities.

Mr. Peter Kirby: —it's not my problem; it's your problem, although I'm having to pay for it.

Mr. John Herron: I think you flagged a very important issue, which I brought up in some hearings earlier, which is that the reason why individuals resist the income-splitting or the joint filing of income tax is because they say it benefits, potentially, those more affluent individuals than those persons on the lower end of the spectrum, because people on the lower spectrum are already paying the lower tax rate. But you flagged something that's very important. Certain professionals on the highest end can actually income-split, and middle Canada doesn't have the luxury to do that. I think you have flagged a very important policy issue in that regard.

If you could comment on that part of it, and finally on the concern that—I believe, Paul, over half the children who live in poverty are in one-parent families.

Mr. Paul Szabo: From lone-parent families.

Mr. John Herron: Yes, from lone-parent families. At that point they wouldn't benefit from the income-split scenario. And given the number of children who are in play in that regard, I think that's something we may have to engage with a public policy perspective.

Mr. Peter Kirby: Let me stop at your second point first. I made the point earlier that the Income Tax Act tells me explicitly that I would be better off if I divorced. Why? Because I would be effectively splitting my income by paying my wife. In the mono-parent situation, you're dealing with two distinct problems, two distinct issues. One is they wouldn't benefit from income-splitting. I'm not saying that income-splitting is going to be the panacea that benefits everybody. There are certain situations where, no, they would not be of benefit.

• 1220

What I'm trying to focus on is that the surviving families are being placed under such a tremendous burden that something has to be done to ensure that the surviving families don't become mono-parental. What is that? That is to lighten the load.

The Chairman: Thank you.

Mr. Szabo, please.

Mr. Paul Szabo: You mentioned homelessness, and you're probably aware there was a major study done in Toronto. Just to give you an idea, of all the homeless in Toronto, 35% were mentally ill, 17% were aboriginals off-reserve, 10% were abused women, and 28% were youth who had been alienated from their families, of which 70% had experienced physical or sexual abuse. It sounds like homelessness in Toronto has less to do with economics than it does with social problems—alienation from the family, or whatever.

With regard to family breakdown, according to the latest numbers, 75% of family breakdown is due to domestic violence, substance abuse, and infidelity. So this all supports your presentation with regard to the importance of secure, stable families, and it appears that much of the economic poverty we experience in Canada is due to social poverty or the social problems families get into.

The previous witnesses, when I asked them what we can do about this, basically said we can't do anything. I don't think that's the case, and I'd be interested in your thinking.

It seems to me if we raise healthier, well-adjusted children who are made aware of the social realities of the society in which we live, who are raised with a good foundation of social, family, and moral values, when they become adults and when they enter into relationships they'll be better able to cope and to in fact establish healthier relationships. Over time, the breakdown of the family or the stability or strength of Canadian families could improve. So there seems to be something we can do.

I think you're right, we all have a role to play. Governments have a role to play to protect citizens who get into difficulty, for those who are in most need or who have gotten into difficulty. And they should create or have policies, I think, that promote a stable environment for families with children. At the same time citizens have to address some of our problems, like domestic violence, substance abuse, infidelity, etc., which are causing a lot of the social problems, which cost all Canadians, all taxpayers, a heck of a lot of money.

If we all contribute, if governments hold the line and have good solid policies, and if Canadians start dealing with some of the problems we all blame on government, which are in fact some of our own problems, we will then reduce social costs and therefore be able to reduce taxes and relieve the financial stress that all Canadians feel.

What are your comments?

Mr. Peter Kirby: Rather than take the points individually, I'd like to restate the position.

We would probably disagree about the role of government, but I think we'll all agree that, yes, there is a role for government. We're going to debate what it is and how interventionist it is.

The point I was making about the social ills is a multifaceted point. The homelessness, where I was on Bay Street three weeks ago and had to walk around a fellow who was sleeping on the grill.... Now, I'm not saying the tax system put him there. It's likely he was put there because he's likely a victim of mental illness, alcoholism, or some tragic event in his life. The point I was making, though, is that I wasn't alone in walking around this gentleman. Hundreds of people on Bay Street were walking around him. What has got into the mindset of Canadians that we do that? We are not responsible for our fellow citizens. Why? Because of the mindset from what we've been told time and again, that governments fix social problems; people pay taxes.

• 1225

What I'm saying is it's time to say no. The message has to go out that people and communities fix social problems, and to give them the tools to do that you leave money in their pockets. Right now there isn't any spare money floating around in the system. So I can give of my time, and I do, but I can do very little to direct my charitable efforts, to give of my money, because I don't have it. That's my point, that in order for us to attack those social problems, to give Canadians a sense of responsibility and of control and of choice, we have to leave more money in their pockets so they can make those choices. Thank you, Mr. Chair.

The Chairman: Thank you very much, Mr. Kirby. I will give you the last word, and I want to thank you on behalf of the committee for sharing your viewpoints with us. Our task is a little bit lighter because we've had testimony such as this throughout Canada, and we'll hope to reflect the testimony in the report. Thank you very much, and we wish you a safe journey back home.

Mr. Peter Kirby: Thank you, Mr. Chairman, and thank you, members.

The Chairman: We'll adjourn until 1 p.m.