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]

Thursday, May 13, 1999

• 0905

[English]

[Technical Difficulties—Editor]

The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): All right, let's go.

As I was saying, if you could limit your presentation to between five and ten minutes, that would give ample time for members to ask their questions and engage in a dialogue.

On behalf of the committee, welcome.

Ms. Maureen MacDonald (Individual Presentation): Thank you. Good morning, and welcome to Halifax again.

I was very pleased when I was contacted last week about appearing here.

First of all, I'd like to take an opportunity to tell you the various vantage points from which I will try to bring to my comments today.

I've been an MLA for only one year, and I had a prior life, as we all did before politics. I have a strong interest in social policy and these issues, because I teach at the Maritime School of Social Work at Dalhousie. I have a PhD from the University of Warwick, and my area of study has been in the labour market, particularly around women and work.

Prior to teaching, I practised as a social worker in the north end of Halifax for quite a number of years, with a community health centre, where I was quite active in working with parents, predominantly parents with very low incomes, both parents who were on social assistance and parents who were in the labour force as low-income labour force participants, single parents, but also dual-parent households. Since election as the MLA, I represent that riding where I worked as a social worker.

I'm not the community services critic in the official opposition; I'm the health critic. But I chair a standing committee in the Nova Scotia Legislature, the Standing Committee on Community Services. I don't speak here today on behalf of that committee, but there are some comments I would like to make, based on my experience on that committee in the last year, where we have been conducting public hearings across Nova Scotia with respect to social assistance reform, trying to get a greater appreciation for the issues that are confronting low-income parents and communities that are trying to grapple with questions of equity and child poverty and these kinds of serious issues we're all concerned about. So that is the context in which I speak.

Briefly, I want to say that one of the presentations we had made to us at the Standing Committee on Community Services came from a group of academics at Dalhousie University who have been engaged in an international exchange of faculty and students and agency people in the child welfare field, from four countries: Canada, the Netherlands, the U.K., and Sweden.

One of the things that struck me tremendously in their presentation to us was their discussion about how different their experience was when they were in Sweden working with families that had children at risk. The point they made to us was because there is quite a different social security system in place in terms of income security for families, social workers in that country working in the child welfare system were actually able to focus on the problems that parents were having, because they didn't have to deal with income questions, unlike here, where income security tends to be a big issue for these folks.

• 0910

There are a number of things that are of concern to me and to others in Nova Scotia with respect to particularly the transfer system as it relates to parents and to families, and particularly children in those families. We've seen tremendous changes in our social infrastructure in the last five years, most notably the introduction of the Canada health and social transfer and the introduction of the new child tax benefit program, the national child benefit.

One of the things that has occurred in Nova Scotia, Nova Scotia being among the provinces with the highest incidence of child poverty, is that the families who are in the deepest poverty in this province have not benefited from that program, because it is being deducted dollar for dollar from their social assistance entitlement. From one end of this province to another, the presentations that the Standing Committee on Community Services heard condemned that practice and pointed out that it was a practice that really was in opposition to the intent of a national child tax benefit program. So I think it's really important for the subcommittee to visit this feature of what has gone on around that particular program.

I think there is a fair body of research that indicates that it isn't so much the family composition that's important in terms of public policy; what's really important is that there be equity in the way our tax system evolves and operates, and that child care expenses, for example, need to be seen as part of a deductible cost if people are in the labour force. We need horizontal equity in our tax system so that people with children are given the same consideration. In fact, their costs of raising children need to be incorporated into our tax system.

Ultimately, the best solution for dealing with both child poverty and income inequality between families is a universal benefit of some form that would be paid directly to the parent who is the primary caregiver, which would give that parent more autonomy. We need to equalize marginal tax rates between families with or without children.

I think one of the things that's very clear is that we need to revisit the changes that have been made to the EI program, which I think have dramatically decreased the numbers of people who are eligible for employment insurance. Women in particular, and single parents with weaker labour market attachments, have really been disadvantaged by those changes.

There are many more things I could talk about, but I'll leave it at that.

In closing, I'd like to draw your attention to the work of Shelley Phipps. Many of you may already be aware of Dr. Phipps' work. Dr. Phipps is an economist here at Dalhousie University. She has been doing research for many years on tax and transfer options for Canada and for Canadian children, and she does it in a comparative way. She looks at Canada in comparison to a whole variety of OECD countries. Her research is quite interesting. Perhaps we could talk more about some of her proposals.

• 0915

The Chairman: Thank you very much.

We'll turn to questions, comments, and answers, and we'll go with six-minute rounds. Mr. Paul Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you.

Thank you for your comments. There's so much to speak about that it's difficult to focus, but I did perk up at a couple of statements you made.

First, let me ask you, do you believe there are inequities, or some would say discrimination, in our current system of taxation and transfers, inequities between two-income families with children and one-income families with children with one parent who stays in the home to provide direct care?

Ms. Maureen MacDonald: Yes. First of all, I don't think we have a perfect taxation system. I think there are inequalities. We don't have horizontal equity in our system.

For example, we have in our taxation system features that allow people who are employed to claim certain expenses. Obviously, people who are unemployed, single parents who are unemployed, for example, don't have the opportunity to make those kinds of claims. They may not have those expenses, but they may in fact have child care expenses that aren't employment-related and they can't claim them. So there is inequity there that results in quite serious differences in income, and that has a significant impact on the family, then, and on children within the family. We need tax reform at all levels, not just with respect to children. But I understand that's what you're looking at.

Mr. Paul Szabo: Okay. You made a statement that we should seek to equalize marginal tax rates between families with and without children. Could you tell me more?

Ms. Maureen MacDonald: I'm not a tax expert, but I've been attempting to read about the different ways in which we can address income and equity. The tax system clearly is one of those ways. There are at least two people who have been doing research in this area who write about this feature of our tax system that would make a big difference. I can't really explain the details of how that would work. I rely on the experts for that advice.

Mr. Paul Szabo: Okay. I have one more question.

A particular area that seems to be of some interest to many of the witnesses has been the existence of a child care expense deduction, up to $7,000 for preschool and $4,000 for a school-age child, which is available when both parents are in the paid labour force. A view is that some equivalent benefits should be made available to parents where one provides direct parental care and there's only one income earner. We're having some difficulty trying to determine what form that benefit might take, whether it's through the tax act or external to the tax act, and trying to quantify it. Do you have any suggestions for us?

Ms. Maureen MacDonald: No.

Mr. Paul Szabo: Okay, that's fair. It's better that we not just speculate about how it might be done, without it actually being done. But in your view, there's an inequity that should be addressed.

Ms. Maureen MacDonald: Yes, I think there is inequity that needs to be addressed.

Mr. Paul Szabo: Okay. Thank you.

The Chairman: Thank you, Mr. Szabo.

[Translation]

You have six minutes, Mr. Cardin.

• 0920

Mr. Serge Cardin (Sherbrooke, BQ): Good morning and thank you for coming. First of all, I would like you to clarify something for me.

A number of people have talked to us about the child tax benefit and how it affects families that receive social assistance benefits in various provinces. In some cases, it might lower their income. I don't have a great deal of information about this. Most likely, we would need to look into this further to see whether in fact in certain provinces, this causes some income disparities for families receiving government assistance.

Could you tell me more about the disparities that could exist between a family receiving assistance in order to survive and another family? Ultimately, how do the incomes of these two different families compare? Consider, for example, a family consisting of two parents and two children living in a province where the tax benefit is assigned directly, and another family living in a different province where the same benefit affects the way in which the base income is calculated.

[English]

Ms. Maureen MacDonald: I think the tax system and how it works is extremely complicated and confusing for most people, myself included, quite often. It's very clear that there are so many complicated rules, depending on your family configuration and the various programs you might have access to on a provincial or federal level. So it's difficult for most people to sort out the various features of inequity, either in the tax system or through the transfer system.

• 0925

My own area of work is primarily around transfers, so it's in this area that I know the most about inequity, and not around the taxation system. I can speak to what has occurred in this province around the national child benefit, which has resulted in families that are in the labour force receiving that benefit in addition to their wage but families that are on either family benefits or income assistance have it deducted dollar for dollar. They receive the federal transfer, but then it's taken out of what the province gives. There are three provinces in Canada that have chosen not to claw back the child tax benefit for people on social assistance in their province. The rest of the provinces in fact are clawing it back.

In theory, this province intends—it is the stated intent—to reinvest that clawed-back money into areas of maybe early childhood interventions or those kinds of things, which are very important. But I would argue that the money shouldn't be deducted from families who require it. Other pools of money, other allocations of resources, need to occur for those kinds of programs. It's become a bit of a sneaky way, I think, for provinces to have federal money to do program development. We need, frankly, that money to be going into the hands of the low-income families, regardless of where their income comes from. And we need to invest in those other programs with new money, better resources.

The Chairman: Do you have any suggestions as to how we could prevent the provinces from doing that, or why we should prevent the provinces from doing it?

Ms. Maureen MacDonald: The federal government had a hand in setting this program up. In fact, it was the intention of the federal program to target this money at working poor and people in the labour force. That's a weakness in the program. It's important that all children benefit from a national child benefit program, and not to segregate out some parents and then some children. I think both provinces and the federal government have a responsibility here. Obviously three provinces took what I would call the high moral ground and didn't go along with this notion that it's only parents in the labour market who need the income supplement through the national child benefit. But it's very problematic for people in this province.

The Chairman: Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): You've studied this problem. Have you then contemplated the actual legal change or rule change, whatever, that could just end this practice?

Ms. Maureen MacDonald: I don't want to predetermine the outcome of our Standing Committee on Community Services; we're in the process of writing our report. But I can say that members of our committee—it's a committee that's made up of three members from each of the parties in the House—are actively discussing whether or not this is something we need to recommend strongly to the provincial government here in Nova Scotia.

• 0930

[Translation]

The Chairman: Go ahead, Mr. Cardin.

Mr. Serge Cardin: It's still my turn, Mr. Chairman?

The Chairman: Yes, you have some time remaining.

Mr. Serge Cardin: We have identified some disparities between a low-income working family and a family receiving social assistance. We noted that persons receiving social assistance benefits actually received a lower child tax benefit. Is the situation similar from one province to the next, that is do families receiving social assistance get less because of the tax treatment of the child tax benefit? I'm curious about this, based on what we have observed.

[English]

Ms. Maureen MacDonald: Any of the research I've seen done by the National Council of Welfare and the Canadian Council on Social Development and Statistics Canada I think would all suggest that first of all the numbers of families and the numbers of children in poverty are worse in the Atlantic region and probably Manitoba and Saskatchewan, followed by Quebec, in terms of proportion of the overall population.

In terms of the welfare system, for example, and the system of transfers, the Atlantic region has always fallen on the bottom of the pecking order in terms of the financial transfers that are available to families. And then in addition to that there is some research—it's not well developed, I don't think, but there is some—that indicates that the kinds of community-based programs, I guess you would say, and other programs that low-income families could access are weaker here in the Atlantic region than in other parts of the country.

One other program that people talked to us a lot about when we did our public hearings on the standing committee was the CAPC program, which you'd be aware of, the federal program for better futures for children. This has been a really important program in many communities throughout Nova Scotia, especially coastal and rural communities. But the way in which it has been developed and funded on an annual basis has left those programs in a very precarious and insecure position. So they're trying to build family resource centres and intervention approaches at an early stage without knowing what the future is for those programs.

We really need to have some longer-term planning and some commitment that would allow those programs to do their work in a more secure way. The evaluations of the outcomes of these kinds of programs are quite interesting, in that they show some real progress for kids if you can work with them at an early enough stage and work with their parents and provide support. They're important programs. We need to have a strong commitment to them.

[Translation]

Mr. Serge Cardin: I'll repeat my question. Are families living in a particular province and receiving social assistance at a disadvantage compared to families living in another province and receiving similar benefits because of the tax treatment of the child tax benefit?

[English]

Ms. Maureen MacDonald: Yes. Absolutely.

The Chairman: Mrs. Dockrill, please.

• 0935

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

Maureen, thanks very much for coming. I have to say it's great to be almost home. We've had, as you can well understand, a lot of presenters over the course of the last four days. One of the presenters—I think it was in Calgary—said she thought it was futile to target parental activity, and we should be recognizing the care of children within the tax system and the transfer system. I just wonder if you agree with that and would like to comment on it.

Another issue that seems to be coming forward is the sense from some individuals and groups that we have to look at placing an economic value on unpaid work. There was a sense from some presenters that they felt that would help alleviate some of the inequities between a one-income-earner family and a two-income-earner family. I just wonder if you want to comment on those two things.

Ms. Maureen MacDonald: I would agree that we need to move away from developing programs based on parental activity. That can be quite stigmatizing in many respects. We really need to think about all of our kids, regardless of whether they have one parent or two parents, whether their one parent is a single male parent or a single female parent, and what have you.

We need to develop good public policy, based on the immediate needs of children and the long-term needs of children, and our aspirations as a society for what we want for our kids and for ourselves in the future. After all, those kids will hopefully be productive members of our society in our old age.

That's the approach we need to take, which is why people who know a lot more about this than I do, who have been writing and researching, talk about some form of universal child allowance right at the outset. It's administratively cheaper than all of this tinkering and what have you that we're trying to do around the tax system and other things. It is something that can be for higher income earners. It can be taxed, not in a special way, but in the regular process of the fair tax system.

It creates much more equity in the system. I think it results in a social set of relations in our society that are more harmonious, so we're not pitting one group against another constantly, and people aren't trying to make their cases for how they need to be treated differently, based on how they look as a family. This is a very destructive road to go down if we try to develop our social policy in this way. It becomes very mean-spirited and I don't think it's the way Canadians identify, in terms of how we like to provide public policy.

On your second part, the economic value, this is quite interesting. It sounds like the old feminist argument back in the late sixties and early seventies about wages for housework. There's quite a large literature on how unpaid work in the home needs to be calculated into the GDP, and all of that kind of stuff.

• 0940

Clearly, unpaid work does have an economic value in our society. Marilyn Waring, the former Labour MP in New Zealand, has done a lot, and wrote If Women Counted. But it seems to me this issue could be somewhat controversial, in terms of trying to embed it in some way in our public policy. It would require a lot of thought, a fair amount of research and lot of public debate before we jumped into that.

Ms. Michelle Dockrill: Thank you.

The Chairman: Thank you, Michelle.

I'd like to now turn to Mr. Scott Brison, please, for five minutes.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chair.

It's nice to see you, Maureen.

On this disincentives issue, particularly with single parents, I see it in my riding quite a bit where a single parent who receives—

Ms. Maureen MacDonald: Lone parent.

Mr. Scott Brison: I'm sorry—lone parent. It's not the single ranger; it's the Lone Ranger and the lone parent, yes.

I see it in my riding a lot. Disincentives exist for lone parents who are on social assistance, who ingeniously want to work and find an opportunity to work at, in most cases, lower-wage jobs. They have a direct disincentive to do so because they will lose provincial benefits. In addition to that, there is the cost of actually getting to work and associated costs of working, plus child care costs.

I'd appreciate your feedback on that and how we can coordinate, through the transfer system or the tax system, some way of eliminating those disincentives that exist between the provincial and federal governments in that sense. That's the first issue.

Second, in terms of the child tax benefit, you said seven of the ten provinces are clawing back from those who are receiving provincial social benefits. I thought it was actually eight of the ten provinces. Newfoundland and New Brunswick were not. Which is the third province that is not clawing back?

Ms. Maureen MacDonald: I'm not sure. I thought it was B.C.

Mr. Scott Brison: Okay. Those provinces that are clawing back, I believe, have indicated they are using that money for some sort of provincial program spending focused on benefits for children. I would like to know what Nova Scotia is doing with that, because that is one of the things—

Ms. Maureen MacDonald: So would I.

Mr. Scott Brison: That's the second question. I'd like to know whether the money is simply going from a federal bureaucracy to a provincial bureaucracy, when it was meant to go to children.

Thirdly, you mentioned that the tax code was very complicated, and I share that view. In fact, it's nice to see New Democrats and Progressive Conservatives agreeing that the tax code needs simplification. Is the tax code being used to try to address too many social functions, and should we be trying to look at the transfer system and more innovative programs?

For instance, Dr. Fraser Mustard presented to the House of Commons finance committee's productivity committee recently on early childhood intervention and head start programs, and how the return on investment societally for those areas is very substantive. Perhaps we are trying to do too much with the tax code and maybe we should be looking at more innovative social investment. Those are just some of my questions on which I would appreciate your feedback.

Ms. Maureen MacDonald: First of all, in terms of disincentives around lone parents and the labour market, it's complicated. I think one of the big disincentives is that the labour market itself has some problems. There has been labour market failure, in terms of being able to provide full employment. Then the kind of employment that is increasingly available in the labour market is part-time work or non-standard work.

• 0945

This province is no different from any others, in that there has been an extremely rapid growth of employment opportunities generated through temporary employment agencies. It's probably the fastest-growing area of employment opportunities, to the extent now that in this country probably 30% of the employment in the labour market is non-standard. So what I like to think of as labour market failure is a huge disincentive for people being able to get into the labour force.

The next problem, or another problem, is training and education opportunities that are able to keep pace with the changing labour market conditions that people who are unemployed can get access to. We really need to invest heavily in assisting people to constantly upgrade their skills and abilities to get into the labour market. If we don't do that, not having those skills will be a disincentive.

Then if you come down on a more specific and focused area in the welfare system, we have a social assistance system that was designed back in the 1940s and 1950s, really, and maybe the early 1960s, when market conditions were entirely different from what they are today, and social values were entirely different from what they are today. For example, women weren't in the labour market at that time in the numbers they are now.

The kinds of incentives or supports that were available were made available in our welfare system in the 1950s and 1960s, when in this country we had what could be characterized as full employment. You didn't need to assist people through your welfare programs to get into the labour market in the 1950s and 1960s because people could get jobs if they were able to work.

Women weren't part of the equation because they hadn't entered the labour market in the way they have in the last 25 years. So the whole requirement around child care didn't exist. The whole question of training and education also didn't exist because we were still primarily a resource-based economy, and people could get jobs with relatively low levels of education. All of that's changed, but our welfare system hasn't changed to meet these new conditions.

If we really want to give people a hand up out of poverty and welfare into our labour market, then we absolutely have to address the reality that a lot of the work is temporary and a certain group of people will be in and out of the labour market. We need to be very clear that we have to invest heavily in training and education to assist people. We have to deal with the gender factor, which has the big requirement of child care. There's no getting around it.

The Chairman: Thank you, Mr. Brison. Last question.

Mr. Scott Brison: We've had five minutes of questions and now we'll require at least twenty minutes of answers.

The Chairman: You're at eight minutes, Mr. Brison—

Mr. Scott Brison: Oh, I thought—

The Chairman: —and we're running five minutes overtime.

Mr. Forseth.

Mr. Paul Forseth: Thank you.

We're looking at any kind of universal program, the benefit paid to children, and this whole problem of the so-called welfare clawback, or whatever. You've been holding hearings and I suppose the outcome will probably be that you'll be calling upon the government locally in this province to end that practice, but to do it voluntarily.

I'm wondering if it's ever come within earshot of someone giving some ideas about it, in a prescriptive way, from the federal government, seeing it's coming from Ottawa and it has a program design; if there's some kind of legal or rule change or something, beyond the provinces getting together at their annual federal-provincial meetings and agreeing to do so—so we can just say those are the rules and you can't do it. Have you heard of how that could be done?

• 0950

Ms. Maureen MacDonald: No. There are at least two lawyers in this province who have been developing some expertise in federal-provincial transfer programs. They are looking at this. I don't know what their determination is at this point. We did hear from one of these persons in our hearings. They talked about some of the potential legal challenges that could occur, and they're exploring them.

Mr. Paul Forseth: Who is that? We might be able to get a letter from him or something.

Ms. Maureen MacDonald: There's a lawyer in Nova Scotia named Vince Calderhead, with Nova Scotia Legal Aid.

Mr. Paul Forseth: I want a last question. Early on in your presentation you talked about how in Sweden they've managed to look after the basics of income support and welfare, which might perhaps provide basic stable housing and other things. So then you're able to get on to the more soft social pathologies. I'm wondering, do you know of any international comparative rates of pathology such as national alcoholism rates, drug problems and so on, that indeed show that Sweden is any better off than some of the other countries?

I would think that now there's more of an ability to do these kinds of comparative studies within the European Union there's going to be a lot of one-upmanship games between countries, saying we're a better place to live than you are, and so on. One intuitively could figure that this might be the case, but I'm wondering if you can cite any study or stats that would demonstrate that.

Ms. Maureen MacDonald: No, I don't know of any comparative studies that go beyond an income distribution analysis, that look at the distribution of income and then the proportion of the population who fall significantly below the median and what have you. They tend not to be very qualitative, but mostly quantitative.

Mr. Paul Forseth: The reason I ask is because of course Sweden has been down a particular road for an awful long time, so if there was direct benefit to it, it would certainly show. Yet I understand alcoholism rates in Sweden are very high. So you begin to wonder, where is the real pay-off? Because often those kinds of rates are indicators of social health.

I'm finished.

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

I'd like to thank you, Ms. MacDonald. I believe when it comes to offering choices for families, especially when it comes to children, there are no partisan politics and all parties agree, and we'll try to find a common ground we can all afford as Canadians. On that note, I'd like to thank you for your contribution. Thank you very much.

Ms. Maureen MacDonald: Thank you very much.

The Chairman: As our next guest, again on an individual basis, we have Jennifer Auld-Cameron. Ms. Cameron has to leave by 10.30. Therefore, I'd ask our members to have the questions for her ready so she can answer them before she leaves.

As well, we have Mr. Harris, who will be presenting equally. Therefore, in the interest of time I would ask Ms. Auld-Cameron to make her presentation.

Try to restrict yourself to five to ten minutes at the most, so we have enough time for questions, please. Welcome. You may begin when you're ready.

• 1000

Ms. Jennifer Auld-Cameron (Individual Presentation): Thank you.

Good morning, ladies and gentlemen. Thank you very much for allowing me the opportunity to speak today. I appreciate the opportunity your subcommittee is giving to Canadians to voice our concerns about the tax system as it currently stands.

I am here today as an individual. I am a stay-at-home mother who left a rewarding career in 1992 and I now have two children. Last year I began to realize that single-income families are being hit extremely hard tax-wise. I began to do some research last year and I came up with some facts that were quite startling to me. I have just distributed to you—I hope I kept a copy for myself—a scenario I did that shows the difference between a double-income family and a single-income family with the same net income.

At the outset I would like to tell you that I believe all families should have the right to choose the method of child care that best suits. I'm not trying to put one method above another; I simply want to make a comparison. I think tax fairness would presume that whatever choice parents make in this regard, they should be neither penalized nor privileged by the tax structure.

As I mentioned, today in Canada the tax system discriminates against single-income families with dependent children, and this violates three basic assumptions we would make about fair taxation: that taxes should be neutral; that they should be progressive and based on the ability to pay; and that they should consider the number of dependants.

I'll refer to the sheet, the table I've prepared, for a moment. What I've chosen to do is to take a total income of $70,000, and you can break it down in various ways, say $30,000 and $40,000, with two parents working full-time outside the home, and another situation in which there is one income earner. I've allowed a $10,000 child care deduction—I'm assuming that both families would have two preschool children that would require child care—which would make the total net income $60,000.

I won't go through it line by line. I've just summarized the tax form. But if we consider all deductions—and I haven't even written in the spousal deduction and some of the other deductions, but they are all included in this—you'll notice that there is a net difference between the two families of nearly $2,500 a year, with the single-income family paying that much more. I'd also note that there are deductions that both families would incur that a single-income family is not allowed to claim.

As a result, I feel the system clearly is flawed. It's not neutral. It's not based on the ability to pay. Nor, in the case of single-income families, is it affected by the number of dependent children.

Two years ago Mr. Martin, in his speech to introduce the budget, stated that children are our future and that families are important, so the Liberal government would substantially increase the child care expense deduction. Unfortunately, it was designed to help double-income families, so only a few families and children were able to benefit from this.

Statistics I've recently received have shown that only about 15.8% of families with young children are even using this credit. So even the population it was designed to serve is not being served by it, because I think estimates are in the range of 30% to 40% of families with both parents working.

The other tax incentive that was designed to help families was the child tax benefit. It was an attempt to ease the tax burden on lower-income families, which I think it is doing to some degree. It does assist very low-income families, double or single income, and it does progress up to a certain cut-off point. The relief does vary, and at a certain point it is no longer in existence.

• 1005

To give you an example, a single-income family that would earn $30,000 a year would be able to get about $2,262, with two children under seven. A $60,000 single-income family would get $762. A double-income family at $60,000 would get $336. So you can see the way that scale works.

I am proud to live in Canada. I think we live in a safe, stable country with a viable economy. And as Canadians, I think we value families. We talk about families as the fabric that binds our society, yet our tax system is discriminating against middle-income families who choose to forgo a second income so that we can provide a home for our children on a full-time basis.

According to Statistics Canada, this middle-income group is among the highest taxed in the country. Many reports have been written on this subject and studies have been done, but they don't seem to be heeded. In 1970, for example, the Royal Commission on the Status of Women stated that all mothers should be able to deduct child-rearing expenses, whether they choose to use day care or not.

In 1997 the Fraser Institute reported that in some cases single-income families pay 150% of the tax of dual-income families, and they recommended a universal grant for families per child. Also in 1997, the National Forum on Health reported that the environment in which a child is nurtured in the early years is crucial to lifelong social and mental health, and it stated that the Income Tax Act does discriminate against single-income families with children and recommended greater horizontal equity in that regard.

I also think it's interesting that the Department of Health is recommending that the best advantage to young children is given if mothers can breast-feed their children for the first year of life, and other departments are recommending that we have national day care from as early as we can get our children in there.

I think we have to also look to the world and what's happening in other countries. Canada, I am told, is the only western country that does not take into account the cost of raising children in the family home when determining how much tax families with children should pay. I know Norway pays—due to the fact, I guess, that their day care centres are overflowing—$570 per month to a family home where one parent will provide care in the home. I know the United States is in the process.... In fact I read in U.S.A. Today that they're trying to make some changes. A bipartisan bill has just come forward to try to raise the tax credit for working parents and non-working parents who stay in the home in family situations like that.

I know Alberta has made strides to make some fair concessions, and P.E.I. is also seriously looking at this. However, I think they're looking to the federal government for leadership.

I am not a tax expert, and I don't claim to be, but I think if I were asked my opinion on how to make this fair, I would make three suggestions. First, I would give the option to families to being taxed as a single unit. I think that would help to level the playing field.

Another option would be to create a flat-tax break. I think the C.D. Howe Institute recommended a $2,000 flat rate be implemented to flow with the child, regardless of the child care arrangement.

Also, I think increasing the spousal deduction would be a fair place to make some changes. I think it's interesting to ask: Is a parent at home only worth just a little over $5,000 for what they're contributing to the life of the children and to the community with the other things they do?

In conclusion, I'd like to say that the state of affairs with our tax system as it stands points to the fact that we need to make some significant changes so that it is fair for all family income configurations. We need to bring government departments together so they can work in concert. We need to take the advice of experts, and not let these expensive studies just gather dust.

• 1010

I ask you as a subcommittee to make recommendations that will end the discrimination and disparity that now exists and will create a tax system that is fair and benefits all Canadian families, regardless of their choice for child care arrangements.

The Chairman: Thank you very much.

I'd like to now ask Mr. Harris to make his presentation, please.

Mr. Ed Harris (Individual Presentation): Thank you, Mr. Chairman.

I'm representing myself here and no particular organization.

I've been teaching and practising tax law for about 40 years and have seen a great many reports and a great many suggestions come forward as to improving our tax law. Most commentators feel the tax law still needs a great deal of improvement, and that will probably always be the case. I've provided notes for my remarks if members of the subcommittee wish to refer to them. In view of the time allotment, I've not tried to deal with all of the areas that are within your jurisdiction but have concentrated primarily on the tax and other support for dependent children.

The proper tax treatment of the family is a perennial issue that won't go away. You can go all the way back to the 1960s and the report of the Carter commission, which recommended, among many other things, that the family should be the basic tax unit and the income of spouses and dependent children should be pooled and taxed as a unit. This radical change to the existing tax system would of course have created both winners and losers, and the government of the day found it too controversial to implement. I hear Ms. Cameron is suggesting that perhaps we should have another look at this issue.

Since then, however, many changes have occurred to our tax laws, particularly changes designed to offer relief to lower-income taxpayers, and some of these changes require a pooling of family income to a greater or lesser extent. These changes include both the present child tax benefits and the present GST credits, which operate essentially as refundable tax credits even though they're not necessarily directly tied into the tax one pays.

Until the late 1980s our tax system provided tax relief for dependent children in the same manner as personal exemption as a manner of shielding from tax a minimum amount required to sustain a taxpayer's family, so that if a taxpayer's family included dependent children it was assumed that the cost of maintaining that family was higher than if it didn't. That much of a taxpayer's income was not regarded as discretionary and therefore was not taxed, regardless of the taxpayer's income level. At least the principle that was implemented was clear, although the amounts allowed were never enough for the purpose; they were always too low. While indexing helped, it started too late really to solve the problem.

In the late 1980s the government substituted tax credits for the personal deductions. This was claimed to enhance the progressivity of the tax system by imposing higher effective rates on middle-income and higher-income taxpayers with children. But I think it lost sight of the purpose of the deductions that were in place before the credits were substituted for them. Many careful observers believe this change was a mistake, that the obligations of middle- and upper-income taxpayers to support their children should be recognized as much as those of lower-income taxpayers.

If the government felt that the tax system was insufficiently progressive, it should have addressed this issue directly through the rate structure, and not by treating families with children the same as families without children. I hasten to add that I'm not advocating higher marginal tax rates at any level of income—quite the contrary. Lower marginal rates, among other things, will relieve some of the problems this subcommittee has to address. My only point is that the appropriate degree of progressivity should be dealt with in the rate structure itself, and not through vanishing tax credits, surtaxes, and other indirect means.

The phasing out or clawback of credits relating to dependent children based on increasing levels of family income can be a powerful disincentive to improving one's economic position. You've already heard some submissions on this point. The marginal tax rate for a family of modest means on an additional dollar of income can be very high. To some extent this undermines the advantage a non-working spouse who is considering joining or rejoining the workforce might enjoy by being subject to the lowest marginal rate of personal tax.

• 1015

One of the reasons why the Carter recommendations for the family tax unit were not accepted was that it would place too high a tax rate on the first dollar of income that a non-working spouse would earn if he or she went back into the workforce. The idea was that if that happened, he or she would pay tax at the lowest marginal rate, and that would be an incentive to go back to the workforce. But in fact if there are dependent children and there's a clawback of child tax benefits and GST credits and so on, that incentive or limited disincentive is undermined.

Child care expenses have been mentioned already. The deductibility can be important. But in the end, assuming that such a person goes back to work primarily for economic reasons, as distinguished from just wanting to get out of the house, no matter what income is earned, the amounts earned after tax must exceed the additional expenses of going to work by enough for the effort to appear to be worth while. High marginal rates hitting the first dollars earned in excess of child care expenses discourage what would otherwise be productive economic activity.

I haven't given you a lot of easy answers to these difficult questions. It seems to me that this is going to require some pretty careful technical analysis to see, for example, whether the clawbacks can be dealt with in a more sophisticated way so as not to create disincentives through high marginal tax rates on relatively low-income taxpayers.

Those are the points I wanted to make in the formal presentation. I'm happy to respond to questions.

The Chairman: Thank you.

I'd like to thank Mr. Forseth for relinquishing his turn in favour of Mrs. Dockrill.

Five minutes, please, Mrs. Dockrill.

Ms. Michelle Dockrill: Thank you, Mr. Chair, and thank you, Mr. Forseth.

I have one question, and I will allow both of you to take the opportunity to answer.

I'm wondering if you could tell me your thoughts on whether or not what we're discussing today with respect to inequities in families is an issue about children or an issue about parental activity.

Ms. Jennifer Auld-Cameron: I think that's a very interesting question. First of all, being that it is a financial matter, certainly it is a parental issue, but I think the choices parents make have an impact on our children. I think if we give parents financial incentives it helps them to make choices that are best for their children.

Mr. Ed Harris: I haven't much to add to that. There are two areas of choice, I think, in the modern family. One is whether to have children at all, and the second is how much to spend on their upbringing and education. The tax system can have a powerful influence on both those decisions. So it's hard, really, to separate the parents from the children when you're looking at this issue, if I understand your question.

Ms. Michelle Dockrill: The reason for my question is when we're talking about public policy, when we're talking about the tax system, should we be looking at it from a perspective as it relates to the child or as it relates to the parental activity within that family?

Ms. Jennifer Auld-Cameron: I think it should be based on the child; I really do. I think it's difficult, though, because it's the parent who is the taxpayer. But I think that's a really important point you've raised, because I think we sometimes make tax concessions that will suit parents without looking at the impact that will have on the children.

Ms. Michelle Dockrill: Again, the reason I ask this is that I have some concern that what we're seeing is a pitting of one family that has a parent who has chosen to stay home against a family that, possibly for economic reasons, has to have two people working. And if we're looking at the child and to ensure that all the policies in the tax support the child, then in fact you're supporting the family.

• 1020

I have one point about the child care expense deduction. We've had a lot of presenters who have clearly said that given the fact that some individuals do not have a choice with respect to staying at home purely for economic reasons, and they would not incur that expense otherwise, it is an employment-related expense. I'm wondering if you want to comment.

Mr. Ed Harris: You're probably familiar with the Thibault case, of course, where this issue came up.

But I agree, I think the child care expense in the cases where it's allowed is an expense of earning income, and that's why it is allowed. And the only question is whether the present rules are too restrictive in terms of qualification for deducting the expense in terms of the limits that are imposed, although those limits have recently been increased.

No, I think socially it's a very desirable element of our tax system, and I certainly would support it.

Ms. Jennifer Auld-Cameron: And I would echo those comments. I certainly would not like to see families who have chosen both to be working be penalized. What I'm asking for is just to equate the playing field, because now parents who choose to be at home are penalized in that regard just because of the way they are as a unit in terms of the tax structure.

Ms. Michelle Dockrill: I think it was yesterday we had some mothers present before us, and one of the mothers made an interesting comment that stayed with me. I was wondering if you'd like to comment on it. She said she didn't have the answers in terms of how we could address the inequities, but what she had hoped was that it would be fair and equitable. So on that basis, would you support say going back to a similar system that we had previously with respect to the baby bonus or child allowance and a deduction for dependent children, for everybody?

Ms. Jennifer Auld-Cameron: Yes, I would. I think something has to be done that makes it equitable. As I stated earlier, I'm not a tax expert, so I don't know the ins and outs of the comparisons between the various systems, but if there was a flat deduction for everyone I think that would make it fair.

Mr. Ed Harris: That's the point I was trying to make as well.

The Chairman: But you realize that in making it equitable you still have a lot of differential.

Ms. Jennifer Auld-Cameron: Definitely, because I do believe that people who are earning this income do have those expenses incurred. So yes, it's not going to be totally equal, but in the other regard we were mentioning, it will balance equally.

The Chairman: Mr. Brison, please, five minutes.

Mr. Scott Brison: Thank you, Mr. Chairman.

I really appreciate both your comments. Ms. Auld-Cameron, I appreciate your comments that it should be about choices, not necessarily for the government to encourage at-home parenting or to discourage it, because individual families and parents can make those choices probably better than the state.

On the issue of relative choice, let me give you one situation I'm familiar with. In fact it's my brother's family. My sister-in-law is a student; studies dentistry at Dalhousie. They have two children. So it's a single-income situation. They have to pay for child care, so there is a difficulty in that sense. A flat deduction would benefit them and help them to make whatever choice, because a lot of times I think in situations one spouse may be upgrading their education, for instance, not just a stay-at-home parent. Would the flat deduction be the best way to approach that? Would you see it as one way to approach that? I think in a lot of cases, particularly with labour market flexibility, it's important that we allow for opportunities for one spouse to train or retrain throughout their careers.

Mr. Ed Harris: Generally they're eligible for the child care expense deduction—

Mr. Scott Brison: As a student?

Mr. Ed Harris: —where the spouse is studying full-time.

Mr. Scott Brison: She's not full-time; she's studying part-time.

Mr. Ed Harris: There are also tuition and education credits, of course, that would assist in that situation.

• 1025

Mr. Scott Brison: Does the reporting—and this goes back to the Carter commission recommendations and what you were saying about a single-family tax return—of joint income or family income in any way subordinate independence of the two partners in a marriage? If you have two partners or spouses with careers—and it's my experience that many in that situation have independent financial affairs as well—is there a way of subordinating financially the independence of one or the other with that?

Mr. Ed Harris: I think we have to recognize that a lot has happened to the typical family since the mid-1960s, when the Carter commission was deliberating, and that there is in many families today a much greater independence of each spouse from the other, financially and otherwise, to a point where in many families one doesn't disclose to the other his or her financial situation.

The Carter report did offer an alternative whereby the families could elect out of the family unit taxation and be taxed individually, but there would be some tax penalty to doing so.

The Chairman: Mr. Harris, in the 1960s we didn't have the computers we have today. You could have separate filing, where you don't have to disclose anything, and have Revenue Canada's computer merge the two reports very easily. So that concern would not be there.

Mr. Ed Harris: Still, if that happened and you relied on Revenue Canada to do it, and you wanted to dispute Revenue Canada's figures, they would have to disclose what they were doing. I think there are still administrative problems in doing it, although I recognize that there may be ways around it.

The Chairman: Mr. Brison.

Mr. Scott Brison: Thank you. Mr. Chair, you just took one of my minutes.

As to progressivity, many people argue that there's a large body of evidence and research to suggest that we should be moving toward a consumption base and away from income-based taxation. Some concerns about that are the progressivity concerns. Do you see a way in which consumption-based taxation can be made more progressive, particularly for those with child care expenses? I would appreciate your views on that.

An hon. member: Do you recommend proposing that we increase the GST?

Mr. Scott Brison: The last time our party suggested the GST we weren't positively reinforced politically, but your party seems to have benefited quite nicely from that, so don't complain.

Mr. Ed Harris: Yes, I would certainly support a move in that direction, though I understand the political problems of doing so. I was involved in the 1980s with a study done by the Economic Council of Canada, which came up with very much that recommendation.

Granted, the progressivity issues have to be addressed, and whether you address them through an expansion of the GST credit or something else, whether you exempt certain commodities and services that become necessities, and so on, some combination of that has to be considered. But again, you don't want to have clawback provisions that make it unattractive to earn that next dollar of income.

Coming back to my presentation this morning, I think if we had marginal rates of income tax considerably lower than we have now, the clawback problem would be much reduced.

The Chairman: Thank you.

Ms. Auld-Cameron, do you have anything to add?

Ms. Jennifer Auld-Cameron: Yes. I would like to make one final comment in regard to what Ms. Dockrill had mentioned earlier about the child.

I know we don't have money falling from the sky, unfortunately, to make tax changes, so we have to be realistic, and we do have so many different configurations of families and working. But as I mentioned in my presentation, it's important to look at the whole range and to consult various departments of expertise, because the decisions we make to encourage families to do one thing or another may have a price that we pay in the health department or social health department or social costs later. So I think we really have to make smart choices now in the way our tax system is structured to prevent problems down the line.

• 1030

The Chairman: Thank you.

With the committee's indulgence, if the other members have direct questions to Ms. Auld-Cameron, I'd ask them to ask their question, and then you can answer all those questions before leaving, if you don't mind.

Ms. Jennifer Auld-Cameron: Thank you.

[Translation]

The Chairman: Mr. Cardin.

Mr. Serge Cardin: Welcome to both of you.

Whether or not there are children in the picture, there will always be differences between one-income and two-income families.

The Chairman: Could you limit yourself to one question, because Mrs. Auld-Cameron has to leave.

Mr. Serge Cardin: Of course.

The Chairman: Could you put your question directly to Ms. Auld-Cameron? I would ask Mr. Szabo to do the same. Do you have a direct question for the witness?

Mr. Serge Cardin: Instead of thinking in terms of a single return or income splitting, wouldn't it be better to think in terms of the child? In terms of calculating the allowable deduction, shouldn't the system take into account the costs associated with raising and educating a child and recognize the work of the spouse who stays home?

[English]

The Chairman: The questions are going to be short.

Mr. Szabo, please.

Mr. Paul Szabo: There were three recommendations Ms. Auld-Cameron made. One was family taxation. I'm concerned that one-sixth of all families that are lone-parent families would be excluded from any benefits by doing that.

The second recommendation was the $2,000 deduction, which benefits high-income earners over low-income earners. You do have to have income, and lone parents may be in situations where they have no income and can't use the deduction. The increase in the spousal amount also would go to empty-nesters and childless couples who have a spouse in the home, and therefore the targeting would be very inefficient. But even if you did do it, the savings would only be $134, so I can't see that it's a major item.

Finally, if you excluded children totally from your analysis, you would find there's still a major discrepancy that has basically to do with progressivity rather than the existence of children. So I don't think we should blame the difference on the fact that you have children. I'm asking whether you might want to reconsider how we approach this.

The Chairman: Ms. Auld-Cameron, be as brief as you can.

Ms. Jennifer Auld-Cameron: Monsieur Cardin, in regard to your remarks, I think you've made some very interesting comments. I would agree that maybe we should look at the cost of rearing children. I think that would tie in with Mr. Szabo's remarks too, that if we can focus on the children, as opposed to the taxpayers, then we can get around some of these problems.

Mr. Szabo, I do sympathize with the situation with the lone parents, because I do believe they should be considered in this whole equation too. I just don't know how to do it. Would a flat deduction per child per lone parent be of assistance?

Mr. Paul Szabo: If they have income, yes, but again, keep in mind that if your income is low enough, a $2,000 deduction for a high-income earner would put $1,000 in their pocket, but a deduction for a low-income earner would put $250 in their pocket.

Ms. Jennifer Auld-Cameron: I see.

Mr. Paul Szabo: It's regressive.

Ms. Jennifer Auld-Cameron: Yes.

• 1035

The Chairman: They're very difficult choices that we have to make.

I do want to thank you on behalf of the committee. I want to thank the committee members for respecting your wish to leave at 10.30 also.

Ms. Jennifer Auld-Cameron: Yes, I appreciate that. Thank you very much.

The Chairman: Thank you.

Ms. Jennifer Auld-Cameron: Thank you for your time.

The Chairman: We'll now continue with Mr. Cardin.

[Translation]

You have four minutes left to put your final questions to the witness.

Mr. Serge Cardin: I think I've already asked enough questions.

As I was saying, it matters little whether a couple have children or not. The fact remains that there are differences between a one-income and a two-income family. Some may refer to these differences as disparities, but I would simply call them differences. Why not stick with a system based on personal exemptions and with a minimum number of deductions? Then, we could recognize the contribution of the spouse who stays home through income splitting, much the same way we recognize that parents who both work are entitled to claim a portion of their child care expenses. Why can't this be an option? If only one spouse works, the other could be recognized for the contribution he or she makes.

As I said before, the focus should be on the child. Consideration must be given to the cost of raising children, and to their age, because costs vary depending on the age. All of these factors must be taken into account: different costs, age differences and income disparities. Some parents have low incomes; others earn substantially more and are not affected, regardless of the deductions.

We could have a system that takes into account the cost of education and caring for children, a system which would ensure that low-income families are reimbursed directly. The deduction or credit could be adjusted as the income of the parents increases. It might be difficult to implement a system like this, but it could meet the needs of everyone, that is low or moderate income earners, and high-income earners. At some point, persons would not be required to contribute.

Mr. Ed Harris: I'll answer that question in English.

[English]

The points made I think are very important. The issue of providing appropriate relief to taxpayers of different circumstances, whether they have high incomes, low incomes, two-earner families, one-earner families, are very difficult. There's no absolutely correct answer to those questions.

The cost of raising children, in my submission, should be recognized in the tax system. How they are to be recognized is more difficult. My view is that they should be recognized by allowing a particular dollar amount for each child. You can argue over whether younger children and older children should be treated the same or not, but somehow an effort should be made to determine what the minimum reasonable cost is of raising a child. Whether you have a one-parent family, a two-parent family, high-income earners, low-income earners, it seems to me that those costs should be recognized.

You can argue about the progressivity issue, because it depends whether you look at the tax relief that is given for the cost of raising children as coming off at the bottom, the first slice of income, or whether it comes off at the top. In my submission, it's better to look at it as coming off the bottom, because it's a non-discretionary item, and we should be taxing discretionary income, not the portion of one's income that one necessarily has to apply toward living costs.

• 1040

I think the present tax system is too complicated for people to understand well. But for those who understand it, there are definite disincentives to joining the workforce or remaining in the workforce as against staying at home. One of the principles that I think everybody is trying to achieve is to make the tax system neutral with respect to work choices. That's not an easy answer to get. You're going to get as many views, I think, as you have people making presentations to you.

[Translation]

The Chairman: Thank you very much.

Go ahead, Mr. Cardin.

Mr. Serge Cardin: We could try to make the tax system neutral in some way, but there are so many possible choices and combinations within the population that any measure would have a different impact, depending on a given situation. People will always perceive any difference as an inequity, if it is not to their advantage. In that sense, there will always be some inequities in the system.

[English]

Mr. Ed Harris: Yes, I agree.

[Translation]

The Chairman: The tax system has spawned two major industries: chartered accountants and lawyers. We are indeed well served.

You have four minutes, Mr. Szabo.

[English]

Mr. Paul Szabo: Thank you, Mr. Chair.

We don't often get people who know much about the tax act here, so maybe we should ask for an opinion.

Much of the initial discussion or debate about this issue had to do with comparing a $60,000-income family to two $30,000-income families. Of course it comes out that there's a difference, and that difference was attributed to us taxing one-earner families differently. Do you think this is a valid analysis to look at in order to address the question we have before us?

Mr. Ed Harris: It's certainly a fact. How you address the fact is the question. The differential between two-earner families and one-earner families exists whether there are children or not. I don't think there's any question about that.

Mr. Paul Szabo: Bingo.

Mr. Ed Harris: We see how Carter wanted to deal with it. But if you deal with it as Carter did, then you have to face the fact that where you have a one-earner family and the second member of the family is thinking of going back to work, having to pay tax at a very high rate on the first few dollars of taxable income is a real problem.

Mr. Paul Szabo: Maybe you can help us a little bit here. I've always thought of this situation as not comparing family Jones to family Smith. I've always thought that the comparison was for a family. Normally you get a couple, both of whom are involved in the labour force. They're out of school and they go to work. In my own case, I was making $50,000 and my spouse was making $30,000. Then the child occurred—

The Chairman: And then you got elected.

Mr. Paul Szabo: —and we had two choices. One was to engage third-party care for our child and get the child care expense deduction. The other choice was to have one of us withdraw from the labour force for a period of time and provide direct parental care.

When you work out the mathematics, all of a sudden we are comparing an $80,000 gross family income to a $50,000 decision. The child care expense deduction, even if I spent $4,000 and even at the highest rate, is only worth $2,000 in terms of reducing the burden of the taxation on the family. The loss of $30,000 of economic gain, however, losing that job temporarily, the net pay was worth about $22,000. The forgoing of the income was worth at least ten times more than the value of the child care expense deduction.

It seems to me that people make these choices not because they're going to save a dollar or two. There has to be much more to it than that. So I start thinking that if you withdraw from the labour force temporarily to provide direct parental care, you forgo income, you forgo pension accumulation, you forgo advancement opportunities and training opportunities, you probably contribute to the community more than you otherwise would have—to the school, the church, the hospital, or to general neighbourhood support. So there seems to be a tremendous decision taking place, a tremendous impact on a family unit.

• 1045

I guess the question is have we appropriately valued or recognized the sacrifice and contribution a direct parental caregiver gives, compared with if they had stayed in the paid labour force and opted for third-party care.

Mr. Ed Harris: I guess the answer is probably no, but what are the practicalities? We can't expect the state to make up that $20,000 differential. These are decisions the parent has to make. There are, of course, a lot of non-economic elements that are in the decision, including the desire to be close to the young child and so on.

There are no easy answers to that question. The tax system certainly is not the vehicle for addressing any difficulties families are facing in any meaningful way.

Mr. Paul Szabo: My suggestion to you is that this issue is much more than just the value of a deduction.

Mr. Ed Harris: Oh, obviously. Yes.

Mr. Paul Szabo: And the recognition issue, social recognition, is as important as the dollars here, because we know we're not going to make up the forgone net income.

Mr. Ed Harris: I think all you can say is that you want to have the tax system, as much as possible, not penalize the particular choices a person makes for other reasons.

Mr. Paul Szabo: Good.

[Translation]

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Szabo.

[English]

Mr. Harris, you mentioned that the tax system, as it actually is, does not recognize the cost of raising children. I think I quote you correctly. So I want to ask you, doesn't the child tax benefit address that?

Mr. Ed Harris: Oh, yes it does, Mr. Chairman. In my earlier remarks I indicated that it does so, but only for some families.

The Chairman: Because it's income-tested.

Mr. Ed Harris: Yes, because it's income-tested—and even then, whether it recognizes the full minimum cost of raising a child....

The Chairman: Well, it's based on your income.

Mr. Paul Szabo: The child tax benefit is a refundable tax credit and it has nothing to do with the income tax—

Mr. Ed Harris: No, but it's clawed back. When your taxable income gets over $23,000—

Mr. Paul Szabo: But your statement was that the Income Tax Act does not recognize child care expenses, and his question was doesn't the child tax benefit do it?

Mr. Ed Harris: Not directly.

Mr. Paul Szabo: The child tax benefit is not in the income tax system.

Mr. Ed Harris: Actually, it's in the Income Tax Act, but you don't get it through filing your tax return.

The Chairman: On behalf of the committee, thank you very much. It was very enjoyable.

Mr. Ed Harris: Thank you for the chance to be heard.

The Chairman: Thank you.

Our next guests are from the Annapolis Valley—Hants Community Action Program for Children. I am pleased to welcome to the committee its regional coordinator, Ms. Pauline Raven. As well, from the Cape Breton Family Resources Centre, we have Joanna LaTulippe-Rochon.

On behalf of the committee, I'd like to welcome you. I ask you to make your presentations between five and seven minutes, so we have roughly twenty minutes for questions and answers. Whoever would like to go first is welcome to start.

Ms. Pauline Raven (Regional Coordinator, Annapolis Valley—Hants Community Action Program for Children): To keep the goal of staying within that limit, we will be leaving out some of the things you've received in the written brief and skipping some things. That's just to help you follow along.

The Chairman: All right.

Ms. Pauline Raven: How many times have you heard readily accepted statements like “Our children are our most precious resource”, “Social spending on children is an investment in our future”, and “We pay a heavy price for having children grow up in poverty”?

• 1050

At heart, we all know that family income is a very important determinant of a child's health and well-being. Income determines what a family eats, what it wears, and where it lives. In our society, where child care is a scarce commodity, family income will likely determine if a child has appropriate child care while a parent works; for teenagers, it can influence whether a high school certificate will be won; and for a young adult considering post-secondary studies, it becomes a major determinant of whether or not university or college will be attended.

Clearly, the key to Canada's investment in children is the development of tax and social policy that can positively influence the economic status of families, especially those experiencing shortfalls. Unfortunately, many decisions made by recent governments run counter to the need for family-friendly tax policy. Canada now collects a greater proportion of its taxes from low- and modest-income families and less from wealthy families and profitable businesses than in previous decades.

Without fair and equitable tax and social policy, ordinary persons, parents and children in our neighbourhoods, are left to fend for themselves. Our brief argues that to thrive in today's marketplace, parents have to beat the odds. This is because current policy has created an environment that has become increasingly hostile toward Canadian families.

The principal message we bring to you, grounded by our day-to-day experiences with low- and modest-income, lone-parent and dual-parent families using our services, is that tax and social policy must be redirected towards the economic security of Canadian parents and children. This must begin with a plan to use tax policy to increase the income standard of low- and modest-income families. It will require the reversal of some key trends and the enhancement of child tax benefits.

Low wage levels are at the heart of economic insecurity for families. For an increasing number of parents, especially those with lower educational levels, participation in the Canadian workforce does not provide an adequate family income. In the Atlantic provinces, a single-parent mother with one child needs to work 67 hours per week at the minimum wage rate to provide a sufficient income to cover her family's basic expenses.

Indeed, the marketplace has set wage levels so low that parents in the workforce are often worse off than families whose source of income is social assistance. All levels of government acknowledge this situation as bad social policy. A key component of the national child benefit program is addressing the need for stronger attachment to the workforce.

Overall, the last decades have brought changes that have not been family-positive with regard to earnings. Schellenberg and Ross point us to statistics indicating that greater proportions of working families are disadvantaged by market trends.

Yalnizan tracks the disturbing growth of income disparity between Canada's richest and poorest families for the years 1994-96. Concentration of earnings among an ever-smaller and more elite segment of Canadian families is leading to polarization between families and inequity of opportunities for our children.

This subcommittee has been established to study the tax and transfer system as it applies to families with dependent children. But before we consider current policies, we must decide what we want to be the end result of any possible changes. Once our end goal has been established, we can effectively implement policy to achieve the desired result. In this way, tax policy can create equity based on family configuration. Therefore, we must first define a suitable income standard for families.

For years there have been discussions within our society regarding the income needed by families. Central to debates between those favouring better incomes and those who do not is the low-income cut-off standard for poverty. Everyday Canadians are clearly in favour of better support and nurturing for children, making this a top priority for national action.

Working families struggling to provide for children know the real costs of raising these kids, and it is close to $9,000 each year.

When adequate family income is under debate, a recent study by the Canadian Council for Social Development is highly informative. The council examined the prevalence of 27 negative outcomes for children against different family incomes for families of four. They found that 80% of these variables were noticeably higher for children and families with incomes below $30,000, and 50% were higher for those in families with incomes below $40,000. Based on these findings, the authors propose that Canadian families should have incomes sufficiently high to enhance children's chances of healthy development.

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Similar calculations could be made for different family configurations to provide policy-makers with income standards for each type of family, based on providing children with equitable chances of healthy outcomes. This recognizes that children deserve more than the basics.

Clearly, achieving healthier outcomes for dependent children will require action on a number of interrelated fronts, all related to tax and social policy reform: optimizing the earnings of parents; supporting families where labour market participation does not provide the income standard; and providing subsidized child care for families participating in the labour force whose earnings do not exceed the income standard. Action on these issues also underscores that while children depend on their families, society too has a role and responsibility to its next generation.

I'll now turn it over to Joanna.

Ms. Joanna LaTulippe-Rochon (Cape Breton Family Resources Centre): Our recommendations vis-à-vis families' participation in the labour force fall into the three categories that Pauline has just noted. Their collective goal is to increase the economic status of all low- and modest-income families through tax and social policy.

When we look at optimizing earnings of parents, we see that an alarming shift occurred in the federal tax base between the early 1950s and the 1990s. In the 1950s corporate Canada contributed 21% of the federal revenue from income tax, while individual Canadians contributed 32%. By the early 1990s, tax policy had allowed corporate Canada's contribution to sink from 21% to 6%, while the contribution of individual citizens rose from 32% to 47%.

We recommend a reversal of that trend, which would see corporate Canada contributing a greater share of income tax revenues. Specifically, shifting responsibility for income tax revenues from low- and modest-income parents to profitable corporations will increase the income directly available to low- and modest-income families with dependent children. Importantly, the new revenue dollars available to government could be converted to income support for those families where income is below recommended standards, through salary enhancement grants.

When considering support to families through tax policy, tax policy must address what average Canadians readily recognize: that our federal government is not adequately tapping into corporate profits. The federal government is not taking a sufficiently firm stand with corporate Canada. This provides powerful groups like the Business Council on National Issues the ability to greatly influence tax and social policy in favour of corporate profits. This often conflicts with public interest.

Everyday Canadians can no longer afford tax policy that permits multinational corporations and banking institutions to retain excess profits for stockholders. These profits must be fairly taxed to increase sources of revenue and support for ordinary Canadians, especially parents with dependent children. In addition, more responsibility for tax revenue needs to be placed on high-wage earners. It's unacceptable to have all Canadians with earnings above $59,000 taxed at the same rate. Additional tax brackets for Canada's wealthiest families must be reintroduced to make social responsibility relative to prosperity.

The Canada child tax benefit warrants enhancement, as well. One of the major shortcomings that has been duly noted by the National Council of Welfare is the lack of indexing that protects against cost of living. Even when we consider a relatively low rate of inflation, 2% a year, the real value of the Canada child tax benefit declines by more than 18% in just 10 years. Considering it in terms of purchasing power, a family with one child who has a 1998 benefit of $1,625 would be left with $1,328 by the year 2008. This benefit must be indexed in line with the consumer price index.

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The national child benefit also needs enhancement vis-à-vis the income standard discussed above. We believe this program is an appropriate avenue to bridge the gap between earned income and a proposed income standard.

When we look at providing subsidized child care, fully subsidized child care must be made available to families whose earnings do not exceed the income standard. This is needed to ensure Canadian children will benefit from quality child care while their parents work.

For families with income above the income standard, an income ceiling would be established, below which child care related to participation in the workforce would be fully deductible. Allowing child care expenses to be deducted highlights that child care is a necessary cost of participation in the workforce by parents. Eliminating taxes on child care costs, including payroll tax, will enable more families to make appropriate decisions regarding labour market participation. This could be achieved through either tax deductions or tax credits. In a recent study of child care policy, economists Cleveland and Krashinsky underscore the benefits of fully deductible child care.

The marketplace is not creating sufficient jobs or wage levels to ensure an adequate income standard for many Canadian families. This leaves government with the responsibility of providing income support to chronically unemployed and underemployed parents. To date, the income support programs of governments have to some extent deflected attention from the poor performance of the private sector in creating appropriate employment and employment conditions.

We need to consider that while unemployment rates are high and good jobs are scarce, there is very little pressure on the private sector to raise wage levels and improve job opportunities. This type of labour market is hostile to workers and promotes profiteering. At best, it permits employers to gain at the expense of employees.

Recent years have produced revenue surpluses. Government must use the current surpluses to create quality employment. It could be achieved through increased public sector spending in the areas of health and social services, grants to community-based organizations to create employment, and increased spending on infrastructure projects.

Government-initiated job creation should be used as a tool to lower the unemployment rate and increase the income of Canadians. Increased public sector and community-based job opportunities must be implemented without further delay to help address the laggardly performance of the private sector in addressing these issues.

Creating opportunities for increased participation in the workforce by unemployed parents is the crucial ingredient needed to address Canada's climbing child poverty rate. Publicly funded child care matched with income support must be available for those parents needing to upgrade skills and education.

In summary, when we look at the brief there's a focus on a need for an adequate income standard for Canadian families, regardless of their configuration. It tables for discussion income standards based on the enhancement of outcomes for Canada's children. It also recommends tax and social reform that would create a more equitable family-friendly place for parents within the labour market, and it suggests inequities between families in terms of single- and dual-earning capacities and choices can be addressed by ensuring an adequate income to all families with dependent children.

Lastly, we highlight the need for broad-based action and intervention by governments to improve the labour market. Increased participation by unemployed and underemployed parents remains dependent on the ability of the public and private sector to remove barriers to employment and training opportunities that can create long-term attachment to Canada's workforce.

Governments can and should exercise their ability through tax policy to combine earned income, income supports, and social program spending into a family-friendly tax configuration that fully supports our children. The investment this would represent in each child's future would surely benefit everyone. Importantly, it will send a clear and long-awaited signal to parents that Canada places a value on children that stretches beyond the desire to provide only the basics. It will say that Canadian society is ready to share in the responsibility and benefits of caring for our children.

Thank you.

The Chairman: Thank you very much.

We'll only have about 15 minutes, so I'll ask members to be brief and limit their questions to four minutes, please. Mr. Forseth.

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Mr. Paul Forseth: Thank you.

Throughout your brief you've used the phrase “income standard”. I'm wondering if you can clarify what you really mean by it. Do you mean a guaranteed annual income, like basic welfare, for everyone in Canada that is reduced as a person earns? And once you've defined it, what would be the approximate level of this income standard now? And tell me what would be the benchmark for the formula that you'd use to arrive at the number. Obviously that number would have to be adjusted all the time, so you'd need a standard formula for computing that.

I'm wondering if you can give me some explanation, based on my question, of what you're meaning by “income standard”.

Ms. Pauline Raven: That “income standard” would need to be evidence-based against outcomes for children, so it would require ongoing tracking of what's occurring with Canadian families and their children. Certainly there is a formula and a beginning point for that led out by the Canadian Council on Social Development. The $40,000 for a family of four is a beginning benchmark for that. It's certainly almost double what the low-income cut-off would be for a family of four, but we've long known that this low-income cut-off does not take in any factors other than the market price for housing, food, and clothing.

So there is a beginning discussion and formula that has been raised by the economists at the Canadian Council for Social Development to begin looking at what would be an appropriate income standard.

Mr. Paul Forseth: And what would you do with this standard number? Obviously you're asking for government resources to bring people to this income standard. Are you talking about basically a guaranteed annual income?

Ms. Pauline Raven: It would be a guaranteed annual income within the context of a family's configuration. Yes, it would have a lot of parallels to that.

Mr. Paul Forseth: The other phrase you talk about, which was somewhat undefined, was “child outcomes”. I take it that in order to get to this number it wasn't necessarily just sending a cheque to the family, but it was more looking at a combination of what to qualify on a variety of programs and then try to calculate an outcome. Is that what you're talking about?

Ms. Pauline Raven: No, it wouldn't be based on the needs of an individual family, other than taking into consideration the configurations of that family. These would be broad indicators of what a family would need and for children to have positive outcomes. So when we look at society as a whole, we know that in those families where the family income is below $40,000 there's much more likelihood of children experiencing negative outcomes as they develop through infancy and childhood and adolescence. So income does seem to determine to a large extent the outcomes for individual children.

Mr. Paul Forseth: Also, on page 8, in the second paragraph, you talk about

Increased participation by unemployed and underemployed parents remains dependent on the ability of the public and private sector to remove barriers to employment and training.

I can understand what barriers are to training. Maybe you can describe what are the particular issues that you see as barriers to employment, because certainly what children need, and what families need to support them and help them, is employment and jobs, not welfare. So what are these barriers to employment?

Ms. Pauline Raven: I think if you try telling a single-parent mother that a minimum wage opportunity in the workforce is better for her and her family than a social assistance payment, you would get quite an eloquent argument from her about how her family would be better off outside of the workforce.

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Current barriers are that there are practically no subsidized child care spaces in Nova Scotia relative to the need. Another key barrier is that once women begin to earn an income, that is very quickly deducted from social assistance payments. So the most that full participation in the workforce can benefit is $200 if a woman is in receipt of family benefits, or $100 if she's in receipt of social assistance and income. She leaves her child in a child care situation that may not be at all appropriate to the child's needs and moves into the workforce for a benefit of $100 or $200. Anyone in that situation would be hard-pressed to see that as something—

Mr. Paul Forseth: These are all the traditional barriers that all governments in the western world have struggled with regarding the transition from social assistance to someone getting off that, the old welfare trap syndrome and all the permutations that may—

Ms. Joanna LaTulippe-Rochon: If I could interject for a minute in terms of maybe one of the new barriers we're hearing a lot about, certainly from our parents on the island, that's changed now.

If we take one of our single-parent families and mom decides to try to go out into the workforce because mom wants to participate and wants to contribute to society, and that's where our parents are, she leaves family benefits. So she goes out and works and earns that $100 or $200 and begins to feel comfortable with that, and then something happens down the road that the job is not available to her any more.

If and when she needs to return to income assistance in the province of Nova Scotia, she returns now through social assistance and employment support policy. She's no longer returning to family benefits. That policy, which is a significant change from the family benefit policy, disallows her to attend an educational institute or to become involved even in part-time studies that would limit her full-time participation in the workforce.

Some of our parents, for fear of that minimum wage job not being long-term or not working out, are afraid to leave the family benefit situation, knowing that they need to return on income and employment support policy, because the supports for them to further their education and some of the supports for child care and those other things are no longer there. So that might be a newer limitation, and certainly one we're hearing about from our parents.

The Chairman: Thank you very much.

Ms. Dockrill, please.

Ms. Michelle Dockrill: Thank you, Mr. Chair.

Once again, Joanna, your presentation is to be expected of a fellow Cape Bretoner, I might say. I think we have to acknowledge that individuals like yourself are really the ones who are on the front line in terms of listening to a lot of Canadian families that I think sometimes get lost in the shuffle and the bigger picture.

An issue that has come up on numerous occasions across the country is the talk about a universal program. We had a mother yesterday who said she didn't have the answers and didn't know what the answers were, but as long as we ensured it was equal.... In that light, given the fact that, as you probably know better than we, family configurations change—you can come from a two-parent, two-earner family to two-parent, one wage-earner family, to a single-parent family—I wonder if you don't think maybe we should be looking at something right across the board.

Ms. Joanna LaTulippe-Rochon: I think what we've talked about here is almost something like that. It's talking across the board, looking at families and supporting children.

One of the trackers right now is LICO, our low-income cut-off, which only considers food, clothing, and shelter. When you look at what families' needs are, when we hear from our families what families' needs are in terms of supporting literacy, in terms of supporting the children through school, all those kinds of things, the Canadian council has come up with 27 pieces of things that are what guarantees that children will have a reasonable chance of healthy outcome, much broader than food, clothing, and shelter, no matter who provides that.

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I think we are talking about looking at providing every child in Canada with a reasonable opportunity. When we, as government, set an income level that's below that, we're not taking responsibility to ensure that all children have that reasonable access to a healthy outcome. So we are talking universal with respect to meeting that minimum standard and then, beyond that, phasing things like child care in and out, changing it from fully subsidized to maybe fully deductible, to maybe saying you're on your own after a certain income threshold.

Ms. Michelle Dockrill: And in that light, would we not in fact be supporting the children as opposed to parental activity?

Ms. Joanna LaTulippe-Rochon: Absolutely, fully supporting Canada's children, which is the rhetoric that we talk about all the time. But in all honesty, I'd like to tell you, for parents who may not be able to be here, parents don't feel like Canada is supporting their children.

Ms. Michelle Dockrill: And I think there's a difference between parental activity within the family and the child.

I'd like to ask just one question. Would you like to see this subcommittee—and I've asked this question of a few presenters—being somewhat of a stepping stone? In the last week or so we've been trying to hear a national agenda for children. Would you like to see this subcommittee be a stepping stone in terms of the items that agenda would address?

Ms. Joanna LaTulippe-Rochon: Absolutely.

Ms. Michelle Dockrill: Not the end, the beginning.

Ms. Joanna LaTulippe-Rochon: No, but certainly a beginning if you're travelling through the country and providing an opportunity for folks who are either doing the front-line work or for the parents themselves to come forward and talk about what supports and what gaps are there. I think that is the beginning, and certainly tax policy reform is a big piece of that. So I think you are well placed to start looking at that and certainly linking with the national children's agenda on that.

Ms. Michelle Dockrill: In closing, from a personal perspective I'd like to thank you, Joanna, for what you're doing in terms of Cape Breton Island. As we know, things are not all that good down there and families are being seriously affected. I know you're working really hard and will continue to be committed to the children and the parents, and I want to thank you for that.

Ms. Joanna LaTulippe-Rochon: Thank you.

The Chairman: Mr. Brison, four minutes, please. If you can respect the time, I'll be impressed.

Mr. Scott Brison: I can't say hello in four minutes, Mr. Chair. Okay, I will be uncustomarily succinct.

Thank you, Pauline and Joanna, for your presentations and interventions.

To start off with a statement, I would appreciate your feedback. Sometimes I think we're trying to do too much with the tax code and not enough through innovative programs. With the tax code, for instance, you referenced corporate taxation, you referenced taxes on high-income Canadians. It's becoming increasingly difficult to tax corporations and to tax high-income Canadians because of the mobility of both people and capital in a global sense. Secondly, if we want to create jobs and employment and attract companies, there's a significant competitiveness globally in terms of tax rates and tax reform and tax structure.

What I would suggest is maybe we should be focused on more innovative social program spending—things like Dr. Mustard's looking at revisiting some of the Mustard studies on early childhood intervention and head start programs and some of the return on investments for that. You know, a dollar invested in the first three years of a child's life provides society with a $7 return. I think up to age 25 it's quite something.

Should there be a cooperative effort between federal and provincial governments to develop a national strategy to address particularly the first three years of a child's life? That's the only area that educationally we ignore completely in terms of government policy, and those are the most important years in terms of 90% of the child's cognitive and adaptive skills closing off in those areas. It's the area we never talk about. We always talk about post-secondary education and secondary and primary, but we never talk about preschool. So I would appreciate your feedback on that very specific issue and initiative.

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Ms. Pauline Raven: I don't think it needs to be either/or. I don't think corporations need to be taxed to the extent that they're going to flee our shores and all head for Mexico, where they can exploit employees to whatever extent they would choose to do so. But I do think there is a fair share of taxes to be paid, and that isn't being done.

In terms of—

The Chairman: Excuse me. You're basing that share of responsibility on the amount that corporations and individuals pay in their taxes to Revenue Canada. Have you done a study on the per capita? If you go back to 1960, obviously the per capita number of people who were contributing was different. If you did it on a per capita basis, I'm wondering what it would reveal. Have you done any of that?

Ms. Pauline Raven: No, and I certainly wouldn't pretend to be an economist who would hit on all of those necessary indicators. I kind of picked up on those that were understandable to me as an ordinary citizen. There may be some degree of misunderstanding in the interpretation of that.

Mr. Scott Brison: If I may interject, Mr. Chair, you just took one of my minutes.

The Chairman: I think it was 30 seconds. You always round out.

Mr. Scott Brison: Realistically, though, in a corporate tax sense, we in the G-7 are very close to the top in terms of corporate taxes, so our manoeuvrability in those areas is limited. But I guess if we can focus on the problems, where we can find some common ground is on the notion of transfers and a better federal-provincial program. That's what I'd like you to focus on.

Ms. Pauline Raven: Well, we agree to disagree on appropriate taxation and—

Mr. Scott Brison: You'll spend more time... [Editor's Note: Inaudible].

Ms. Pauline Raven: And we'll spend more time on that in Wolfville.

We did highlight the need for increased public sector spending in the area of health and social programs and the community-based organizations, where I think dollars are very well spent. Again, it's that extra dividend that you're spending in an area that will have a long-term impact—and in reducing spending on other types of services that are remedial rather than preventive. So it's a very good thing.

I do think there have been a lot of promises made to children in terms of initiating those types of social programs to the extent that they need to be initiated, and the national children's agenda of last Friday builds on that with more promises. I think a committee such as this can put some practical solutions forward so that those promises get some beef attached to them, and we can actually look at the year 2000 or the year 2001 and have chunks of policy that will be aimed at success on these promises.

Ms. Joanna LaTulippe-Rochon: I guess, Scott, it's very much why, everywhere you see us mentioning tax policy, it says “tax/social”. We were trying to be respectful of the tax nature of this committee but also recognize that it's about tax and social policy.

Mr. Scott Brison: I have one quick question on the child tax benefit and the clawback that I understand eight of ten provinces are doing. We heard this morning that seven of the ten provinces are doing it. But in Nova Scotia provincial governments, if they're clawing that money back, are supposed to be putting it into provincial programs to benefit children. What are those programs in Nova Scotia? To what extent has the Nova Scotia government augmented its provision of services to benefit children in Nova Scotia?

Ms. Joanna LaTulippe-Rochon: I'd like to take a really quick minute and tell you about one of those programs.

The Chairman: Not too long, please.

Ms. Joanna LaTulippe-Rochon: Not long at all.

It's a four-pronged initiative based on increasing subsidized child care spaces, healthy child initiatives, increases to early intervention, and rural family day care. Let me tell you a little bit about rural family day care.

There was a provision made in the last budget to create 70 subsidized family day care spaces, and those 70 spaces were to be divided equally—a working group was set up—amongst the four different areas. So some of those spaces were allocated out. In the end, at the end of the working committee work and when it came to implementation, 70 subsidized spaces are not even on the books any more. What's on the books is a child care resource and referral program, and we've been approached as an organization to look at creating a child care resource and referral system in northern Victoria County on Cape Breton Island. There are no child care resources there to resource or refer to. There isn't one subsidized space, there isn't one child care facility, in the entire county.

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So now, at best, what we could do is create a community registry that might list caregivers that small communities already know are out there, and link people who perhaps come in from outside the community and don't know about those caregivers, and do an informal exchange: Sally up the road will take care of two children, and Johnnie down the street needs his two children taken care of, so you guys switch. But there's no subsidy.

Mr. Scott Brison: So you're saying that money that was designed by the federal government to benefit children—

Ms. Joanna LaTulippe-Rochon: Provincially. It's the NCB dollars.

Mr. Scott Brison: —is benefiting the provincial bureaucracy.

Ms. Joanna LaTulippe-Rochon: Absolutely.

The Chairman: Thank you very much. There's no such thing as a short question or a short answer, I'm beginning to understand.

Mr. Szabo, please, a short four minutes.

Mr. Paul Szabo: Thank you both for coming. I know where your hearts are.

Page 2 of your report says that a $5,000 annual income will be taxed at the same rate as a $59,180 income. Could you help me with that? It's the first bullet in the middle of the page there.

Ms. Pauline Raven: Our understanding was that ten tax brackets had been reduced to three, with a ceiling at about $59,180 getting you into the third and highest of those tax brackets.

Mr. Paul Szabo: Okay, but where did the $5,000 come from?

Mr. Paul Forseth: That's $5 million.

Mr. Paul Szabo: Oh, the “M” is “million”. Okay. I was a little confused.

Mr. Paul Forseth: You're working too hard.

Mr. Paul Szabo: Yes. Actually, only 12% of all Canadians make more than $50,000 a year, and interestingly enough, they pay 42% of all income taxes in Canada. Even more interestingly, they also contribute 37% of all charitable donations. I suspect that if you increase the tax burden of people who make more than $50,000 a year, they do have choices, and they could withdraw charities probably to organizations such as your own.

Ms. Pauline Raven: Yes.

Mr. Paul Szabo: I'm always trying to figure out how you balance out people's right to be as successful as they can be with their social responsibility. I have a feeling that most organizations in Canada that rely on charitable donations look to the higher-income earners of our society to support them. So it's kind of interesting.

But you're here because you care about children, and that's what is really important. When we develop some sort of policy to approach the issue before us, do you think it should be child-centred or child-focused as opposed to something else?

Ms. Pauline Raven: It's interesting to separate out children from families. Parents also need a safe, comfortable, supported place in Canadian society to serve their children as best as children can be served within the family setting. So “child-centred”, “family-centred”, and “parent-centred” all really turn out to be part of the same continuum.

Mr. Paul Szabo: This issue that's before us sometimes has been characterized as the problem that if two parents are in the paid labour force they are eligible to deduct child care expenses up to $7,000 for a preschool child and $4,000 for a school-age child, whereas if a family chooses to have one remain in the home and provide direct parental care, there isn't some sort of benefit, equivalent or otherwise, that would recognize their contribution. Do you see that as an inequity or discrimination?

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Ms. Pauline Raven: I think this type of policy helps to address that, because fundamentally what it's saying is that families can make a choice to have a dual-earner parent situation, or a single-earner parent situation. Regardless of that choice, there will still be an adequate income, although maybe not a really high income, for that family with which to look after children's needs. So I think this kind of income standard based on family configuration regardless of whether that family is a dual-earning family or a single-earning family helps to address that.

Certainly when you look at that $40,000 income standard for a family of four, lots of Canadian families, the average Canadian family of four, would have an earned income above that. So this brief is really about looking at the needs of low- and modest-income families in terms of ensuring good outcomes for children who are being raised in those families.

Mr. Paul Szabo: I very much agree with that. You're saying tax the family rather than the individual, and that's part of it. So one in six families in Canada is a lone-parent family. Many people have referred to them as single parents or single moms, but they're not single; they're lone parents. Single are never married or whatever. In any event, one-sixth of all families only have one income, and changing the tax system to tax on a family unit basis and in fact split income or average income between two parents would tend to broaden the tax burden between.... It would lower it for a two-income family, and it wouldn't affect a one-income family where it was a lone-parent situation. Does that cause you any concern?

Ms. Joanna LaTulippe-Rochon: What we were looking at and thinking about in terms of this standardizing based on positive outcomes for children was a minimum. So if we were to say a family of four, which could be a lone parent with three children, that $40,000 is what as a country we would say is the minimum amount required. So the changes to the NCB would say that if this mom is in the workforce and is earning $30,000, then the NCB would be changed to add $10,000 to bring her up to that standard. So we saw the NCB, and when we looked at broadening some of our tax base we saw that in terms of some of those dollars the NCB could be the tool that would support her and bring her up to the $40,000 minimum.

Mr. Paul Szabo: Okay.

I did a little research on this, and it was reported in the House of Commons standing committee that 40% of the people who are below the LICO own their own home and that of those, half of them have no mortgage. Were you aware of that? LICO is not just food, clothing, and shelter; it's relative to those who pay at least 50% of their disposable income on food, clothing, and shelter.

Ms. Joanna LaTulippe-Rochon: What we've seen in looking at LICO are things like LICO for a single parent with one child living in rural Nova Scotia is set at about $15,000. When that family is in receipt of income assistance or family benefits they fall about $4,000 below LICO.

Mr. Paul Szabo: Absolutely right.

Ms. Joanna LaTulippe-Rochon: So those are the people we're working with and that's the focus we have.

Mr. Paul Szabo: The province has to raise their welfare rates, there's no question about it.

Thank you, Mr. Chairman.

The Chairman: Thank you, colleagues.

On behalf of the members, I would like to thank you both, Ms. Raven and Ms. LaTulippe-Rochon, for your input in the committee. You have made our task a little bit easier. Nonetheless, it's still very complicated, as you can see. On behalf of the committee, thank you very much.

Ms. Pauline Raven: Thank you.

Ms. Joanna LaTulippe-Rochon: Thank you.

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The Chairman: I'm pleased to welcome now, from the Anti-Poverty Network Halifax, two members, Mr. Tay Landry and Ms. Susan Le Forte; and on an individual basis, a social worker who needs no introduction to this committee, Mrs. Mary Boyd.

I'd ask you to limit your presentations to between five and ten minutes so that we would leave ample time for questions from members. If all those members who are interested would like to take their seats, we could begin. But they are in the room, and I'm sure, Mary, they will hear every word you're saying.

Therefore, Mrs. Boyd, I'd ask you to begin please.

Ms. Mary Boyd (Individual Presentation): Okay. My name is Mary Boyd, as you said, and I'm here from Prince Edward Island representing the P.E.I. Action Canada Network and the MacKillop Centre for Social Justice. I want to thank you for the opportunity to present my views before you today on the tax and transfer system as it applies to families with dependent children.

The Reform Party claims that the tax system is not neutral because two-earner families are able to deduct their child care expenses while one-earner families have no equivalent tax benefit for looking after their own children. This supposedly discriminates against women who stay at home full-time. In actual fact, the tax deduction for day care discriminates in favour of women who stay at home with their children and against those who have a paid job and pay for day care. The income tax system taxes the value of work done by people in the workforce but not when they work in the home. In other words, the tax system biases the person's choice in favour of working inside the home, not outside.

The only way the tax system can be neutral, allowing the decision to work at home or outside the home according to personal preferences, is if it allows the person to deduct child care expenses for working outside the home. One purpose of the child care deduction is to correct, at least partially, the Income Tax Act's prejudice against people who work in order to buy the services as opposed to those who provide the services for themselves. The value of looking after children is not taxed when the taxpayer provides the service herself. In order to make the system neutral, the earnings that are needed to pay for someone to do the same work should also not be taxed.

The tax system is biased in favour of doing self-performed services, and that is why we choose to do so many of them ourselves. By allowing a deduction in child care expenses for people who work outside the home, the Income Tax Act attempts to be neutral with respect to this decision. However, the removal of this deduction does not remove a great many of the tax biases against working outside the home. Income is still taxed. The person working outside the home has to pay for many things that the person staying at home does not have to pay for. In fact, child care expenses consume a large share of the income of working outside, and the deduction covers only a portion of that.

When both spouses work outside the home, they lose the benefit of the spousal credit, which is worth about $1,500 and is not subject to tax. Since the value of both spouses' services is reflected in cash payments when they work outside the home, the family is likely to lose some income-tested benefits such as the child tax benefit and the GST credit. With both spouses working outside the home, they will probably have to pay tax twice on the value of some fringe benefits such as private health insurance, whereas the whole family would be covered by them if only one spouse were working. There are other expenses incurred when both parents work outside the home—transportation, clothing, meals and so on—that are not deductible. These are very costly, and working parents have to make a lot of sacrifices.

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All other things being equal, if a person was indifferent about whether to work inside the home or outside, the tax system would exert enormous pressure on them to work inside the home. It discriminates against people who work outside the home.

The Reform Party wants to repeal the child care expense deduction. But we need a tax credit for all children, and we should try to achieve gender equity in caregiving work and working outside the home.

In addition, the Reform Party suggests that Canadians should adopt a form of family unit tax system. Their supporters even suggest that spouses should be able to pool their earned income and then divide it between themselves for tax purposes. The lower-earning spouse would be taxed at a higher marginal rate, determined by the pay of the other spouse. For example, if one earns $20,000 and the other one earns $35,000 and they're taxed on that, the one who earns $20,000 will be taxed at a much higher rate, and this is a disincentive to work.

Reform argues that the tax system is unfair since a two-earner family pays less tax than a one-earner family even though they have the same family income. Under the present Income Tax Act, a family with one earner in a high income bracket pays more than two earners bringing in the same amount. This is supposed to be unfair, but it is not. The income tax is progressive, and the basic taxpaying unit is individuals, not families. It treats men and women as equals.

Basing the tax system on the earnings of the individual rather than the family is based on widely held moral judgments and on the principle that the tax system should be as neutral as possible in regard to the decision to work inside the home or outside the home or to choose to enter into a family relationship. Individual taxation respects the autonomy of each individual. It also reflects the judgment that the distribution of income that results from market forces alone is not socially acceptable and therefore each individual's earnings should be subject to a progressive tax and progressive tax rates.

If a system of family unit taxation were adopted, who would benefit? Men who earn high incomes. It would disadvantage women. Women constitute only 20% of taxpayers earning over $100,000. Probably few women would benefit from income-splitting with their spouses. Under the present tax structure, a person earning $100,000 would receive a tax break of around $10,000 by splitting income with a non-earning spouse. A one-earner family earning $30,000 pays no tax under the present income tax and therefore would derive no benefit from family unit taxation. Family unit taxation benefits the rich.

Family unit taxation would not benefit the 1.1 million single-parent families, most of whom are female-led and living in poverty. They would receive no benefits.

Furthermore, basing the tax system on some form of family unit taxation would complicate the tax system, require some form of definition of family unit, and make Revenue Canada's task of regulating such a system very difficult. Those who favour removing the child care expense deduction and moving to a family unit taxation are not interested in the neutrality of the tax system based on ability to pay, which is the basis of the fairness in our tax system—what exists of fairness.

Gender equality implies that both women and men alike should be equally protected from poverty and exploitation, be able to participate fully in all areas of social, political and economic life, and enjoy the same levels of leisure time and respect. In order to achieve this, men and women must fully share caregiving and paid employment work. When we bias the tax system in favour of stay-at-home parents in the present social and economic conditions, women will be vulnerable to having to perform the most difficult, precarious, unpaid, and leisure-consuming work.

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What is required is more generous public services for children. Put the money, if we have extra money—and we do—into a national day care program, and also early childhood care education and kindergarten, public services for children, health and dental care, and more special education facilities for those who need it. Give everybody a tax benefit. Make day care part of the education system, as they do in France. Set up public services so that the welfare of children is not tied to the welfare of parents who sometimes are not able to take care of their children because of poverty.

We need policies that make it easy for women to work outside the home, and we shouldn't stereotype work in the home as women's work. It belongs to men and women together.

Society has an obligation also to support children. We have privatized the support of children, but it's a public obligation. An attempt to push women back into the home...this is what this recommendation represents. It's a form of social engineering that says the woman's place is in the home and the woman should be pushed back into the home.

Reform opposes the public and employer supports needed to genuinely expand the choices for working families. It's really using the system to domesticate women, and when I say “domesticate women”, I say reinforce the stereotype of the woman's place in the home.

I could go on and on, but I think I've probably used my ten minutes.

The Chairman: But I'm sure Mr. Forseth will have ample time to question you.

Who will present on your behalf?

Mr. Tay Landry (Member, Anti-Poverty Network Halifax): We're splitting our presentation.

The Chairman: To within five to ten minutes?

Mr. Tay Landry: Yes.

The Chairman: Thank you.

Mr. Tay Landry: My name is Tay Landry. I'm here on behalf of the Anti-Poverty Network, first of all, but I'm also here as a sociologist and, more importantly, I'm here as a single parent. I don't consider myself a lone parent.

I went through all three stages of parenting, beginning in a two-parent family with both employed, then a two-parent family with one employed, and I'm now a single parent of four children. So I've seen—

The Chairman: Just to qualify for Mr. Szabo's sake, have you been married or not?

Mr. Tay Landry: Yes, I have been married.

The Chairman: Okay.

Mr. Tay Landry: But I do not consider myself a lone parent.

Mr. Paul Szabo: What box do you check off on your tax return?

Mr. Tay Landry: My tax return?

Mr. Paul Szabo: Single, married, common law, divorced, widowed—which one do you check off?

Mr. Tay Landry: Right now I'm checking off single.

The Chairman: So he's a single parent, Paul.

It's an internal debate that we have here.

Mr. Paul Szabo: I just don't like to stigmatize unwed mothers or whatever by—

The Chairman: You'll be able to explain that later.

Mr. Tay Landry: I see using the term “single parent” only for unwed mothers or unwed fathers as stigmatizing—and lone parent being used for everyone else. I believe we are all single parents because we are raising children on our own; therefore, we are single.

Mr. Paul Szabo: One-parent family.

Mr. Tay Landry: One-parent family is the same thing, yes.

Mr. Paul Szabo: [Editor's Note: Inaudible]

Mr. Tay Landry: Yes, it's just all too simple.

My presentation is about the idea of equality in taxation, taking into account the differences in the quality of life and the availability of access to programs and access to life in general.

Our tax system is built in with special tax benefits for people who are being socially discriminated against, or culturally, such as persons with disabilities and people living in northern areas, and one-parent families can go for the exemption of equivalent-to-spouse. I see those as all very important and very good things being in place in our tax system.

The day care deduction, which I believe is a big part of this discussion, is also very important. I see that as something that, yes, families where two spouses are working can claim. I see how it can be construed as discrimination if one parent decides to stay at home. As well, I see it as discrimination against one-parent families because of the situation one-parent families are in as far as the remainder of their life goes.

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Being in a one-parent family, I work during the day, so I wear that hat as the employed part of a married couple. When I come home at night, I take on the role of the stay-at-home spouse. I stay up until midnight usually doing laundry, dishes or cleaning. So I don't have the option that married families have in either one working and one staying home, or both working and using day care, and then coming home in the evening and sharing those tasks, the parenting role. I have to work both roles.

I see the equivalent-to-spouse deduction as being beneficial there. But as a single parent I also have no access to the day care deduction. What I would like to see in place, which would benefit everyone, is an equivalent-to-day-care exemption. That way, married couples who decide to stay home and raise their own children can use that deduction, and as well, single parents who have no option but to either stay home and raise their children or to work could use that exemption. This would of course be geared to income. That is what I would see as a functional solution.

What I would see as an ultimate solution would be a national day care program, which is free of course, and adequate social assistance rates. People talk about head start programs and other programs for younger children. I believe those are very important, but the benefit of them is quite often undermined by the children being hungry. Young children who are not having their nutritional needs met adequately do not learn. So any such program isn't of great benefit unless the food is also in place.

I think I'll stop there because of the five-minute limitation.

Ms. Susan Le Forte (Member, Anti-Poverty Network Halifax): When we talk about what is the purpose of a tax benefit, we talk about making all children have equal access to resources. But in fact that's not really true. If you look at how significantly a tax benefit is used in a low-income family as opposed to its being used in a family of middle income or upper income, it's used very differently.

In a low-income family, a family on social assistance, the child tax benefit that people receive covers the necessities of life. Therefore, is it really a benefit? It's being used by the Department of Community Services as earned income. It's being deducted dollar for dollar from social assistance cheques. So in fact is it a benefit? Is it really a benefit to those low-income families?

You say it's really wonderful to have things even across the board, but is it? Is it really even? Does it put all children at the same level when you give benefits with one hand to people who are the least likely to be able to sustain their families and then take them away?

So I have a concern. It's the concern I've said over and over again about the national child benefit program, about the way it's constructed, about its mandate. I haven't been able to get any clear answers as to why it was constructed the way it was, so that this money now, this federal money that's coming to social assistance recipients, can be looked at as an income because it's taken off dollar for dollar from their cheques. And so it doesn't benefit those low-income families.

If you're talking about those programs, a lot of people can't access those programs. In fact what you're saying is that people who live in those low-income families, who live on social assistance, cannot be trusted to use that money for their children's own benefit, self-directed, and so you're stigmatizing people living in poverty. In fact by taking that money and reinvesting it in social programs, you're making those people on social assistance, those least able to sustain their families because of their personal circumstances, fund social programs. That's really sad.

You're talking about giving a benefit across the board so all children are at an equal level. Are you really? When you're talking about, say, a low-income person, somebody on social assistance, who gets $1,000 a month, their child tax benefit may be $300. That's significant. That is a significant amount of their monthly income. When you look at somebody who's making $4,000 a month and getting the same benefit, what relationship is that to their monthly income? How significant is that?

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So that is my major concern and I think it needs to be re-examined. Again, I'm expressing concern that federal money can now be accessed by provincial governments, federal tax benefits are being accessed by the provincial government, and it was never possible before. So I have a concern that now the provincial government can take that little tiny bit of benefit, that little tiny bit that improves the quality of life for low-income people, and use it now as an earned income so that they can reduce the amount of benefits they give to social assistance recipients overall.

Then when you're talking about making it an equal benefit all the way across the board for everybody who has children, in fact it's not an equal benefit, because when people with middle and upper income receive that benefit they can use it to improve the quality of life for their children, working poor people can in fact use it to improve the quality of life for their children, but people on social assistance cannot.

That's all I have to say. Thank you.

The Chairman: Thank you very much.

Colleagues, recognizing the fact that we're going to be cutting into our next session and into your lunch hour, I will implore you to be precise. We'll go to five-minute rounds and that way we'll only cut into 15 minutes of our lunch hour. And with anything in excess of that we would be cutting further.

Mr. Forseth, five minutes, please.

Mr. Paul Forseth: Thank you very much.

I wanted to respond briefly to Mary Boyd—

The Chairman: Surprise.

Mr. Paul Forseth: Surprise. Typically—

The Chairman: If you're right and you can convince her, she'll vote Reform next time.

Mr. Paul Forseth: Maybe so.

Often when we get into a debate an individual will erect a straw person that is not based on reality and then seek to go through the exercise of knocking down that straw person and then declaring victory. I have a couple of points.

The Reform Party did not advocate repeal of the child tax expense deduction, first of all.

Second, the suggestion of income-splitting is only a discussion point that we've heard from a lot of testimony at this committee. We all recognize that income-splitting may be a partial solution for some people, but as you say, it certainly doesn't particularly benefit people in lower income brackets. Mainly the issue of income-splitting is to address the three different rates in the progressive tax system we have now, and not everybody in various configurations would be able to benefit from that, depending on where the margins were in the mix. So obviously that has very limited value and certainly is only one of the measures that have been discussed as a possibility. But it is not a prescription coming from the Reform Party. So both of those things you have said is our plan, and it's not so.

One of the other things you said, in a somewhat pejorative sense, is that we're trying to get women back into the home or domesticate women and so on. Certainly that's not the case at all. But you must understand that the reason for the existence of this committee arose I think from quite a considerable feeling out there in the community—and there's polling data to support this—that the present appearance, or the feeling, of some unfairness. Many Canadians are saying what they want versus what they see, and then they look at the difference between the two and that gives rise to the desire for change to what they say is more equity or more fairness.

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When people come to this committee we want to hear how we can respond to those feelings of inequity and also how we can better support children so that they will be self-actualized and become everything they can be.

As we all know, we are into a very complicated tax system, and we've heard a lot of testimony about how to perhaps disentangle ourselves from that. But I do appreciate your comments about some of the other social supports, that not everything can be done perhaps out of the tax system, everything from better support for education and other programs. There are issues concerning EI, the Canada Pension Plan, and other things. We heard testimony earlier about employment barriers and barriers to training, the way social welfare is jigged, clawbacks, and so on, which is quite discouraging. That's just a touch of a lot of the other things we need to address.

I just wanted to assure you that the Reform Party is trying to be sensitive and accountable to the community mood out there. So we are reflective of what we are hearing from the community, rather than coming from a particular ideological prescription that says something is better than something else. Various individuals have come before this committee and have slid down that slope and have begun to argue somewhat ideologically. I think we ignore those things. We will try to assess weight to the various testimony to try to be as child-centred as possible.

I think you speak very eloquently to defend kids. I just wanted to reassure you that no one would ever be comfortable, in a pejorative sense, with phrases like “putting the woman back in the home”.

The Chairman: Thank you, Mr. Forseth. You've left no time for our guests to answer, but I'll grant a short period of time. Mary, I presume you will want to answer first.

Ms. Mary Boyd: Briefly.

You have left that impression, and it is more than creating a straw person and then claiming victory. When you go through the figures and the analysis, it comes out very clearly that it's that hint of a suggestion, if that's what it is—I thought it was stronger than that from what I read about what happened in the House of Commons and why this committee had to go on the road and consult Canadians. Certainly, it would favour the wealthy if that were to go through and not the people who are struggling with lower incomes and working very hard, and they are the majority of Canadians. I don't know who out there is sending these kinds of messages to whom, but it's not the majority of Canadians, because the majority of Canadians are somewhere else in their struggle to make a living and to achieve fairness.

The Chairman: Thank you. Ms. Le Forte.

Ms. Susan Le Forte: I have a little comment. We talk so much about taking care of children and child poverty. Canada doesn't have child poverty. Children don't live independently here. We don't have a high vagrant population of poor children. Those poor children live in poor families. So if you're going to address what you would call child poverty, you have to look at the family unit. You have to look at family poverty. You can't just say, oh, we're going to do all these wonderful programs to address those poor children, because in fact that doesn't really occur.

We would like to say that as Canadians we believe in human rights, but in fact I don't believe we do. Our value system is based on merit. Those who are worthy are the ones who get the benefit. If you believe in basic human rights, then you believe that everyone is deserving of a basic level of living. In fact, the way our programs are set up, they're set up on merit—who is worthy and who is not. Therefore, we don't have a fundamental philosophy of believing in human rights.

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Mr. Tay Landry: Just a comment on the idea of listening to what you're hearing in polls. Polls are usually conducted by telephone. I worked for a pollster for four years doing research, and there's a real reliance on polls. The majority of low-income people and people on social assistance do not have phones, so you are not hearing their voices when you're taking into account this information you're obtaining from polls.

The Chairman: Thank you.

[Translation]

Mr. Cardin.

Mr. Serge Cardin: Mr. Landry, the witnesses who have appeared before us since the beginning of the week have not necessarily been in the same situation as you are. We have listened to many presentations. However, the head of a single-parent family with four children may yet present us with a somewhat different picture than other persons.

I'm interested in hearing your views on some of the issues dealt with in the course of our consultations. You are a working man with a family to care for. Some persons have talked to us about the situation of person who stay at home. The majority of these individuals are women. There are some who want the unpaid work done by persons who stay home to be recognized in some way.

As a man with a family to care for, how do you feel about this demand? Some have also contended that the system is unfair because a married couple is entitled to deduct child care expenses from their income for tax purposes, whereas in the case of a couple where one parent stays home, child care expenses cannot be claimed for tax purposes.

In your case, you probably have access to child care services. Or maybe you get someone to help you care for your children. In your opinion, as a rule should families be allowed to claim child care expenses, whether a spouse stays home or not? I'd like to hear your views on the subject.

[English]

Mr. Tay Landry: On the first question, I believe in Canada, in general, work at home for everyone is not recognized sufficiently—the importance of raising children, whether it be a stay-at-home parent full-time in a spousal relationship or a single parent. In fact, as a single parent, I see the work being done being very stigmatized. I've either not been hired for jobs or I've lost jobs because I was a single parent, because of the amount of time I have to take out for family emergencies for which I have no choice but to leave. Going into the whole social aspect, it's also very stigmatized. I've lost all my friends now that I'm a single parent. I've lost my hair. I've lost—

The Chairman: It's because you have children, not because you're a single parent.

Mr. Tay Landry: It's because I'm a single parent and because...well, this is true for all single parents. When you have a spouse who comes home, or both spouses work and both come home and they're both there, if one gets stressed out or one has something they want to do—take a class, go to the gym, things like that—that opportunity is there because the other spouse is there. For a single parent like me, that doesn't happen. I haven't gone anywhere in four years without at least one kid behind me.

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So I see that the whole idea of being a parent, in particular being a single parent, as really devalued in Canadian society, and the single parent actually being very devalued, very stigmatized.

As for your second question, I am in a position where I don't earn enough to afford day care. Subsidized fees are almost impossible to get. What I've done over the years is arrange my work so that I get my kids to school, I go to work, and I'm home by the time they get home from school. Then I work at home in the evening. So my children aren't in day care; they go to school. At the same time, I have to do the parenting role while being there, usually while doing work as well, and having to fulfil the rest of the parenting role. Most of my friends ask me when I sleep and I just tell them I haven't. I get three to four hours sleep a night, when I'm lucky.

The whole idea of the tax exemption...I see that the day care tax exemption in particular, depending on how you look at it, is or is not discriminatory. It's discriminatory in that not everyone can get it, but it's not discriminatory in that those who can't get it have access to an alternative, which is that one parent can stay at home. That's why I see that it's not discriminatory.

It's the same as the disabled tax benefit. Those who can get it, get it because of some sort of inequality: they are disabled. So I'm sure if everyone else in Canada wanted to get it and they were willing to go out and become disabled...certainly they should have equal access to it.

The Chairman: Madame Dockrill, s'il vous plaît.

Ms. Michelle Dockrill: First may I say, to pick up on something my colleague, Mr. Forseth, talked about when he referred to communities, I think it's safe, certainly from my perspective, Mary, that your presentation today is certainly what I've been hearing with respect to this issue at this end of the country. Clearly it's been a position that has been taken by a number of groups we've heard from in the last few days.

One of the concerns I have is that we're being given a number of suggestions in terms of the issue. As I was listening, I found myself asking, but what is the question?

When I look at the terms of reference for the subcommittee, it refers to tax and transfer assistance and families with dependent children. I think it's important that we stay within that framework, because as you have talked about, and, Tay, as you're living, there are various family configurations in this country. We cannot make the assumption that all of those configurations have choice, because they don't. Tay, you've just talked very eloquently about how you don't have very many choices in your situation.

Given all of that to struggle with, I'm wondering, Mary, specifically for you, if you can give me your views on a universal solution. Yesterday we had a mother in Toronto—and I repeated myself a couple of times this morning, but I think it was really important. Certainly it was key for me. She said she didn't have the answers, but all she knew was that she wanted whatever was going to be done to be done for everybody. I just want to know if you'd like to comment on that, Mary.

Ms. Mary Boyd: I think universal programs are the fairest. Take our health care system. When the poorest person in the country can walk into a doctor's office and have equal treatment with everybody else, that's the kind of program that I think is important.

We did have a universal family allowance, and all of us growing up remember our parents waiting for the family allowance cheque, because it meant so much. Why all these universal programs have been cut out, I don't know. We have a high unemployment rate—

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Mr. Paul Forseth: It was done to save money.

The Chairman: Under the Conservatives.

Ms. Mary Boyd: The fact is, the ideal, of course, is people have the choice to work if they want to, and they need to. In most cases where both people are working, they have to work. They need the income. It's very expensive to live these days. That's why a single parent has such an unbelievable challenge and struggle to make ends meet, because they're alone in that.

I do think that making it easier for people to seek work, if the jobs are there, is extremely important, and that's why universal day care is really important. That's the program that was promised and hasn't been delivered on. Of all the programs, I think, to pursue universal day care...and making some of that part of the education system, as I said. In France, babies six months old can participate in these programs. We're low by OECD standards on a lot of these programs to help out parents, whether they are working or staying at home.

I think if you give something universal and somebody is in a high-income bracket, it can be taxed back. If you're in a low-income bracket, you should be able to have the full benefit of it to give some equality to people.

Keeping the child benefit is just an unbelievable thing the provinces are doing. It's theft. I don't know why the federal government doesn't put some conditions on these grants to prevent provincial governments from taking them. They should be higher. The child benefit should be much higher than it is.

So I recommend that we do have a universal child benefit that will be for all and that can be taxed back, but that in no way can the provincial government interfere with that or have any relationship to welfare.

I think one of the problems is that the federal government, by cutting back on a lot of things, has.... Once they reduced the Canada health and social transfer and took off CAP and all of this, they took away the rights of people to have a voice and to fight. It impoverished people, and it impoverished the provinces. That's a way to get back. In fact, the federal government let go of the lever it had to endorse national standards, and we do need those levers, as we do in health.

If more money isn't put into health and if the federal government doesn't take at least 25% ownership for our health care program with the money, it will not have the lever to say to those provinces that are opting out and doing all these things, there are national standards and you have to conform to those national standards.

So universal day care and universal child credits are important, but also, going back and taking a look at what has been cut back, and restoring some of those.... The thing is they're just coming out for the amount of money lost per riding with the cutbacks in unemployment insurance. That means the number of people now who cannot qualify, even though they're seasonal workers.... These were excellent programs of a universal nature. Why are they gone? I don't know. But the people of Canada are really suffering because they're gone.

The Chairman: Thank you, Mary.

Last question.

Ms. Michelle Dockrill: A comment and a question. I think one of the things that's clearly coming forward, Mary, is the question of whether or not we deal with this as an issue of the child or an issue of parental activity, and I think that again is another question we have to decide.

Just in closing, I'd like to say, Tay, that I commend you for your commitment to your children. I know it's not easy. I'd like to say thank you for your commitment to what will be our country's future. I think you've made it very clear today that it is not an easy road.

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I think one of the things that we as a subcommittee have to look at is how can we ensure that public policy from here on in assists individuals such as you, who are truly committed to their children and the future of the country. I just want to say thank you.

The Chairman: Thank you. No question, then. Thank you.

Monsieur Scott Brison, s'il vous plaît.

Mr. Scott Brison: Merci beaucoup, mon cher collègue.

Welcome, and thank you for your presentation. The issue of neutrality in the tax system—and not to encourage or discourage one type of parenting, single-income families or two-income families—I think is important. I can assure you that in studying this issue it's not with any sort of misogyny or desire to go back to a Ward and June Cleaver model of what may have been in the...probably they weren't that functional anyway.

In any case, the bottom line is we're trying to evaluate whether or not frankly there is a discriminatory policy now, and that's part of what we're trying to achieve. Your comments, Ms. Boyd, were helpful because you provided a perspective that I don't think we see that often. It did provide an alternate view of this, and that's very beneficial.

Would you see the reporting of joint income, or family income, as in some way subordinating the independence of one of the two partners in a marriage potentially? I can think, in my own realm, of couples who are two-income families in which the one does not know the financial information on the other, and that's the nature of their relationship. They're families, they're couples, but they have financial independence, separate finances, and their relationship is not built on financial dependence. It's a relationship, a marriage, that's based on probably what it should be, and that is an emotional commitment. Would you see that as somehow having a deleterious effect on the independence of one or the other spouse?

Ms. Mary Boyd: I would, yes. Women especially—even though we have people like Tay, who really is committed to his children—in general bear the burden and take more responsibility, have more feeling for the needs of the children, and I think are more willing to pay their salary for the children rather than go to the golf course, or wherever, if they're in a certain income bracket, which has to be higher and higher these days. In a family where there's one earner, I don't think the person who stays at home has 50% of that income. I think the person who earns the income in general has more say or wants to have more say. It's an unusual situation where there's total equality there.

The other thing is that I really believe each person can place their priorities where they need to be when they have income. I think it also facilitates better decision-making together of partners if both are earning; both have a certain independence, so they put their earnings on the table and make the decisions together. I've been told by people on social assistance that some of the biggest fights and problems, and things that cause the greatest mental stress, were these issues of income and where you spend the money. When you just have a few cents left, do you buy meat, do you get something that a child needs? We're talking about poverty here that a lot of people certainly experience in this country, and around those very practical items, when there's one income there's an awful lot of fighting that goes on, whereas if you have the opportunity to get out to earn and you have some independence, that barrier is not as great.

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The other thing of course that we have to look at is that we only have three income brackets right now. We should have a lot more, and we should have a cutoff point where, if your income is below, say, $10,000, you should not have to pay any taxes. We need more fairness in the tax system in general, and to give more breaks to people who are so close to subsistence.

Mr. Scott Brison: Thank you. And I can assure you that disputes over money in domestic partnerships is not limited to those on social assistance either.

Ms. Mary Boyd: No.

Mr. Scott Brison: I think it's probably more because you're talking about what to put on the table.

You mentioned—and actually it was my next question—raising the basic personal amount to $10,000. I share that with you. In fact, that's been part of our party's policy now for three years.

In terms of the disincentives that exist for those who are on social assistance to actually enter the workforce, there are huge disincentives, and I see it constantly with people who come to see me in the constituency. One alternative that has been suggested—and some people are trepidatious about it because they say it may reduce labour market flexibility—is movements to increase the minimum wage. The experiment in the U.S. has demonstrated that increases in the minimum wage need not increase unemployment, which was the traditional economic argument. So I would appreciate your feedback on whether or not increases in minimum wage may be able to help that end. As I said, my arguments have been consistently against increasing minimum wage, but I've looked at what has happened in the U.S., and frankly, it has surprised me and there is more evidence that I was wrong. So I would appreciate your feedback on whether or not that would be one alternative.

Ms. Mary Boyd: I'd like to start on that because I come from P.E.I,, which has the lowest minimum wage in this country, and this is quite shameful. The worst part of the low minimum wage is that while maybe not a lot of people pay the minimum wage, they pay just a few cents above it; they use it as a guideline. That's the trouble. And I've sat at meetings where people have said, if the minimum wage was $7 an hour I'd pay it. What's stopping them from paying it right now? It's closer to a just wage.

So I think the minimum wage should be much higher. We continue to advocate a much higher minimum wage that would reflect the national average, and then each province would have to respect that. It would raise income significantly and it certainly would help the working poor. Low minimum wages are a very big part of the problem of poverty in this country.

Mr. Scott Brison: Could it potentially reduce social assistance spending? Again, that is one of the barriers.

Ms. Mary Boyd: I'm going to say something about reducing social assistance spending. For two years in a row now we have done alternative provincial budgets. We've also done alternative federal budgets, which we keep recommending. There are many wonderful ideas in there. If people really read them, I think they would see that in fact the assumptions are closer to the reality in the alternative budgets.

But what is shocking for a small province like Prince Edward Island is that the statistics are very wrong. It's put down as the least poor province in Canada. In fact, it's one of the poorest provinces in Canada, because it has the lowest minimum wage, it has a very high unemployment rate, and it costs a lot to live there. I heard somebody saying before I came in here that a lot of the people who are below this line, this so-called poverty line, own their own houses. And my question is what kind of house do they own? I know a lot about housing in rural areas, and owning a shack is no asset, I can tell you.

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But we have found that even in a small poor province there are choices. There certainly are discretionary choices, and to the disgrace of the P.E.I. government, with discretionary money last year they lowered the welfare. They cut out almost $2 million, which is significant for P.E.I. This year, with all the extra equalization they received, which was around $75 million, which is very good for our economy, they took out more than a couple of million again; and not only that, but in keeping the child benefit they're earning millions that way too. So you add all that together and it's significant.

So in fact governments do have choices and welfare does not have to be lowered. Every province in this country can afford to have a much more generous welfare system than it has. And it shouldn't be so punitive either.

The Chairman: Thank you very much.

Mr. Szabo, please.

Mr. Paul Szabo: Thank you.

The child expense deduction will go to the lower-income-earning spouse. So if we took an example of a two-income-earner family where the lower was making $25,000, they have one child, and they paid $5,000 for the child care expense deduction, that would reduce their taxable income to $20,000. If you work out the mathematics, there's $3,386 of taxes payable.

So if you look at what happens to the pocket, a $25,000 a year job less your $5,000 of child care expenses, less the $3,386 of income tax you have to pay, gives you net pay in your pocket, to take home and deposit in your bank, of about $16,614. As Mary correctly pointed out, if you withdrew from the workforce, the other spouse who continues to work gets a spousal amount, a non-refundable tax credit, that's worth roughly $1,500.

The bottom line is that somebody who had a $25,000 a year job who withdrew from the labour force to provide direct child care has given up $15,000 of cash to the family. They've also given up the opportunity to participate in pensions, career advancement and training. They probably now are contributing more time to the school, to charitable work, to assistance, to hospitals, etc.

It seems to me that the difference between having two in the paid labour force and only one is much more than just whether there's a child care expense deduction. It is the loss of income, the opportunity to earn economic gain and all the other things. So I ask you, Mary, since everybody doesn't live in an urban centre, do you think that a family where one stays at home to care for their child or children should get some recognition for that, considering that probably in some cases care is neither available, accessible, nor affordable, or it just happens to be their choice to provide that care to their child themselves?

Ms. Mary Boyd: I think everybody addresses the unpaid work in the home, the value of work that is done in the home, and it has never been counted in the gross national product. And if it ever were, it would be huge.

I don't think we should pit parents against each other, those who choose to go out to work and those who choose to stay at home. The choice needs to be there. And if we had some more universal programs it would enable somebody who wanted to stay home, if that was their choice, to benefit and have some income. I think that, yes, pensions for women who don't work because they feel they need to stay with their families are important.

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Mr. Paul Szabo: I think I agree with you. Choice is good. Parents probably are in the best position to make the best choice for their situation, and we should help. That's good. I agree with you.

For Susan and Tay, I'm glad you brought up the issue of poverty and child poverty, because it really is family poverty. You're quite right. I'm not sure if you're aware, but the divorce rate in Canada is about 40% right now, and common law relationships break down about twice as frequently as married relationships. One-parent families represent, according to the last full analysis, 12% of all families in Canada, and at the time they counted 46% of all children living in poverty. The latest numbers from StatsCan are that now one out of six families in Canada is in a lone-parent situation, and they account for more than 50% of all children living in poverty, all families living in poverty.

It seems to me that if the single largest cause of family poverty is family breakdown, we have to not just help people who have fallen into that situation after the problems occurred, but we also have to look for opportunities to support families early in their relationships, because I think they all start off with loving and caring relationships and something happens along the line.

I think part of it has to do with financial pressures, part of it has to do with social problems, domestic violence, substance abuse, etc. But a better balance between investing in children, and therefore investing in families, will help to strengthen family relationships so that maybe the rate of family breakdown may not be as bad. I have a feeling that theoretically the poverty levels would go down very substantially if families were in fact more stable and more intact for the children, because I think, as you will both agree, in the large proportion of the cases where the family breaks down the real victims are the children.

Ms. Susan Le Forte: Mr. Szabo, that's a very narrow view of why families break down and why people are living in poverty. In fact, if you're looking at family breakdown and you're looking at those issues that impact on poverty, it's because one or the other parent is not contributing a sufficient amount to sustain that family. Just because a family no longer lives together, no longer is married, does not mean that the other parent therefore no longer has responsibility to provide financial support for that family, and that's where the breakdown is more significant.

So to have enforced child maintenance maybe coming directly out of paycheques, to track down—and I don't like the term—deadbeat dads and to take that money and reinvest it in families so that those families' poverty is not more significant, and to have the Department of Community Services not take child maintenance off dollar for dollar when that money is therefore recouped—

Mr. Paul Szabo: I agree with you.

Ms. Susan Le Forte: So when you're saying that simply because the family has broken down the family is in poverty, you have to look at what happened; you have to look at the whole construction of the family, what the family looked like, what the role of the parent was, and how disproportionately the women in those households have taken on the nurturing care and have not had the opportunity to be in the paid labour force. That impacts on poverty and that impacts on what families—

Mr. Tay Landry: First of all, you're making the assumption that the nuclear family is the ideal and the norm. In western Christian culture—

Mr. Paul Szabo: I'm just suggesting that lone-parent families, broken families, account for more than half of families living in poverty.

Mr. Tay Landry: Yes. And I think you're going to see that—

Mr. Paul Szabo: That makes no assumption with regard to what's the best configuration. I don't make that judgment.

Mr. Tay Landry: I believe you're going to see that over the years—and this is something the government is going to have to take into account—lone-parent families will grow, because the nuclear family, which developed over the last half of the 20th century, is something that is now being evolved away from.

Mr. Paul Szabo: Finally, do you think that as a committee we should, as a general criterion or philosophy, or as an approach or guideline for our work, seek to support parents in their choices, and assist and make it child-centred, so all families have the flexibility and option to give the best possible care to their children?

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Mr. Tay Landry: But first of all, even if you make the tax system marketable, all parents still won't have that option, because there are too many other social factors contributing to the life of a parent and the life of the family.

I think you're being idealistic in thinking that changes to a tax system are going make any major impact. The greatest impact they'll have will be to give a few thousand dollars' worth of break to the high- or middle-income people.

Mr. Paul Szabo: We're not restricted just to the income tax, we're looking at the full range.

Mr. Tay Landry: Okay, getting into the tax system may help, but the way our society is constructed, there are so many restrictions and so much stigmatization on such a large portion of the Canadian family population, meaning the single-parent, lone-parent, one-parent family, whatever you want to call it, that they will never reach equality with married families.

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

I have a question for Mary. One of the goals was to try to address the appearance of inequity between the two different family configurations, with working spouses or not. From the outset, the Finance officials seemed to indicate—and I don't want to get into the costs here or the benefits—that by income-splitting you would address that inequity.

I've heard lots of testimony that people don't like that route, for various reasons. There might be no benefit to income-splitting for some people, but I don't see there being any negative benefit to 100% of families. Whereas some families, for example, would not benefit because of the income level they're in, certainly there is no downside to doing it, on a financial basis. I think families overall would be better off. They wouldn't be worse off. All families would be better off.

Ms. Mary Boyd: By putting the two together in the same family.

The Chairman: Right, because there would be savings for the family, inevitably.

Ms. Mary Boyd: No, it depends.

The Chairman: No, but I chose my words very carefully. No family would be penalized by it, but some families might not be able to benefit from it.

So if we went to an optional joint filing system, it seems to me those families would benefit from the tax savings there. We could give the option of transferring some of those tax savings directly to the lower-income spouse, whereby some of those savings could be then transferred into an RRSP for that spouse, or CPP contribution—I haven't thought this out fully. But one of the goals we're trying to achieve is to enable the spouse who's not working to get some of the benefits.

Would you still have overwhelming objection, or do you think other Canadians would also? So far there's been an overwhelming objection to even considering joint filing.

Ms. Mary Boyd: The Canadian income tax system is based on the individual, and I think that's very important. It's really important to the independence of the individual.

The Chairman: But many of the benefits are based on family income. The spousal exemption, for example, and the child tax benefit are based on family income. The old age security is clawed back based on family income. The taxation is based on the individual, but the benefits aren't necessarily based on the individual.

Ms. Mary Boyd: So with the combination of the two, it may work out that taxation should remain as taxation of the individual.

The Chairman: Even though the family might be better off.

Ms. Mary Boyd: Well, I'm not sure. I think a lot of mathematics has to be done yet to say the family would be—

The Chairman: They won't be worse off.

Ms. Mary Boyd: —better off in that way. I said they would be worse off in different categories by putting the two together.

The Chairman: You don't think making it optional would solve it.

Ms. Mary Boyd: I did say that and I have some examples, so I'll stick to that. That's the tax system, and the value of the individual is extremely important because that's where the choice of the individual to do.... It especially reflects on women and it's a sociological thing as well.

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Women have a long way to go yet in this society before they earn equality. We'll have an equal society when there's equal responsibility for care in the home and nurturing and bringing up the children, and equal responsibility for earning. We're so far away from that, and the amount that a woman can earn compared to a man in the workforce is still way out of whack.

So with all those things, when you combine the two under one family unit, you can actually can keep reinforcing those inequalities. So our system is fairer as it is, based on the individual taxation.

The Chairman: Thank you very much.

Ms. Mary Boyd: I have one other point.

I've heard some other people say that maybe the budget for the millennium should be a children's budget. Of course you can't have a children's budget without having an adult budget, but in fact the priority would be on overcoming poverty and having new programs for children that are universal and fair and that are going to reflect back to make the parents better off so that they can take their children out of poverty. This could be the priority for the new millennium. I would certainly endorse that. I think it would be wonderful if that could be achieved.

The Chairman: Thank you very much. I think you'll find a sympathetic ear to that cause around the table.

On their behalf and on my behalf, I'd like to thank you very much for being with us today, and for giving us your valuable input, as always.

Colleagues, the meeting is adjourned until 1.15 p.m.