[English]
EVIDENCE
[Recorded by Electronic Apparatus]
Monday, May 10, 1999
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[English]
The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): I now call today's meeting to order. Pursuant to the motion adopted by the Standing Committee on Finance, dated March 17, 1999, the subcommittee now resumes its study on tax fairness for Canadian families with dependent children.
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I'm pleased to welcome this afternoon, from
Focus on the Family, Mr. Darrel Reid,
president, and Mr. Jim Sclater, director of public
policy; and on her own behalf, Ms. Leslie Zenger.
I believe Ms. Zenger has to leave by 2 p.m. Therefore we'll commence with her presentation, and depending on Focus on the Family's presentation, we might be able to combine them before you leave. If not, we'll ask you questions, and then you're welcome to leave.
Thank you for your patience. We ran over time this morning.
Ms. Leslie Zenger (Individual Presentation): So I should begin.
The Chairman: Yes, please.
Ms. Leslie Zenger: Thank you. Is there a proper address to the House of Commons committee?
The Chairman: No, it's very informal here.
Ms. Leslie Zenger: I will say that I am a little anxious here as the time presses on, and as a non-working person in the room, I do need to get back for my children.
The Chairman: We'd all like to get back to our children.
Ms. Leslie Zenger: Well, they don't have anybody else today, so....
I'll also say that the kids have been telling me lately some statistics that say more people are more afraid of public speaking than they are of death. I'm not a public speaker.
The Chairman: Just relax.
Ms. Leslie Zenger: Okay.
The Chairman: The only person who would bite you is Paul Szabo, so we will keep him off the biting list.
Ms. Leslie Zenger: Okay.
I think the focus is on the two-parent family situation where one parent earns an income. That's certainly what I'm addressing.
I'll start by saying that since the introduction of the child care expense for the family with both parents working—and I believe it would include the single-income family—this has been a discrimination against those of us who stay home to raise our own children. Previously, the job of raising children had no value for any of us, so we were unfortunately equal in this.
The current system, where the two-parent single-income family pays tax as one income earner with deductions, child care not included, does not acknowledge that the parent who stays home does work. The job of caring for children and the home does have value. This is acknowledged by our tax system in that it recognizes this work when it is done by nannies or as part of the job by day care workers.
The two-parent single-income family with children has two working parents. The parent who stays at home will often contribute far more both in the home and in the community than any nanny does.
I've just come from a parent meeting at a school with 830 children. There were 10 parents at the meeting, a reflection of how many are available to participate in needed jobs at the school.
Parents who stay home to raise their own children are also the people who help in the schools and in the community. I do not see nannies out there making this extra contribution. Admittedly, many working parents are also contributing in the schools and in the community, just not as much during school hours. The parent who parents all day does not quit at 5 p.m. either.
Help in the school and in the community gets harder to find if fewer parents are available and as many of those available get tired of volunteering, tired of helping for the benefit of their own children and the children whose parents are out there earning extra income. Some get tired of paying for the vehicle, the gas and the repairs while the unavailable parents are out earning extra income and probably getting the expenses on their gas too.
Do nannies work? Do day care staff work? Do parents who stay at home to raise their own children work?
The tax system needs to recognize that the parent who stays home is a working parent. The current system that recognizes work done outside of the home and work done by nannies and other caregivers does not recognize work done by a stay-at-home parent in a two-parent single-income family. I believe the work done needs to be recognized regardless of the income of the parent who works outside of the home. This work, whether done by someone in the family or outside of the family, does have value, and the people who do the work need to be valued through the income tax system.
My understanding of the current tax system is that it favours the position of two parents working outside of the home. It is set up to enable both parents to work outside of the home. It says that if you work outside of the home, then the raising of your children has value. It says that the raising of children has value as long as a non-family member does the job. This is a highly discriminatory system. It discriminates against the parents who stay at home to raise their own children and against families who are fortunate enough to have a grandparent available. We cannot value the job for some and not for others.
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Child care value is not about a credit for low-income
families; it is about a job that has value, whether it
is done by someone inside or outside the family. The
tax system does not need to be changed so low-income
families can deduct child care expenses. The tax
system needs to change so the job of child care has a
universal value, so it values the work of whoever does
the job.
Higher-income families still pay higher taxes than lower-income families, but the amount of the child care deduction needs to be made universal. That would offer equitable choice to the individual, whether the second parent worked in the home or outside the home.
The value allowed for raising children needs to be the same across the country, whether the family's earned income is high or low. The job of raising children has value and the people who do the job need to be valued. Once this job is properly valued, women will truly have equitable choice in working in or out of the home. Women—and I say women because this is an issue that mostly affects women—need to be able to work outside of the home or stay home. They need equitable choice. If a woman has a desire for a career or is just better equipped to work outside the home, she needs to have the opportunity to do this.
Too many women are working just to earn the extra dollar. Once the day care is paid for they are just a little better off, but they need this little bit. Others are just plain tired of working for nothing. They prefer to pay for child care and receive some economic remuneration elsewhere. Too many of these latter two groups are doing entry-level or progressive-entry jobs that could otherwise be filled by our too many unemployed youth.
Please note also that the job does not end once the children reach kindergarten or grade one. The job does not end once the children reach the age of 12 years. Not only does the job not end, but the parent who stays home to raise children, take care of the home and help in the community also gives up years of job seniority and income-earning potential. This parent, whether previously educated or not, needs training opportunities later on if he or she is to re-enter the workforce once the children are raised and independent.
As long as young people need jobs, I would favour a tax system that would offer these parents an equitable choice as to whether to continue to be home and in the community or to go out and rejoin the workforce. Rightly, the child care expense deduction should be offered retroactively to all single-income two-parent families to when the job was first valued through the child care expense deduction. The business of valuing the job for one group and not for another is highly discriminatory.
The Chairman: Thank you very much.
How long is your presentation, Mr. Reid?
Mr. Darrel Reid (President, Focus on the Family): It's about eight to ten minutes combined between Mr. Sclater and myself.
The Chairman: Maybe we'll hear your presentation and then we'll ask Ms. Zenger questions. Are you pressed for time?
Ms. Leslie Zenger: I will be leaving at 2 o'clock.
The Chairman: So maybe I'll ask the opposition to put their questions forward.
Monsieur Forseth.
Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you for coming here today.
Certainly the main theme you've brought home is that child care should have universal value. You point out our general Canadian societal lack of priority to children by not compensating those who care for our children. Somehow in society we have to address the larger issue of how we as a people really view our children and how we can do that in practical terms in a monetary way, perhaps through the tax system, because that's a somewhat reflective symbol of our larger Canadian attitudes.
It's interesting that you've talked about a retroactive solution. It might break the Bank of Canada to do so, but it would certainly address the whole sense of justice or fairness.
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You've looked at the panoply of what's available, so
if you could change just one thing on the current tax
form, what would that be, to try to at least shift the
boundary to somewhat more of this world of value you've
talked about? Considering we can't do everything
overnight and that perhaps the ideal, to have a guaranteed
annual income with a flat tax and all kinds of other
things, would be quite revolutionary, within the
limited scope of this committee, what could be done in
the short term?
Ms. Leslie Zenger: The first thing is to establish the value of child care. If you consider an average workweek, that would become the average workday of the caregiver. All parents work 24 hours a day, whether they work outside of the home or not, so I'd like to see value given. Whether it's only as a deduction or one spouse paying the other, I haven't given enough thought to my preference on that. But I really have two things.
I also think income-splitting is highly desirable in a family situation. But on just the child care issue, whatever value is given to child care for parents who work outside of the home must be given for child care that is done in the home as well. So if that deduction is $5,000 per child, then every family must be allowed the same deduction. Whether or not I'm actually paid, my family must have the value of the child care represented.
Mr. Paul Forseth: So what is your comment on what we've heard at the table here, that for a parent who goes out to work day care is an employment expense? There is some controversy over whether that is true or not.
We have a lot of comparable individuals—tradesmen and so on—who have very clear employment expenses, such as an automobile mechanic who has to spend several thousand dollars on tools and constantly upgrade and cannot deduct any of that. There are many other examples of what the Income Tax Act does not recognize as employment expenses in order to do what they do. So this is perhaps a special case. Instead of it being seen as a child benefit or anything else, it's seen as an employment expense, therefore it should only be given to someone who has employment income and has to pay for day care.
Ms. Leslie Zenger: I think the big step in the right direction the government took was recognizing that somebody has to be paid for child care. They have given value to child care, which I think has enabled women to work outside of the home. That's a progressive social step. Women need to have equitable choice.
But we need to go beyond that and realize that women don't need to be enabled to work outside of the home only, and there are women whose better contribution is in the home. Those who have a career desire, by all means, support that and enable them to have their choice. We have to recognize that the job has value, and that is what the income tax system recognizes when it allows people to write that value off. They call it an income expense. But to actually go out of the home to work is, by and large, a choice.
Mr. Paul Forseth: For the stay-at-home parent, how do we put some value into their hands?
Mr. Leslie Zenger: For a school-age child, a family that is paying day care can write off up to $5,000 a year, I think. Is that what they're allowed? I'm not even sure of the actual amount; I've never had the opportunity to write it off. Is it $7,000? At the very least, whatever a two-income family is allowed to write off for their child care, the single-income family must be allowed to write off for their child care. The child care is done by somebody in the home, so that's a saving in the home—something adds it onto their income. It values somewhat the work being done in the home.
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There was an article in a magazine a while back saying
that the three most stressful jobs in our country were
family physician, pastor of a church of 300 or more,
and a stay-at-home mom of two or more kids. Certainly
we all know we cannot be valued as much as a doctor;
that would really bankrupt the country. But the job
does have value and it needs to be an equitable value.
It's not just a job value to send people out of the home. We need parents in the home too as a preferable choice for our society. It apparently is not part of the issue today to get into what's better for society, so I'm addressing it as a job that has value.
Mr. Paul Forseth: You said it's not—
The Chairman: We are running out of time. We're already at about eight minutes and we have two other guests.
Mr. Paul Forseth: I'll cut it off there then.
The Chairman: I'd like to take the questions all at once and then have have Ms. Zenger respond them.
Michelle.
Ms. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): I just have a comment and a small question. I heard you talk about choice with respect to those women who work outside the home. I would argue that for some women it's not a matter of choice; it's a matter of necessity.
Ms. Leslie Zenger: That is true.
Ms. Michelle Dockrill: I don't think you'll have any argument that there is a need for unpaid work—it's a terrible phrase—to be recognized. But what would you have to say with respect to one-parent families?
Ms. Leslie Zenger: Are you talking about single parents with income or single parents without income?
Ms. Michelle Dockrill: Both. We prefer the term one-parent family.
Ms. Leslie Zenger: Of course the work of a single parent has value too. But for the single parent who works out of the home, the question of value of caring of the children is clear. The parent is entitled to the full child care deduction. The situation becomes more difficult with a single parent who has no income. We do not want to encourage a society where people have children in order to get a guaranteed income from the government. I know some young people who think in those terms.
Families where no parent earns income will be provided for, but their incomes will be low. You must be responsible in your choice to have children. But the choice to have children so other taxpayers can pay them full nanny wages cannot be a full option.
We must provide adequate and decent incomes for the single parents who are at home with no incomes. They are more the issue than the ones who have incomes. It's not the one I'm addressing here, which is discrimination in the single-income two-parent families, where it's obvious that one group is allowed to write off their child care expenses while the other is not.
The no-income family is something I would have to regard as a separate discussion and another very serious issue, but not one that directly impacts the child care expense deduction that is available to one group and not the other. I know I work as hard as any nanny in town. I do more than just clean the house. I think I'm a valuable contribution to my community in my work. It irks me when I know the nanny is being paid and I have no value. I think there's something badly wrong with that system. The job has value. We have a child care expense deduction so the job has value, but it's a discriminatory system that says it only has value when it's done by somebody who's not part of the family.
I can go into the social issues. That is more than just the economic discrimination. It is also something that is not promoting a healthier society. The government has taken the stand that they will enable parents to work outside of the home.
Ms. Michelle Dockrill: Would it then be fair to assume that a lone parent, to use your words, would possibly be irked because she or he does not have the choice to stay at home with the children?
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Ms. Leslie Zenger: That's another question too. How does a person become a single parent? Sometimes it's 100% no fault of their own. No marriage is easy. Every marriage can end in divorce. Some people work harder at it than others. Those are other very big questions.
Ms. Michelle Dockrill: The reason I ask that is because one of the things this committee is looking at is the various family configurations. The reality of Canadian society is that we have one-parent families out there. I'm cautious about hearing comments that they're a lone parent because of—
Ms. Leslie Zenger: No, it could happen to—
Ms. Michelle Dockrill: It's the reality of the society we live in, and I think it's important to recognize that they do not have a choice, because that's the only way they can help support their children.
Ms. Leslie Zenger: Mine could really easily be a single-parent family. Marriage is not easy and it's often not fun. I could really easily be there. Now, some people might have less choice as to whether they stay in marriage or they don't than I would have. Maybe their husband leaves them, and then that choice is gone.
Ms. Michelle Dockrill: But you would agree that this is an issue—that a lone-parent family can be as irked as you can, but for the reverse reason.
Ms. Leslie Zenger: If a lone-parent family has an income, they will have a child care deduction, and raising their children will have value. If they are staying at home and living on income assistance...without child care, it's really hard.
Ms. Michelle Dockrill: Do you have any comments on a national child care program?
Ms. Leslie Zenger: One thought I had that actually addresses that one was that for all of us, whether we are working in the home or out of the home, the value put on the job is what welfare allows for the raising of children and then we are valued the same as welfare says. Income assistance, they call it nowadays. But I don't know the economics of it. I haven't looked at the figures, the numbers, the paperwork.
Ms. Michelle Dockrill: Are you saying you support the idea of a national child care program?
Ms. Leslie Zenger: National child care...?
Ms. Michelle Dockrill: To ensure accessibility of outside child care, outside of the home.
Ms. Leslie Zenger: I don't know if I understand what national child care is, then. Does that mean child care has value if it's done by somebody outside of the home, or does that also address the parents who stay home and raise their own children? I do not want to promote the position that children should be raised primarily by people outside of the family.
Ms. Michelle Dockrill: Well, there's been some suggestion by some presenters we've had that there are parents who are forced to remain at home because there are no policies or systems in place that would assist them to enter the labour market, one of them being accessible, affordable child care. In that context, would you agree with a national child care program?
Ms. Leslie Zenger: I really still don't understand it well enough. What does that say to the issue that I see, that the job of raising children has value? National child care—is that instead of valuing the work of parents who stay home? As I say, I don't understand. I want child care to be available to the lowest-income people, to all people, whether they choose to stay home or otherwise.
Ms. Michelle Dockrill: That's our point, the question of accessibility and also affordability. I think we all agree that if children have access to quality child care, we, as society, benefit.
Ms. Leslie Zenger: Yes.
Ms. Michelle Dockrill: There is a large portion of society that is saying very clearly they cannot access child care because of lack of affordability. So in that context you—
Ms. Leslie Zenger: And a lot of parents are saying, “I can't stay home because I can't afford it” so they're working evenings and they're shifting with their husbands.
Ms. Michelle Dockrill: That's right.
Ms. Leslie Zenger: Does the job of caring for kids have value? Other than all of that...because I think it is a job that has value and that we need recognition of that value too. In that sense, it's not an income-related value. It's not worth $3,000 a month because I'm rich—or maybe rich people want to spend more—and it's not worth $500 a month because I'm poor. It's established at whatever the wage is, $1,000 a month or whatever it might be—and once again, it's just a figure. But it's established as that amount, and it is that for people who have a high income or those who have a low income. Sometimes I've even thought that in the sense of income assistance, if the mother is valued for her job, maybe that's better than focusing too much on the children—if the mother has a value and then she puts her esteem value into the parenting of her children—and that we should change the whole social system around that.
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The Chairman: Thank you, Michelle.
Mr. Szabo, you have exactly five seconds.
Mr. Paul Szabo (Mississauga South, Lib.): Leslie, I want to thank you for being very clear, and I think you did extremely well. I want you to know that I, for one, don't believe money has anything to do with your decision to provide parental care. I think your values are very clear. Thank you.
Ms. Leslie Zenger: Thank you.
The Chairman: Thank you very much, and thank you for participating.
Mr. Reid now, please, if you'd care to continue.
Mr. Darrel Reid: Thank you, Mr. Chairman and members of the Sub-Committee on Tax Equity for Canadian Families with Dependent Children. It's my pleasure to be able to address you on this very important issue this afternoon.
Having been out of Ottawa now for nearly a year, I've learned two things: first, that there really is life after Ottawa; and secondly, that opportunities to touch lives often come in greater than 10-minute chunks. So I'm trying very hard to make my comments here this afternoon, and I'll be splitting them with Mr. Sclater. I know that's 30 seconds gone right there.
Focus on the Family is a Christian ministry that exists to support the family in Canada through radio broadcasting and family-building resources for parents and children alike. We're also members of the Canadian Family Tax Coalition, and you'll find copies of the coalition's press release and ours in the appendices to this presentation.
Through our radio broadcasts, we speak to approximately one million Canadians a week, and like persons in your chosen profession, we also hear back from them on a regular basis—from some more often than others, I might add. Like you, we also travel across Canada on a regular basis listening to the concerns of, I would hope, ordinary Canadian families and those struggling to make ends meet. Now, I want to stress that we are not tax experts, but we do talk to a lot of Canadians, and it's on that basis that we're coming to speak with you this afternoon.
During the course of your hearings, I know you've already spoken to many and will speak to many more social policy experts and tax experts on the questions set out in your committee's mandate. We would like to address them from the point of view of ordinary Canadians.
What do we believe? Well, we believe that the family is society's fundamental social unit, sharing a home that serves as the centre for social, educational, economic and spiritual life. We also believe that parents, not governments or other social agencies, bear the ultimate responsibility—and I would stress “ultimate” because I know there are many different responsibilities—for all aspects of their children's well-being. Any efforts that would undermine that responsibility are detrimental to the health of the family and therefore to society.
One mandate of this committee is to investigate the truth of the statement that real tax fairness presumes that whatever choice parents make with respect to the case of their dependent children, they should be neither privileged nor penalized by the income tax structure. We commend this search, and we commend Paul Martin and the finance committee for investigating this, because we believe most Canadian families would support an outcome that provides true tax fairness for families.
This is about choice, and that's the context in which we're addressing it. I certainly agree with Ms. Dockrill's earlier comments that working is not always a choice. There are many, many people who don't have that choice, and that means not just two-parent families but single-parent families as well. But I'm talking about the choice that families who have the choice to make would want to make.
One pertinent fact is that Canadians want choice regarding the kinds of family arrangements they make for their children, and they believe the current governmental system denies them that choice. I would cite, for example, the Compas poll of October 1998, which found the following: 91% of Canadians believe governments should evaluate programs and policies according to their impact on family life; 82% believe that making it easier for parents with young children to afford to have one parent at home should be at least a priority; and 81% believe that government should place “a lot more” or “somewhat more” emphasis on creating the financial and social conditions that would help families stay intact.
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A key belief of Canadians is that if they are able to
make child care decisions independent of financial
considerations, they would overwhelmingly choose to
keep one parent at home, especially during the early
childhood years, and they believe financial
considerations, especially tax considerations, to be
fundamental to that choice.
I'd ask you to consider the following: According to a major family poll of March 1997, which was conducted in Ontario but I think it's indicative of feelings across the country—the key consideration for Ontarians' not providing parental care—at least one stay-at-home parent, that's what I mean by that—appears to be financial. The key considerations are financial. If money had not been a worry—and I guess we could all say that—respondents would have preferred direct parental care to day care by a margin of almost ten to one.
The question was as follows: Suppose money had been only a small factor in your thinking, would you or your spouse stay at home? And 89% of people answered in the affirmative. Or would you send your child to day care? And 11% said yes.
Now, we're not denying the value of day care and the fact that some people have to have day care. What we do argue is that when Canadians are given a choice, by far the most important choice would be to have one caregiver stay at home if they could afford it.
Canadian families understand that one major factor in these considerations is the discrimination against single-income married couples. According to the Compas poll mentioned earlier, 79% believe that allowing couples to pay lower taxes by filing joint income tax returns should be at least a priority. By that I mean that 21% say priority, 31% say high priority, and 27% say very high priority. At Focus on the Family Canada, we believe it is truly time for such discrimination to be reversed.
I want to turn now to Jim Sclater, our director of public policy, for some direct comment on how this tax might affect individual families.
Mr. Jim Sclater (Director of Public Policy, Focus on the Family): Thank you, Mr. Chairman and members of the committee.
The context for the discussion of discrimination is the overall decline of income, and people like the Ottawa Citizen reported that it was the first half of the nineties that was particularly brutal on families, whether they were poor or rich. De-indexing is a problem that you'll hear about, I'm sure, as you travel across the country, and the larger tax bite in general.
But our specific concern has to do with the discrimination that we think is inherent in the present tax code. Kenneth J. Boessenkool—and I don't know whether the C.D. Howe people are coming to appear or whether he will—said this:
He went on to say:
—as we heard Leslie say just a few minutes ago.
Now, you'll hear many statistics, and we are not an organization at this point that does polling ourselves, but we have footnoted the references we're using here. There's actually a wide discrepancy in the numbers that various groups use, but the first one referenced there is the premier's council in Alberta, which found a gap of up to $5,654 in income taxes between two families with identical income, but one had two earners and one had only one. At $30,000, in our second example, the one-earner family paid $590 more than a two-earner family making $20,000 and $10,000. So these were not equal incomes for the two-earner family; they were split differently.
I think the committee, through experts appearing before it as well as their own ability to use modern technology, can literally run all the numbers and find out—you could even graph—where the discrimination really occurs and begin to target it specifically. Item (d) under number two in major section D of our brief says that in Ontario a married couple with one wage earner bringing in $60,000 nets $42,951 after taxes, while a two-earner family at $40,000 and $20,000, again not identical second earners, nets $47,430.
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So you can go through all the numbers and
find out whether discrimination occurs. We think
it's significant. We think there isn't a rational
reason for doing this within a system that should,
under the mandate of this committee and under the words
of Mr. Martin, find equity for whatever choice parents
make.
The recommendations we made as a member of the Canada Family Tax Coalition were enumerated in our press release early this year, and in an open letter to the Prime Minister and a letter to Mr. Martin.
We recommend—and these are the general recommendations—that the government recognize the discrimination against single-income families. Secondly, we ask why should families that choose to keep one parent at home be penalized thousands of dollars on top of income already forgone? We think that latter remark is worth considering. We've heard many opinions trying to dismiss, but it is a significant factor.
At to the specific recommendations, I'll focus on just the first three before we run out of time here.
We think the child care expense deduction should and could be turned into a child tax credit for all families.
Secondly, we think there should be the choice of joint filing or income-splitting to lower the income tax for one-earner families. If it were an open choice, it could be under their own scrutiny or the advice of an accountant as to which, if they're in a bracket where they would be able to alleviate the discrimination by choosing that option.
Thirdly, we say the spousal exemption should at least be made equal to the personal exemption to show an equal evaluation of the spouses at home.
I think I'll conclude there. Our main point, as Dr. Reid said, was to speak on behalf of families. We hear from them, we've studied the literature, we've studied the briefs and books of many who are more qualified than we are to understand the system, but we want to speak out and add our voice on behalf of particularly the single-income family where there are two parents and one or a number of children.
So we welcome this opportunity and commend the minister, by the way, for setting the mandate and the challenge to this committee. We believe it's being taken very seriously. Thank you.
The Chairman: Thank you very much.
Dr. Reid, you'll be interested in knowing that it has been 11 minutes and 45 seconds. You did very well.
Mr. Forseth, please.
Mr. Paul Forseth: Thank you.
One of the underlying things we have to understand in some of the presentations you've made concerning single-income versus two-income families is that tax and equity continues whether they have children or not, and that is mainly an effect of the progressive tax system.
If you had one of the partners earning a lower income, they would get their basic deduction and then they may be paying at the lower rate—because we have three rates now—and the other partner would be paying at an upper rate. As you said, you can work the numbers and you get these differences of tax bill at the end for the family corporation, from one-income to two-income families, no matter how you work it, all kinds of scenarios that have nothing to do with kids at all. None of these comparisons may have children.
But then you throw in the additional component of what's made available for children, and then that compounds it. But we have to be careful in separating those two issues. We may not be able to address the front half of the progressive tax system without throwing out the whole current tax system and being able to get to a flat tax and so on, but the second part of it, where it does involve children, is something that maybe we can address.
We have issues here of compensation for unemployment insurance, and I see that one of the recommendations was to allow a stay-at-home parent to contribute to their own RRSP. That's another one that hasn't come up yet today. Maybe you could talk about that. That seems an interesting and a sensible thing to do, but how do you compute the number as to how much they should be able to put in? Certainly for someone who's employed, it's dictated within parameters by how much they've earned. How do you choose a value as to how much can be put aside for someone who doesn't have employment income?
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Maybe you can address that particular one, and
I'll leave it to my colleagues to follow up some of the
other things.
The Chairman: You might also address the question of RSPs and why you feel that the spousal RSP doesn't fulfil the objective you had in mind.
Mr. Jim Sclater: The short answer to the questions on this one is that other members of the tax coalition said it was an important thing to recognize the woman's possible inheritance of money and the ability to shelter that. This came up particularly in regard to women being able to do that.
We recognize, of course, that there is a spousal RRSP program available. I haven't done the numbers or analysed how it would work, but we felt it was worth while to put it in as a recommendation, because there's no provision right now for a stay-at-home mom who may inherit money or come into a windfall in some way. There's nowhere she can go with it. So we felt it was worth recognizing her right to do that, as someone working in the home.
Mr. Paul Forseth: I understand that inheritance is not taxable, yet if you own a property in the States and you inherit a historical family cottage that has appreciated in value and may be worth $1 million now because it's lakefront property that was purchased in the 1920s, upon inheritance, all of sudden because of the tax laws, all that money comes due. That may be a provision there. I understand we don't have normal inheritance tax within the country, but we have this problem of inheriting recreational property across the border. That's a new issue.
It would be interesting if you could look at the situation more carefully and maybe come back to the committee in writing around some of the general themes we've heard repeatedly at the committee, that one of the solutions is that we need a national day care system, that one particularly, and the advisability of that.
Also, looking at some of the other submissions, it seems that your survey data of what Canadians want are quite contrary to some of the survey data that have been put forward by other groups. If we're saying that your survey data are correct, then we have to ask the question, why is the tax system twisted the way it is if it's contrary to what most Canadians want?
Mr. Darrel Reid: I suppose that opens one up to all sorts of political answers. However, I would say, when you're looking at some of the presentations that were made here today, the assumption from which we start is that families know best how to care for their children and make the kinds of choices that they make. These polls have been done based on questions about who should be making those decisions. I think there are many groups out there that assume somehow, on the basis of some academic expertise or something like that, that really either government knows better or social agencies know better. We reject that, and we believe most families in Canada, on the basis of this and also intuitively, would reject that as well.
There's nothing wrong with a national day care proposal. The question is that there are limited funds and there's limited tax room. Given that choice, what decision do you make? We would say, given that choice, the best decision would be to give money back to families so they can make the child care choices that they feel to be the most important.
[Translation]
The Chairman: Mr. Cardin, please, you have five minutes.
Mr. Serge Cardin (Sherbrooke, BQ): Good afternoon, gentlemen, and thank you for your presentation.
Some people have told us that our mandate was rather limited, and we have heard an increasing number of presentations which dealt with family policy, child care, how our children are raised and so on. I would like to come back to our mandate per se, which has to do with tax fairness, as it is stated at point D. It seems that couples where one spouse works and couples where both spouses work are not treated the same way.
• 1420
The other day, I checked this out and talked about what I
found with my committee colleagues. When one spouse earns $60,000
a year and works 37.5 hours a week, he keeps about $20 an hour. But
when both spouses work and earn the same yearly income, which means
both of them work 70 hours a week, they get to keep only a little
over $9 an hour.
So when one spouse works 37 hours as compared to a couple where both spouses work a combined 70 hours, can you really say they are treated unfairly, even if each couple ultimately gets different tax benefits?
[English]
Mr. Jim Sclater: Pardon me for not following in the translation. I believe you were asking about certain wages for one-earner versus two-earner families, and I hope I'm on target in answering that we understand that the real differences occur primarily, depending on the level of income, for the two-earner family, whether they're together or varied, compared to a one-earner family that may have the same total as these two.
I don't know if that's what you were pursuing there, but that's why I suggested that tax experts and a good computer could run these numbers and discern where the real inequity occurs. We deliberately picked the various examples from a wide range of options—where they were together, the two-earner family, or where they were separated—so we could show that there is inequity no matter where you come into the chart. We're just trying to point out that there must be a way to address that when you realize that at the highest end, if you have two $60,000 incomes and you use the maximum child care deduction, which is $7,000 plus per child, or at least for the first child, you can have a gap approaching $12,000. So we think there's something wrong there that needs to be addressed. I hope I'm on target in trying to answer in that way.
The Chairman: You were saying that to put it on an hourly rate, the single-income family averages $20 an hour, but with the dual income, it's $9 an hour.
[Translation]
Is that what you came up with?
[English]
And he's saying, is there not inequity there?
Mr. Jim Sclater: Specifically because of—
The Chairman: Well, you need twice the effort to earn the same amount, obviously, but....
Mr. Jim Sclater: Well, quite frankly, the difficulty of addressing the poor—certainly Mr. Szabo has made a strong effort to point out that we don't really have a definition, even, of the poverty line—is something that we wouldn't want to gloss over. If somebody's making only $9 an hour, I think they're the working poor, whether there are two of them or not. So that's a difficulty that has to be addressed, and Mr. Martin has targeted some areas, of course. But we recognize that there are some flaws in that, and they're being challenged—for instance, in terms of the clawback of benefits going to those low-wage earners, that they somehow are not leaving the money where it needs to be left.
So we recognize there's real complexity here. But I would certainly say there's real inequity with our whole system if two people can go out and find only $9 jobs and they're trying to raise families. Somehow they're going to need help. That's not a primary area that we focused on. We're not experts in it. But we wouldn't want to gloss over what we call the working poor, especially those with families. I don't know if that addresses the question at all directly, but we understand the general direction, I believe.
[Translation]
Mr. Serge Cardin: Our mandate asks us to study income inequality depending on whether one spouse or both work, but that is not necessarily where the problem lies. During our hearings, we've heard that people want the ability to make their own choices and they want the government to support them in their choice, which is to stay home and raise their children for a certain period, at least during the early years. They want direct support from the government.
I think our mandate will not correspond much with the recommendations we will make following our hearings. People want support so that they can raise their children well, be it at home or in day care. That's all I have to say.
• 1425
[English]
Mr. Jim Sclater: I made some brief notes here about the poor. Obviously other groups have suggested—and I'm sure you'll hear from them—that there be a higher personal exemption for everybody. The de-indexing problem has moved, by somebody's count, several million working poor into the tax ranks. We think that's something that should be reversed. I'd probably vote with Leslie, who just left here, that there should be a retroactive recompense for that situation that's occurred.
So I think, first of all, the personal exemption should be raised. There may be other mechanisms that can be used there. The clawback, to quote one other tax expert whose materials I've read.... It seems very odd that certain—I'm using the phrase “working poor”—would be taxed because they fall into the taxable category on the chart, but then they end up getting benefits back. It's become too complex. There must be a simpler way to raise the threshold and make it less of a problem for those folks.
Mr. Darrel Reid: I want to make a comment as well.
I know there are many people who want government to help them make choices. I believe, and our research tells us, there's a significantly larger number of people who don't want government to skew the choices that they need to make in terms of their family. Therefore, I think the role and scope of government obviously comes into this decision. I believe a more reasonable route would be for government to get out of the decision-making business, in other words, make the choices, as I guess you taxation people call it, revenue neutral—I don't know what you call it in child care terms—to level the playing field.
One very good way of doing that, I would suggest, is to allow Canadian families to have more of their tax dollars back and then make the choice, whether that is day care—and the question of whether that day care is on a national scope or not is an open question—or whether it is allowing for the value of home care that's provided within the home.
But the point I'd to make is that we think government should get out of the business of deciding, by implication, for parents the choices they would make themselves.
The Chairman: Thank you, Mr. Reid.
[Translation]
Mr. Serge Cardin.
Mr. Serge Cardin: I'd like to speak to that. It's not up to the government to guide people's choices, but it must support their choices, as the gentleman said a little earlier, because household incomes are declining. Therefore, the government should support the choices people make, but not guide those choices.
[English]
Mr. Darrel Reid: I certainly wouldn't deny the fact that take-home income has decreased. I believe it would increase for a significant number of Canadians if the tax bite were less.
[Translation]
The Chairman: Thank you.
Mr. Herron, please.
[English]
Mr. John Herron (Fundy—Royal, PC): There was a fair amount of testimony earlier today from people who resisted the concept of income-splitting. I'm going to ask you to put your feet in some other people's shoes. Who do you think are the winners and losers of income-splitting?
Mr. Jim Sclater: Who are the winners and who are the losers? I think it is dependent on where they are on the chart. That's why I say the numbers have to be run and found out. They could be run through the computer. I'm sure they're doing this all the time in the tax department, and there are probably charts on the wall that would tell us where the discrepancies are or where the discrimination is.
As I understand it, one of the main arguments against income-splitting is that it may put the woman in the position of not having her own income kept separately. I'm sure there are some who feel that's important, but we think in the majority of families—and this has been well stated by someone whose material I was just reading—income is thought of as ours, not as mine and yours. We think that's actually a good idea. We think that families are a unit and the more we do to treat them as a unit rather than as separate entities, the less marriage breakdown we'll have, the less family breakdown we'll have. So I'm not sure we think that's a strong argument.
• 1430
The technical answer is that it seems to be militating
mainly against the middle-income earners; they're being
hit very hard. That's why I say that although we're
very sympathetic to what we call the working poor, we
see real discrimination happening in families where
they may have “adequate income”. They're above the
legal line, or whatever standard we have at the moment, but
it doesn't mean the children aren't suffering what I
would call a real experience of discrimination.
If you're living in a block where the person next door has a family income of $49,000 or whatever, but you're in a situation with two earners making up approximately that, you're going to be better off. It means in the real social world of our kids growing up—and we've gone through enough in the media in the last few weeks to know what happens for kids who feel outside the real world—if they're discriminated against, it doesn't matter whether they have “adequate income”, the discrimination is just as real. It might be just as silly, from our adult point of view, as not being able to buy the right kind of runners. But it's still real and we think it's important to address it.
Mr. John Herron: On point one in your recommendations—we've heard some testimony earlier today as well—it may be possible to provide the same objective as your point one, but doing it through the former family allowance formula versus doing it from a child tax credit or the expense deduction that we have right now. What is your opinion of doing it from a family allowance perspective instead?
Mr. Jim Sclater: Basically, the C.D. Howe people have made suggestions that all of these should be lumped back into something resembling that. That may be the best way to go. Again, not being experts, we haven't run all the numbers on what would be the best method or what the outcome—
Mr. John Herron: [Inaudible—Editor]
Mr. Jim Sclater: Well, they refer back to it not in these words, but as the good old days when there was family allowance or whatever. As Dr. Reid said, though, I think the ultimate goal of this committee and the finance committee should be to find out how to leave the money in the household, not how to give it back after it's been taken away in taxation.
That becomes a real tinkering effort, and we've seen some of the outcomes of it and we're suffering some of it. That's why this committee is sitting, I think, because it has grown like Topsy and is not understandable by most of us. And as you read the experts, I find them using words like “credit” and “deduction” interchangeably. I'm smart enough to know that they're not the same, but I don't know what's the best answer.
I think it's possible, as I said in a recommendation, that a child tax credit could be the way to go. That's kind of an echo of the family allowance idea, but I think it could be broader than that.
The Chairman: Thank you, Mr. Herron.
Mrs. Dockrill, please. If you could make it brief, I'd appreciate it.
Ms. Michelle Dockrill: I'll do my best.
I think you made the statement that you hadn't really done any number crunching with respect to those on the opposite end of the spectrum, i.e., those who were on the lower end of the scale. Do you not think it's important, given the mandate of this subcommittee with respect to dealing with family configuration, to be inclusive of those individuals, and whether or not the present system has discriminating effects towards those individuals?
Mr. Jim Sclater: If I understand what you're saying, our answer would be that whatever is done should certainly be inclusive. It should benefit all families.
Ms. Michelle Dockrill: How would income-splitting benefit a lone parent?
Mr. Jim Sclater: Obviously that is not something that can apply in that situation. But the lone parent thing remains one of the real hard nuts to crack in our society. I would certainly weigh in on behalf of our organization in saying that everybody recognizes a single-parent family is one that has special needs. We might differ in the answer, though, because we think—and I have to kind of strengthen my voice when I say this—it's inevitable, if you target that, that you will exacerbate the problem, that you'll create more of the same. I think Dr. Reid, or someone else, referred to that.
• 1435
So we don't have some clever, easy answer for that. But I
did say in my earlier remarks that obviously there has
to be a targeting in some form of those at the lower
end, especially the single mom. It's become a
paradigm in our country, the single mom and her needs.
We, as an organization, actually have a magazine,
we have materials designed for them. We believe in
them passionately and want them to succeed. But on the
other hand, we believe passionately that we shouldn't
endorse that as a model for our society, either
financially or any other way, which leaves it as a hard
nut to crack.
I don't have a sheaf of papers I can pull out and say what our main recommendations are, although I referred to some earlier, and they simply include the targeting of that. I am aware from our own church organization...I have single moms come and talk to me and ask why I can't help them fix the problem they're up against. The main one is that if they're on social assistance there are new cutoffs. You can't even go out and try to better yourself because immediately the cutoffs come into play and you're no better off. So how is that an incentive?
These are really hard issues. I'm not trying to escape trying to bring an answer, but I think everybody recognizes they are really hard.
Ms. Michelle Dockrill: To qualify what I think I'm hearing you say, we've all heard for the last three weeks that there were various complications with respect to the present system, but are you saying that we will need various solutions as opposed to trying to—I don't know if we're going to be able to—find one solution, a universal solution?
Mr. Jim Sclater: As Mr. Forseth said, you either go back to a really simple tax system, flat rate and everything else, or else you still have complexity to deal with. We are saying that at least under the mandate of this committee some of the inequities can be addressed, and I think that is the mandate.
There shouldn't be negative outcomes for the situation as it is in regard to choice. You're dealing with the hardest end of the thing, and certainly income-splitting has nothing to do with the single mom. It's not going to have any benefit whatsoever. But some of the other things may. I keep using the word “targeting”. There is in Mr. Martin's recommendations, and even in some of the things that are to kick in this July, I think, specific target things for families that may not meet the ideal model.
Mr. Darrel Reid: I would like to make a comment too. I know that if you're asking whether there are going to be some different solutions, for example, for the single-income poor—those are people who really are indigent and do not have any opportunity—I think the answer is yes. However, I have talked with many single parents, particularly single moms, who are as concerned about the tax bite that the government takes away and the limitation on the choices they have in terms of their children's care, as we see with single-income double-parent families.
The point I'm trying to make is that these choices for the vast majority still hold, whether they're single-parent or whether they're dual-parent families. The point we're trying to make is that most times parents know best what kinds of choices to make and would prefer to be left alone to make those choices when they can. There are many situations where people run out of choices, and that's where the role of the government and the social safety net kicks in. But we believe that were the tax numbers lower, it would allow more freedom and more flexibility for single parents as much as for double-parent families.
Ms. Michelle Dockrill: I think in my remark I said lone-parent families, not low.... You kind of tacked that onto the end of it, and I'm not really comfortable with that assumption. When we're saying lone-parent families, there's an assumption there that it's a poor family, and that doesn't leave a nice flavour in my mouth—
Mr. Darrel Reid: No, but it's equally true that if you want to look for an indicator of poverty in the country, you can look for single moms with kids. I'm sorry, anyway.
The Chairman: Thank you very much.
Mr. Szabo, please, to conclude.
Mr. Paul Szabo: Thank you very much, gentlemen, for your material. I'm going to look at it some more.
• 1440
I think what I heard from you is that you believe parents
are quite capable of determining the best possible care
arrangements for their children and that maybe the
wisest thing we can do is put whatever resources we're
prepared to dedicate to families with children into
their hands and let them make their choices. Is that
about it?
Mr. Darrel Reid: I think that's about it.
Mr. Jim Sclater: It is. If I could comment on that, it's an assumption we make but it obviously can't apply to every family situation. Unfortunately, what I see happening is that when government tries to be the overall solution they usually target the problems and they start exacerbating the problem by pouring money into the problem where there has to be a broader approach to it. I think, Mr. Szabo, you've been working on that and making more general recommendations and targeting family breakdown as the main thing—no-fault divorce and other things.
Mr. Paul Szabo: Finally, do you believe it would be useful to consider extending parental leave under the employment insurance program to parents who would like to provide, say, up to one year?
Mr. Jim Sclater: I think there's a strong recognition in many sectors. I don't have figures or a breakdown, but recognizing parental leave is crucial. We face it in our own staff, of course, when we have someone who has a child, in terms of how much time they actually need, because we have folks working with Focus on the Family who have to make their own day care arrangements and decide how much time to take off. I'm not sure technically what we call it, but we give them a leave of absence.
Mr. Paul Szabo: Finally, on your point about RRSPs, it certainly is very problematic to make that work, but I think your message is the opportunity for pension benefits to be developed for those who work in the home, the unpaid work component. Let me throw out the possibility, say, for a parent who does provide direct parental care, that during that period they would be able to earn the opportunity in the future to make up past service benefits under Canada Pension Plan. So if they work five years in the home caring for pre-school kids, they could in the future, when they enter the workforce or otherwise come into funds like an inheritance, which you mentioned, have the cash to be able to buy that benefit and in fact get recognition for the value of their contribution.
Mr. Jim Sclater: It sounds intriguing.
Mr. Paul Szabo. Thank you very much.
The Chairman: I know why you like them. They seem to agree with you all the time.
Mr. Darrel Reid: You haven't asked us any questions yet.
The Chairman: I don't have time, but I want to make two small points.
In your recommendation B.2, you're calling it joint filing, which is politically correct. It sounds good, but I've never known of any Canadian who would voluntarily choose to pay more income taxes. Therefore, why don't you come out straightforwardly and say you approve of income-splitting as opposed to saying, as you did in your presentation, that you want to give Canadians a choice as to whether they want to income split or not? Directly, what you're saying is you want to give Canadians a choice whether as a family they want to pay more income tax or not. I don't think they want that choice. So would you go so far as to say you approve it in total, or do you still want to leave it as a choice?
Mr. Jim Sclater: In terms of the concept of choice, of course it's the mandate of the committee to find choice for Canadians, but I think it also reflects our understanding that at different levels it may not be the best solution for some. So they should be able to get, as I said, tax advice as to whether or not in their configuration of family it would be advantageous to them.
The Chairman: Why wouldn't it be in all cases advantageous?
Mr. Jim Sclater: It has been suggested by some that at certain levels, depending on what other programs are operating, it may or may not be.
The Chairman: Okay.
Mr. Jim Sclater: Or it may be a personal decision. Truly a woman may decide that's not what she wants to do. We have to respect that. I've spoken on the idea that we believe in the concept of the unity of a family, but we can't dictate to Canadians how they view their own situations—so I think choices.
The Chairman: If you have some examples of words... [Inaudible—Editor] ...I'd be interested in your forwarding that to the committee.
Mr. Jim Sclater: Okay.
The Chairman: I have another comment. By your recommendation B.3 again...I don't want to put words in your mouth, but inherently you are then accepting the fact that through the spousal exemption we are indirectly recognizing the value of those who choose to stay at home in some way. Maybe it's not the full value, but I believe from your recommendation that this is one area we may be able to target as a committee to publicly recognize the value.
Mr. Jim Sclater: In answer to that, I think you can almost go so far as to say it's a token recognition. But tokens can be important and I think it's worth doing.
The Chairman: Thank you, gentlemen, both of you. It was a very interesting presentation, and we look forward to studying it in greater detail. As I said, if you have any more comments, please forward them to us.
• 1445
• 1448
The Chairman: We'd now like to introduce our next guest from the University of British Columbia, Mr. Paul Kershaw, a Ph.D. student. And no stranger to the committee is Professor John Richards, from Simon Fraser University. Welcome. Whoever would like to start first, I'll leave you that discretion.
Mr. Paul Kershaw (Ph.D. Student, University of British Columbia): I'm a graduate student at the UBC, where I'm doing my Ph.D. thesis on caregiving work and taxation, and I'm also working part-time as a consultant and most recently have been working on the B.C. child care funding options project, which is funded in part by HRDC and the B.C. Ministry for Children and Families.
I'd like to focus my comments in the next ten minutes on the child care expense deduction rather than the question of what should be the tax unit in Canada, whether it should be the individual family. I think a lot more has been said about the question of the tax unit, and there is a lot of argument offered in the literature suggesting it should remain individual.
I think less has been said about the child care expense deduction, and so what I'd like to do is not so much offer recommendations in my ten minutes, but instead to navigate through some of the different ways in which that deduction is being talked about. The way in which we understand the deduction and what its purpose is then leads us to thinking about whether it should take the form of deduction, whether we should transfer it to a credit, should it be available to all families, or should it be limited solely to families that have to purchase paid child care.
• 1450
I have one caveat beforehand, though.
I don't want my participation
in any debate about the child care expense
deduction to reinforce any presumption that funding for
child care specifically is best delivered through the
tax system. Again, the literature provides a lot
of reasons to suggest it's better delivered
outside the tax system.
Some of the concerns people express are that when the funding is delivered through the tax system for child care, it perpetuates the undervaluation of domestic and non-domestic caregiving work, it facilitates the purchase of paid caregiving work at undervalued rates of remuneration, and it doesn't promote the stability of child care services.
That said, what I want to talk about is how the child care expense deduction is being viewed in two conflicting ways. On the one hand it's a social policy spending tool people are talking about. On the other hand it's a tax policy tool performing a different role.
Could I ask you to flip to page 4 of my brief, table 1? That table is trying to show the way in which the tax deduction has been talked about in the debate that happened in the House of Commons in early March.
On the one hand the Reform Party and other opposition parties are challenging the deduction, because they're saying it's a social policy spending tool and it should be addressing the undervaluation of domestic paid caregiving work. It's not doing that, so it's not being an effective social policy spending tool.
In response, the governing Liberals have said, look, you might be right that it's a social policy spending tool, but it's trying to address a completely different social inequality—namely, the inequality that flows from the barriers to mothers' re-entry into the paid workforce caused by the high cost of child care.
In addition to that, perhaps recognizing that the debate was talking past one another, the Liberals said the child care expense deduction is performing another role altogether. It's performing a tax policy role, which is trying to eliminate a tax disadvantage that families that rely on paid child care incur relative to families that rely on an at-home parent or some other unpaid caregiver.
You can't have it both ways. It can't be both a good tax policy tool and a good social policy spending tool. We need to decide which it is going to be and then go from there. That's what I hope to lead you through in the next six minutes, or whatever I have left.
Understanding the child care expense deduction as a spending tool is pretty easy. People have talked about it before in a number of your presentations. The child care expense deduction is seen to give a tax savings. That tax savings is then said to be equivalent to some sort of subsidy delivered outside the tax system, and as such, it should be viewed as a subsidy. On page 6, table 2 gives the various values of that subsidy for different families. I'm sure other people have pointed out it may be viewed as a regressive subsidy.
Understanding the child care expense deduction as a tax policy tool is a slightly more complicated story. It rests on the presumption that we need to treat people who are similarly situated equally. What it's trying to say is, just because two families' monetary income is the same doesn't mean they share the same ability to pay tax or to do a number of other things in pursuing basic necessities and happiness.
Again on page 6, table 3 is trying to show family A and family B, one a one-earner, two-parent family, the other a family that has a comparable income but has to purchase child care. I've used very low-income families so that we avoid the issue of the marginal tax rates and progressivity, but the same tax disadvantage will exist even at the higher rate. It's somewhat masked because of the progressive rates people are having to pay tax at.
Anyhow, it should be clear that if you have two families, both of which have $23,000 of income but one of which has to then purchase $7,000 of child care thereafter, the two families, after they pay taxes and provide child care, don't have the same amount of income left to pursue other basic necessities. A $7,000 difference at low-income levels is a really significant difference; it's a sizeable difference at any income level.
So if it's clear that family A and family B in my chart are similarly situated for the purpose of taxation, it becomes a little more clear that actually family A, which has $23,000 of income after the child care is provided, is more like family C in my example, which has $30,000 of income but then pays $7,000 of that towards child care. After child care is provided, both have $23,000 of income left over.
But that's without a deduction for child care expenses. What will happen is that family C, which has to purchase child care, ends up paying almost $2,000 more in taxes than the other family, which provides care for itself. That difference in tax is going to be higher still for the middle- and higher-bracket taxpaying families.
• 1455
The only way to eliminate that tax disadvantage,
people say, is to have a deduction for child care
expenses, and that's what I've tried to illustrate in
table 5. I hope that's clear. It's really in a
nutshell in a small amount of time.
What's really important is that you can't have it both ways. If a child care expense deduction is going to be a good social policy spending tool, you can't have it deliver the most valuable subsidy to those families that are the most financially secure, and the least valuable subsidy to those that are least financially secure. I'm sure you've heard that a number of times today, and you'll hear it in lots of other places.
People, in tax policy lingo, will say you're violating the concept of vertical equity, which says treat people, appropriately, differently when they're differently situated. In the context of a social spending tool, that means only deviate from an equal subsidy for all families if that's going to work to the benefit of those who have a lesser ability to pay.
The way to make the child care expense deduction come into accord with vertical equity is to convert it to a tax credit against taxes owing, because the credit will then be the same value for all families, regardless of what their income levels are going to be. But if you convert the child care expense deduction into a tax credit, it's not going to perform that tax policy tool, or at least it's not going to perform it as well.
If you go with the Reform proposal, which is saying let's convert the child care expense deduction into a $1,200 credit for all families, you're going to totally ignore the fact that there is a tax disadvantage for families that purchase care in the absence of a child care expense deduction. What's more, even if you limit that child care credit to only families that purchase care, the credit is likely not going to cancel out the tax disadvantage in its entirety, and that's because the tax credit is not likely going to be the same value as the child care expense deduction currently is for families. I've tried to illustrate that on page 10, in table 7.
So we're faced with the fact that you can't have the same tax mechanism being both a good social policy spending tool and a good tax policy tool promoting horizontal equity between families that purchase child care and families that don't. So we're faced with the question: Which should it be? That's a more difficult question.
If you end up opting for it being a good social policy spending tool, then you're faced with the further question the current debate has posed: Should it be addressing the undervaluation of domestic caregiving work, or should it be addressing the barrier posed to mothers re-entering the paid workforce caused by the high cost of child care?
My 10 minutes are likely up, so I'm happy to offer some comments on those questions. It's important to really carefully navigate through the debate so that we understand how we're viewing the child care expense deduction, because what's happening is it's being talked about in a number of ways, and taken out of context, sometimes the way in which it's being discussed is inaccurate.
The Chairman: Why did you choose $30,000 to reflect family C's situation?
Mr. Paul Kershaw: I was making it simpler than saying $29,100, or whatever the current middle tax bracket starts at.
The Chairman: Don't you skew results by comparing $23,000 to $30,000?
Mr. Paul Kershaw: Oh, no. What I'm trying to show in that table is that both families have the same amount of income after their child care expenses are paid or their child care is provided.
The Chairman: Okay.
Mr. Paul Kershaw: That's how you're seeing when people are similarly situated. If you only look at monetary income, it's not going to be clear that you're actually comparing apples and apples. It's more likely that you're comparing apples and oranges.
Mr. Paul Szabo: What's the big reason for the difference?
Mr. Paul Kershaw: Well, that $7,000 of child care—
Mr. Paul Szabo: No, they both have $23,000 of taxed income. The one-income family makes $23,000, and the federal rate is 17%.
Mr. Paul Kershaw: Right.
Mr. Paul Szabo: The other one has two earners splitting $23,000, both at the federal rate of 17%. They should be identical.
Mr. Paul Kershaw: Yes, but in the case of the first table—
Mr. Paul Szabo: But we're looking at the difference between the spousal amount.
Mr. Paul Kershaw: There's no doubt that what you're saying is correct, but then if you look at how much money those families have after child care is provided, one has $7,000 less still. If they have $7,000 less discretionary income with which to pursue other basic necessities, they're not in the same situation.
On page 6, in table 3, family B, which has to purchase child care, has only $13,000 of income after it's paid taxes and paid for child care, whereas the family with the comparable amount of income has approximately $20,000. That's a significant difference. So they're not in the same situation, despite having comparable monetary incomes.
The Chairman: Well, we won't get into a debate about these questions, because there's also the forgone opportunity for revenue with family A.
• 1500
Mr. Paul Kershaw: Oh, there's no doubt. I'm not saying we don't need to recognize the opportunity costs and in fact change who bears those opportunity costs, because too often it's typically women, all of which leads to other problems.
The Chairman: Professor Richards, please.
Professor John Richards (Simon Fraser University): Thank you.
Let me briefly introduce myself. I have kept my presentation very short; there are two pages that I'm going to force you to look at in due course. I've had more than my fair share of say on this subject.
With the C.D. Howe Institute, I co-edited the book, It Takes Two: The Family in Law and Finance. It brought together strange bedfellows. In my irresponsible youth, I was an NDP member of the Saskatchewan legislature. One of the others in this book, Ken Boessenkool, in his irresponsible youth was one of the researchers for the Reform Party caucus in Ottawa. A third is a very small-c conservative fellow who is a colleague of mine at Simon Fraser University, an economist, Doug Allen, who co-edited it.
The Chairman: Paul and I should feel slighted, then.
Prof. John Richards: The only thing in common is that all three of us originally come from the prairies, which is the source of all good sense about tax measures and social policy in this country.
Now I've insulted virtually everybody at the table, and I'll carry on.
I want to make some very simple points today. The nature of poverty has drastically changed over the last generation. I invite anybody who wants to look at it in some more detail to read the essay that I wrote in this It Takes Two book. By conventional measures, the share of the poor who are families with children is over half, and that is a significant change from a generation ago. Among that poor group, single-parent families are growing.
The second point I want to make, though, is that that overall brute fact has led to an increased emphasis upon the provision of benefits to families with children, one result of which is the Canada child tax benefit, a major federal undertaking at this juncture, to which the provinces have also added their own programming.
Here is the very quick message I want to give: There has been too much targeting on the truly poor, earning less than $15,000. The net result is that as these benefits that have been granted to those who are very poor are withdrawn, we have created for the modest-income family with children in the $15,000 to $35,000 range, to use the technical jargon, an ungodly high marginal tax rate.
I will illustrate that. I don't have quite as nice a coloured xerox as I would like to have, so you're going to have to content yourself with the blotched shades of grey that I've given you there. My nice coloured one comes from a conference that I spoke at in Calgary a week ago, which brought together senior federal and provincial officials involved in social policy work. I want to illustrate to you just how serious a problem we—the provinces and the federal government—have created for families in the $15,000 to $25,000 range.
For anybody who is genuinely interested, I'm happy to talk about the below-$15,000 range and what I would recommend as social policy in that context. But let me illustrate what has happened, using my home province, which, I'm ashamed to admit, is one of the worst offenders.
If you are looking at the graph, what is of relevance here is how much you keep out of every additional dollar earned. The case here illustrates a single earner with two kids. It would not be much different if it was a single parent with two kids. It would be worse if it was a parent with more than two kids, and somewhat not quite so bad with only one kid.
But out of every additional dollar, you have first, at the very bottom, EI and CPP, which amount to about 5% out of every additional dollar. Then the next, which in your version of it is a very light grey, is the federal personal income tax. Above that comes the provincial income tax. Above that comes the clawing back of the Canada child tax benefit. What goes up for the poor comes down for those who aren't quite so poor.
• 1505
The Canada child tax benefit,
which currently would be in the order of $1,500 per
child, stays in place until earnings exceed
$21,000 approximately. Thereafter, it is clawed back
aggressively. The white square represents
approximately 20 points of clawback or of effective
lost income from additional earnings due to the very
aggressive clawback over the range of approximately
$20,000 to $30,000. Thereafter, there's a more gradual
clawback until the child tax benefit is eliminated.
But each province has its own add-on, some of which I've personally had a role in creating, for example, with respect to the earning supplement in Saskatchewan. But as these in turn are clawed back, the net result is that families with children in the $15,000 to $35,000 range are keeping very little incremental earnings.
Initially families may not realize it, because there are different bureaucracies who are engaged in this exercise. The tax people are concerned immediately only with federal and provincial income tax, and as we know, the PIT, the personal income tax rate, at that level is relatively low. Federally it is in the order of 17%; and provincially it is in the order of 50% of the federal rate. That brings in this range something in the order of 26%. But the clawbacks from targeted programming are having the result that for this range the family is keeping very little, and these are operating through separate systems.
They are operating through, for example, in the federal case, the reduction of the Canada child tax benefit, which is being reduced as earnings increase, and each province is doing an analogous exercise.
The bottom of the one-pager shows the situation in British Columbia. It just gives you the summary final line as opposed to all the little bits and pieces that go into making it up.
Saskatchewan is at its worst, for example, in the approximately $18,000 to $23,000 range, where you only keep a dime out of every dollar, which is really appalling.
In British Columbia, it's not quite so bad in any particular range, but it is worse over a broader range. So you can see from the graph that over the range from $15,000 through to $35,000, in most instances the average is about 70%. But on average over this range, a family keeps only 30¢ of each dollar.
To translate that from, say, someone earning $25,000, which is in the order of $15 an hour and 1,800 or 1,900 hours per year of work, it means you're keeping $4 an hour. Your working after-tax pay, after-clawback pay, is $4 an hour. These are going to have, as all the literature would say, some serious repercussions on the willingness to work on the part of modest, hard-working Canadian families who got themselves out of the dire poverty trap of welfare and are now facing what the provinces and Ottawa have inadvertently put in place, a very unacceptably high rate.
What are we going to do about it? In principle, there are two things. One is that you can lower the targeted benefits—no benefits, no clawback. That's an unpalatable thing to do, but in part, I would argue for it. To be blunt, I think the increase in the Canada child tax benefit that was announced in the February budget is a mistake. Were I trying to allocate funds towards poverty, that's not the way I would do it.
Conversely, the other way to handle the problem is not to clawback benefits as aggressively, which brings me to why I made and have agreed to make common cause with people like Ken Boessenkool in this book. Ken's argument in this book was to make the case that tax policy should be more generous to middle-class families with children, relative to middle-class families without.
The only way you are going to get rid of these unacceptably high marginal tax rates on people in the $20,000 to $35,000 range is to either cut down the targeted benefits given to the truly poor or claw these back much more slowly and hence lower the marginal tax rate paid by families in this range. Again, to be blunt, this means giving a tax break to middle-class families with kids. I personally think it's a legitimate thing to do, but it's expensive.
• 1510
To do anything significant here—and the second sheet
I gave you is an illustration of what might be
done—just hypothetically, and I say this somewhat
tongue-in-cheek, were the Canada child tax benefit to
remain in place with no clawback, so that the
vice-president's wife got the same benefits as the
struggling family with $20,000, it would cost the
federal treasury in the order of $6 billion annually.
Slightly more modest versions, in which you do claw it
back but you claw it back at 5% only, as opposed to
this very aggressive clawback in the $20,000 to $29,000
range, would result in a program that would cost in
the order of $4 billion to $5 billion out of the
federal treasury.
I personally think it's worth doing. The Canadian tax system is one that does not sufficiently generate horizontal equity between families with and without children up and down the income levels. But this is a major policy decision, and I don't in any way want to brush over its fiscal implications. To do anything significant to get ourselves out of what inadvertently we have created, which in my opinion is an unacceptable barrier to modest-income people working, we are going to have to spend money, and there are many other claims on Mr. Martin's hidden-away surplus.
Thank you.
The Chairman: Thank you, Professor Richards.
We'll go with maybe 15 to 20 minutes maximum, so you have four or five minutes, Paul.
Mr. Paul Forseth: Thank you.
To summarize how we get out of the mess, one of them is less steep clawback slopes, then I suppose provision of universal non-taxable benefits, or universal benefits that are taxable at the end.
One of the things we've heard is the larger societal issue of valuing the role of taking care of kids. If we're going to do that, then it should be reflected somehow in money, maybe by trying somehow to value in money caregivers, who may not have any current income, for looking after some dependent individual. It could be an invalid parent or whatever. Some marginal, very little benefit is recognized now with this whole idea of non-paid caregiving for a dependent person, whether that is a child or someone else.
Do you have any suggestions about a preferred recipe, a mix? I'm prepared to consider that maybe we have too many items, or too many ingredients in the recipe. Maybe you could expand on that. You've obviously done some thinking in that regard.
Prof. John Richards: I'm going to be glib, given the time pressure, and not talk about handicapped people. There are a lot of very serious problems of interest there, and maybe you and I can pursue it one on one.
I very much take the spirit of what you're saying, to try to keep it simple. The advice I have given, both to colleagues working in provincial finance ministries and to federal, is to look at the programs that target benefits to low-income families with children and lower the clawback rates. That is conceptually simple. It has a very desirable effect of reducing, in this crucial $15,000 to $35,000 range, what are unacceptably high marginal tax rates.
So in the federal context, I would argue, don't claw it back at 20%; claw it back, starting at $21,000, only at 5%, for example. That's expensive, however. It's $4 billion.
• 1515
I would argue to my provincial colleagues in
Regina—and I'm not going to blame the feds any more
than the provinces for what has gone on here—that they
have gone too far in creating a child tax benefit
supplement. They ought to think about lowering it
somewhat, and they ought to think also about spending
some money to extend their own provincial credit up the
income range.
All of these things, when you're honest about it, entail providing a tax benefit to middle-class families with children, relative to the status quo. We have created too much targeting and have concentrated our transfers to very poor families with children, and by clawing them back aggressively in this range, we are creating very severe barriers against modest-income people improving their lot.
Mr. Paul Forseth: I'll close with this point. I have heard that part of the social decay of some of the large inner cities of the United States had to do with the perverse incentive system for teenage girls to become pregnant and not name a father, in order to access not only financial supports but other social supports, such as counselling, access to housing lists, and all kinds of things. There was a tremendous system there that the American jurisdictions began to address, and they still have a long way to go to deal with it. I don't know how much you've looked at that or seen papers on that, but that seems to be the worst-case scenario of setting up something very perverse on the bottom.
Prof. John Richards: You and I are both middle-aged males, and we are probably both equally conscious of the feminist minefields in which we're walking as we start talking about single parenthood.
Mr. Paul Szabo: Yes.
Prof. John Richards: I have read many studies that suggest, yes, there is econometric evidence to suggest that the level of generosity of various transfer programs is probably an inducement to single parenthood in particular communities, whether it be inner-city Chicago or some northern reserves of Manitoba. These are explosive, involved questions, and I don't want to get into any discussion about aboriginals or black people being in any way inferior or in any way more prone to this than you or I.
My final point on this is that the evidence also demonstrates that the source of income among the very poor matters. Adjusting for everything else to the extent you can, the children of a very poor mother who earns will probably do better than the children of a mother who has the same income, in the same neighbourhood, but it is derived from a transfer program such as welfare.
One of the things that has happened in a number of the provinces and in a number of the states that have experimented aggressively, such as Wisconsin, is the extensive use of earning supplements to make low wages more attractive. Saskatchewan, to its credit, has introduced a province-wide earning supplement program accessible to all parents with children, starting last July. This has the potential to be a very creative and good program to link benefits to work.
Mr. Paul Forseth: Thank you.
The Chairman: Thank you, Paul.
Thank you, Professor Richards.
We don't have to look very far, Paul. It's not just the United States. In Quebec in the early 1980s, Mr. Lévesque introduced a program to try to increase the birth rate, which was declining in Quebec. I believe by the time you got to your fourth child, an $8,000 cheque was waiting for you. That program was a total failure, because the birth rate continued to decline and the wrong people applied for it too.
[Translation]
Mr. Cardin, please.
Mr. Serge Cardin: Mr. Richards, given that benefits are clawed back, wouldn't it be better to have a universal benefit, which would be taxed, the way it used to be?
Mr. John Richards: I think that's a very good point. In the past, a family benefit was paid out to everyone, but not everyone is eligible for it anymore. As the tax system evolved, the benefit was increasingly reduced and targeted to those who need it most.
• 1520
And so today we have the child tax credit. If you think that's
a good thing, I have to agree with you: I think it's best we return
to a universal program.
Compared to the United States, Canada has the advantage of universal health care. In Canada, a poor person who gets a job does not have to fear the loss of medical insurance for herself and her children, whereas in the United States, medicare covers only the very poor, who lose it as soon as they start to work. It's a disincentive to work which does not exist in Canada. In a certain way, Canada has universal health care. I agree with what you suggested, which is that if a family has children, they should get certain tax breaks, regardless of household income.
Mr. Serge Cardin: It could be a taxable benefit.
Mr. John Richards: It could be taxable, but that would create a certain problem. It means that people would receive much less as soon as there is a change in the tax rate.
I personally would prefer a benefit in the form of a credit with a clawback, at a very low rate, such as 5%, which would prevent a radical drop in the benefit should your marginal tax rate change.
Mr. Serge Cardin: Therefore, instead of having a taxable universal benefit—
Mr. John Richards: You would have a universal credit.
Mr. Serge Cardin: That's what I was saying at the beginning; it would be a universal taxable benefit that would decrease in proportion to increases in the tax rate. You're talking about a universal credit which would gradually decrease to the point where some families would not receive it at all.
Mr. John Richards: I don't know if Mr. Martin thinks he has enough money. If even the very rich had access to the universal benefit, it would not cost that much. I think what's important in this debate is that politicians ask themselves: given fiscal constraints, is it worth spending a good part of the surplus, regardless of how it is done, on reducing the tax burden of middle- class families with children?
Mr. Serge Cardin: But beyond the taxation issue, there are other fundamental aspects which must be considered, including how much each individual has to pay.
There is a real cost. For instance, I started doing some tax analyses on my computer. I started at the very low end. A person earning $7,000 pays federal tax; even if this individual only pays a little, he still has to pay taxes on $7,000 of income.
I don't know if you are the one who talked about real cost-of-living exemptions. I'm sure that even a person living alone has fairly high expenses, when you include food, housing and other things.
When you work that out for a family, you should also have an exemption based on the real cost of raising a child.
Mr. John Richards: I don't know if I'm following you, but I believe my colleague raised the matter. He addressed the issue you have just raised, namely the difference between a credit and a deduction.
You said that after legitimate deductions based on the cost of living, a certain amount should be taxable. The problem with this approach is the value of those deductions. It obviously depends on the marginal tax rate.
• 1525
Say I create a $1,000 child tax deduction. Take the case of a
person who has one child. If that person is very poor, what is the
deduction worth to them? It depends on the rate at which that
person is taxed. If it is 17% the deduction is worth approximately
$170. But if that person is taxed at a higher rate, the deduction
will be much higher than for someone else. That's the problem with
deductions.
Mr. Serge Cardin: There clearly has to be something halfway between a deduction and a credit.
Mr. John Richards: My preferred compromise is a credit accompanied by a small clawback.
The Chairman: Thank you very much.
Mr. Herron, please.
Mr. John Herron: Thank you, Mr. Chairman. It might be better if I continued in English.
[English]
Mr. Kershaw, on page 10, you mentioned that perhaps the right place to address the issue of child care or direct parental care is outside the tax system. Could you expand on your second paragraph on page 11, in terms of the options you put forth there?
Mr. Paul Kershaw: Second paragraph on page 11. I'm not sure we're speaking about the same thing, sorry.
Mr. John Herron: You mentioned with respect to the Reform proposal that given the reality that the same tax mechanism can't play both roles, we must ask if the child care expense deduction—
Mr. Paul Kershaw: Should it be a tax policy tool, or should it have social policy-setting tool goals?
Mr. John Herron: Right. So ultimately what do you think is the intent of what the government is actually saying today?
Mr. Paul Kershaw: What I'm trying to do here is draw attention to how you do give conflicting messages.
On the one hand, in 1998 when the maximum limit on the deduction was increased, the language in which that was presented was very much in terms of this deduction being a way we spend money to help subsidized families' child care costs. But at the same time, the federal government also, in the Department of Finance literature, really speaks about it being a tax policy tool that's trying to level the playing field for people who purchase child care rather than provide it themselves.
What should it be? That's a different question, and it really comes down to a value judgment.
I think what's happening right now is that the federal government is finding it really difficult to spend money outside of the tax system for a variety of reasons, many of which come down to federal-provincial pressures. The tax system becomes perhaps an easier way of delivering that spending, and I think increasingly the child care expense deduction is being viewed as a tool to spend money on child care. I think that's what's happening.
Mr. John Herron: So you're saying in terms of the $48 billion that other proposals could go to enriching parental leave policies in Canada?
Mr. Paul Kershaw: I think there's no doubt that the Reform Party is correct in saying we need to properly value domestic unpaid caregiving work, but we can't do it in such a way as to reinforce one group of people continuing to incur the opportunity costs for performing that work, because we can never give the dollar value that will actually compensate people for the number of hours they put into child care in the home.
So we can't expect to say that a $1,200 credit is going to make up for lost wages, lost careers and lost pension entitlement, and what not. But what we can try to do is value caregiving work in such a way that we don't require one group of people to continue to incur those opportunity costs. And you can do that through providing far more enriched parental leave polices. Canada is way behind so many other places, unless you look at the United States, where it's more comparable. But compared to other G-7 nations, we often are far behind.
In terms of child care, good-quality child care can both help parents who stay at home and parents who work. Both sets of parents may face different difficulties, but the respite and the support that good-quality child care programs can provide will benefit both families and benefit both sets of children.
Mr. John Herron: Finally, in the scope of your studies, did you review the issue that has dominated a fair amount of this morning's discussions in terms of income-splitting?
Mr. Paul Kershaw: I think the topic of income-splitting is slightly more complicated, but I think there's a lot of evidence in the literature to indicate that for everyone who's interested in promoting the equality for women, income-splitting is a bad way to go, and there are other ways of addressing the problems that single-earner two-people families incur without reinforcing some barriers that lead to the discrimination against women in the country. So I think we definitely need to value the work people are doing inside the home in terms of parenting, but I don't think the tax system is equipped to deal with it.
• 1530
About my brief, as someone correctly pointed out,
last night at midnight, when I was trying to get
around the issue of income-splitting and what not, I
entered a number into the computer that fudged it a bit. So
in the chart—it's probably chart 3—in fact the $30,000
family doesn't pay that much tax, and it probably
doesn't pay significantly more tax than the $23,000
family that provides child care for itself. But while
the numbers are wrong in this particular chart and it's
used throughout, it doesn't undermine the theory of
what I was saying. The child care expense
deduction, some people will argue, is a tax policy tool
that's necessary to level the playing field for those people
who purchase child care, which is in complete contrast
to the Reform charge, which says you're
discriminating against people who are at-home parents
because you're not recognizing their work.
People say, look, you're right, it's not recognizing their work and
it's not what it's supposed to do.
I'm not saying that's how we should view it. I'm saying it has to be recognized that sometimes people are saying that out there and it needs to be taken into consideration. Especially if you move away from providing the child care expense deduction to something that's available to all families—although to my mind it's very good, because we need to start recognizing the value of all children regardless of their parents' situation—it is nonetheless perpetuating a tax disadvantage for families who rely on paid care just because we have to tax monetary income. It's so difficult to tax the income we provide for ourselves outside of money. Imputed income is the issue; I don't know if it's interesting right now.
The Chairman: Thank you, Mr. Kershaw.
Mr. Szabo, four minutes.
Mr. Paul Szabo: Thank you for the correction. I've been there, too, with the numbers. But I think your points are well thought out and I congratulate you for giving us an opportunity to expand the envelope a little bit.
I did a little looking at the 1998 report of Revenue Canada—the latest one available—which analysed 1996 returns, and I found that only one-third of dual-income families who are eligible for the child care expense deduction actually claim it. So it tells you there is a lot of informal economic activity going on.
The average claim of those who claimed the child care expense deduction was only $2,600, which is modest, and at the time, in 1996, the deductions were only $5,000 and $3,000, not the current $7,000 and $4,000. But notwithstanding, on average they were claiming basically less than half of the amount they otherwise could have claimed, which to me means that a $2,600 average deduction, on average, in the mid-range of taxpayers, is worth less than a $1,000 benefit. So the child care expense deduction is only benefiting one-third of the families and the value in your pocket is less than $1,000.
To me, $1,000 is not going to compel anybody to go to work or to stay out of work. It's just too small when you consider all the other important factors. So to me—and I want your opinion on this—it appears that the single largest impact on whether a parent or a couple chooses to have one stay at home is whether they can afford to forgo the economic gains, the net income, that a second job would have, or are they going to exercise their choice to forgo and provide direct parental care because it's more consistent with their circumstances, maybe their value system.
I'm not so sure whether the child care expense deduction isn't a red herring in all of this. Maybe we're really talking about whether we should value children, all families with children, and stop trying to find that single silver bullet that's going to somehow instantaneously make us all equal through a hodgepodge of benefit programs. It seems to be naive to think, in my view anyway, that any kind of massaging here is going to make everybody fit into the same pigeonhole. Maybe the theory or the philosophy should be that as Canadians we value children, we value families who make the lifelong sacrifice to have children, and we want to recognize that contribution to our society of having children. Let's give them some sort of benefit or tax expenditure, some form of recognition of its importance to our society, and accept parents' choices to choose the best possible care arrangement for their children, knowing that it's in the best interest of the children.
• 1535
Philosophically, I think, I'm still trying to get some
recognition of principles. I don't think the dollars
are important to anybody other than the couple making a
decision.
Mr. Paul Kershaw: So your question for me is...?
Mr. Paul Szabo: Should we have a universal recognition of families with children, a universal benefit, or should we somehow try to be judgmental about people's choices by, for instance, giving a tax expenditure for those who choose to provide care by a third party as opposed to those who want to provide care directly?
The Chairman: Paul, you have six seconds to answer.
Mr. Paul Kershaw: I think, absolutely, we need to recognize children regardless of the family situation in which they exist. The question then becomes whether the tax system is up to providing that recognition adequately. I think that's a more debatable question. I think you're damn right—if I can have an extra six seconds—that when you look at the numbers, the tax policy type of response to why we need the child care expense deduction as a deduction doesn't hold a lot of merit. But I think it's something the government did use in its debate in early March to say, look, we need a tax deduction rather than a credit.
I wasn't making recommendations or anything. What I was trying to say is look at the kinds of reasoning that are being offered and sift through them, because we have to make a choice on how we view the child care expense deduction, and then you can go from there.
The Chairman: Are you saying we should continue to view it as a deduction, or are you proposing, like many, that it should be viewed as a credit?
Mr. Paul Kershaw: I'm proposing that it should be viewed as a social policy spending tool, so let's make it a good social policy spending tool by delivering the same value for all people to whom it's delivered. But I'm not saying it should be extended to a refundable credit for all families. I think that money, that $48 billion that the Reform Party proposes, could better recognize the value of caregiving work if it were delivered outside of the tax system.
The Chairman: Thank you very much.
I really enjoyed both your presentations.
Professor Richards, I brought my book with me on the airplane. I didn't get a chance to read it; I got in rather late. But I was looking forward to your presentation, as I always do.
Prof. John Richards: If I might just add, should anybody want to get a copy of that, plus additional material on this, the lower half of the two-pager I gave you is from a publication we're about to release on the marginal tax rate problem that has been created by the feds and the provinces jointly. By all means....
The Chairman: Thank you very much. It was a very interesting presentation. Thank you.
From REAL Women of British Columbia, Laurie Geschke, vice-president; Doris Rankin, board member; and Cecilia von Dehn, member; as well as Eleanor Girard, who is presenting on an individual basis.
• 1540
I'd like to welcome you to the committee.
Hopefully, there'll be one presentation from REAL Women
of B.C. and one on an individual basis. Or are you going
to share your presentation?
Since you're sharing your presentation, I'd ask you to do it in about 7 to 10 minutes, so we leave ample time for questions. Thank you.
Ms. Laurie Geschke (Vice-President, REAL Women of B.C.): Mr. Discepola and honourable members of Parliament—there aren't that many of them here—thank you for this opportunity.
I'd like to introduce Cecilia von Dehn, who's a mother of six children, one of whom is physically and mentally handicapped. Doris Rankin is another one of our board members and she's the mother of seven children. I have four children at home.
The title of our brief is “Family Taxation for the Children's Sake!”. The terms of reference of your committee include examining the impact of federal policies to see if they treat all families with dependent children in an equitable manner. We hope to address this very issue today.
Since the early 1980s, our organization has been concerned with the ever more tenuous position of the family as a protected social unit of our country. We were active regarding issues that affect women and their families long before we knew there were other women across the country with the same concerns we have.
REAL Women of B.C. is an independent pro-family, non-profit, non-denominational, non-partisan, grassroots women's political lobbying organization and family advocacy group. We publish a provincial newsletter to educate our members and to give them tools to become a political force for their beliefs. REAL Women of B.C. has presented briefs to all levels of governments and governing bodies from local councils to regional bodies to provincial and federal task forces, and to international conferences at the UN level.
REAL Women of B.C. exists thanks to the volunteer labours of our provincial board of directors and the membership fees and donations of our members and supporters. Our members come from all over the province and represent all ethnic, educational, and socio-economic backgrounds and religious affiliations.
Since the mid-1980s, when we became affiliated with the national organization, we have been concerned about the detrimental effects of the Income Tax Act on families in British Columbia and in Canada. Before that time, our focus was provincial and local only, so we didn't deal with the Income Tax Act. We feel strongly that the Income Tax Act will have to be redrafted from scratch to totally eradicate the discrimination against single-income families with children that has been present and growing for decades.
We are thankful that the Liberal government is looking at this issue seriously by drafting this subcommittee and we're pleased to take this opportunity to speak to you regarding our vision for addressing some of the inequities in the Income Tax Act as it is currently structured.
A Compas poll commissioned by the National Foundation for Family Research and Education, also known as NFFRE, and Southam News and conducted in October 1998 found that 82% of respondents believed that making it easier for parents with young children to afford to have one parent at home should be at least a priority for government. Of these, 23% said it should be a high priority and 42% said it should be a very high priority. Of these, 79% believed that allowing couples to pay lower taxes by filing joint income tax returns should be at least a priority for government. Of these, 31% said it should be a high priority and 27% said it should be a very high priority.
A Maclean's-CBC news poll released at the end of 1997 found that 58% of respondents agreed that most women with young children would be far happier if they could stay at home and take care of their children.
A Compas poll commissioned by NFFRE and released in December 1997 found that 90% of respondents held that the parent of an infant or preschooler is the ideal person to care for that child during the day as opposed to day care. Of those couples nationally who had used day care, 85% stated that one of them would have stayed home with their children if their financial stress had been less. Of these, 81% said they thought the government's tax policies were unfair to families, including 15% who felt they were extremely unfair. Of these, 73% said they favoured the government giving money directly to parents rather than subsidizing the type of care.
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Ample research contends that in the crucial first three
years of life, children benefit most by being in the
care of a parent. As the children grow older, their
need for a parent available at home does not decrease
even into the teenage years. It is the parent at home,
usually the mother, who chauffeurs to school and
helps out on field trips and in class, volunteers in
the community, and serves her family so that the other
parent, which is usually the father, has his energy,
which can be focused where the family deems it most
important.
As the children grow up and leave home, it sometimes becomes the stay-at-home parent's responsibility to care for elderly parents as well. This is a wonderful benefit to strong, functioning families, and this act of love and service also lightens the load on our increasingly hard-to-come-by health care dollars. The quality of loving, in-home care can never be replicated economically by a paid professional, no matter how dedicated. Family members who take on this responsibility should not be penalized financially for doing so.
REAL Women of B.C. would like to encourage the Government of Canada to undertake a total overhaul of the Income Tax Act. Barring that, we would make the following recommendations:
The dependent spousal exemption should be changed to a homemaker's tax credit and increased to the same level as the personal exemption, to reaffirm the value of work that is performed by the spouse at home.
The non-taxable income limit for spousal employment should be increased to the same level as the personal limit, to treat all citizens equitably.
The deduction for dependent children to the age of 18 should be reinstated at the same level as the personal and spousal exemption, to reaffirm the value of the work that is necessary to guide children to responsible, productive adulthood, and to provide parents with disposable income that they can use to raise their children and provide for their family's future.
Child care tax deductions should be changed to child care tax credits, which would mean that low-income families forced to place their children in care would receive the same benefit as higher-income families. Additionally, this credit should be paid for all children, whether they are in commercial care centres, with relatives or neighbours, or at home with a parent, to ensure that children receive the best possible care, as their parents decide.
A tax credit for in-home care of all elderly parents should be implemented to reaffirm the value of this service to the elderly family member and to society, and to provide for expenses incurred both in caring for the elderly person and in the loss of an employment opportunity by the spouse occupied with the basic care responsibility.
Both spouses should benefit equally from accumulated pension benefits as well, since both shared in the sacrifices made to accumulate those assets during their working years.
Each of these deductions will aid in redressing the wrongs perpetuated against the traditional Canadian family, which chooses to have one spouse remain in the home to care for children and provide priceless services to the family. Granted in total, these changes to the Income Tax Act will afford families disposable income to provide for their immediate and future needs, thus lightening the lifetime burden of care on taxpayers as a whole.
Thank you, Mr. Discepola.
The Chairman: Thank you very much for the recommendations. I don't think we have to revamp the whole Income Tax Act to implement many of those recommendations.
Ms. Laurie Geschke: No.
The Chairman: It would be onerous.
Ms. Laurie Geschke: Yes.
The Chairman: Thank you very much.
Ms. Girard, please.
Ms. Eleanor Girard (Individual Presentation): Thank you for allowing me the time to be here today. I'm taking time off from work to be here this afternoon and hope that I will address the mandate.
My views on this issue are felt by many families. I've gathered a petition of at least 145 names of families who want to see the government recognize the contribution that a stay-at-home parent makes to society, the community, the schools, and their children's lives, plus the sacrifice of income, putting their own career and their RRSP contributions on hold for the years they decide to commit to the well-being of their families.
Families are forced or encouraged with tax incentives to have each adult working and trying to balance work and family, not because they necessarily want to but because if they choose what they might feel is right, that is, staying at home to raise their own children, they know the government will not support their choice and will actually penalize them for not working outside the home and bringing in an income that can be taxed by the government. Not only that, but they will be paying more taxes for the same amount of income than their counterparts who are allowed child care expense deductions.
• 1550
Parental care or stay-at-home caregivers, be they moms
or dads taking care of their own young children or of
older handicapped children under the age
of 18, or daughters or sons taking care of their elderly
parents.... These choices are not recognized. They are
discriminated against. There are only expense
deductions if receipts are from a third-party
caregiver. No matter who provides the care, it should
still be recognized as a job, that same job. If
one form of caregiving is recognized and is allowed
deductions, then the same care given by a family member
should be recognized and allowed the same deductions in
the tax system.
I'm not free to choose the type of child care that I want without paying a high price. That is unfair and that makes me angry and frustrated. I have 15 years' experience working full-time shift work as a health care professional at a Vancouver hospital. I have four sons; the oldest is nine today and the youngest is 21 months. With children, I have worked full-time shift work for the last nine years, working until the day I give birth and returning to work after my maternity leave. I have been through ten nannies in the past nine years, for various reasons, and I can tell you that based on my experience of trying to balance work and family for nine years now, I have had enough.
No one benefits from the stress I'm under—not my job, not my family and not me. I've pushed myself to the limit in terms of the demands on a wife and mother working full-time in a busy, stressful job and coming home to another job, or getting up early with the children and putting in a full day at home and then rushing to work in late afternoon and working until 11.30 at night. It gives me no rest and leaves me sleep deprived and in no mood to take care of the children in a loving, patient, caring way, in the manner that I would like to do it. Plus, I have a husband who has a very demanding job with long hours, so he's not able to give me much relief. This kind of stress only breaks down families and relationships between children and parents, and only breaks down marriages.
I don't want to give up my job totally; I do enjoy it. I only want want to make it a better balance between my job outside of the home and my job as a mother inside the home. I do not want any more caregivers. I will do what I have to do to work only part-time evenings so that my husband and I will be responsible for the care of the children, with a little help from a babysitter until the other parent gets homes. It will still be very hard—if not harder—on me and I will be giving up half my income, but I was paying almost half my income to a nanny anyway.
More and more I see how much I am needed in my children's lives. I see that my husband and I must be involved in their lives from the beginning all the way through if we want them to trust us and to have a good relationship with us so that when they are going through their preteen and teen years we will know them well and will be able to provide guidance and encouragement, and so that they will listen and we'll be there to listen to them, as we have been all through their lives.
Parents have the most powerful, most influential role on earth. Positive parenting practices are strongly associated with positive effects on children, on their social behaviour and school performance. Ottawa should invest in universal programs—if that works—that aim to strengthen all families, regardless of economic status. It takes more than income supplements to improve children's lives, because poverty is only one small factor in the overall scheme of things.
No one compels us to have babies, but when we do bear them we have an obligation to care for them, no matter how dull or tiring that may be, through the good times and the bad times. The New York animal shelter will not let you adopt a cat or a dog if you work full-time. Why should our attitude toward children be any less?
If I choose to give up my income, my career, and my retirement income to raise my children without a third-party caregiver, I should not be penalized. I should be recognized for my contribution to raising a family in the best way I know and for taking the responsibility seriously, just as another family chooses day care and tries to balance work and family as I have done. One should not be looked down upon and considered inferior to the other. Each family has that right and should not be discriminated against by our government and Canada's tax system.
It would be better for parents to get divorced. Canada's tax laws do not advocate families as one unit. Families would be treated fairly by the Canadian government if the higher-income earner, the father, let's say, hired the lower-income earner, the mother—although this is not always the case, for this scenario let's say it is. Now the mother is hired as a nanny and is paid a fair but low wage for that profession, $8 per hour, say. That would be $1,344 per month in gross wages. We pay $7.50 per hour or $1,260 per month gross for our nanny. But $1,344 per month would be $16,000 per year. She would have an income and could be eligible for RRSPs and would be taxed minimally. The father would have a child care expense and would get a good deduction off his income tax.
• 1555
In our case, with four
children, three under seven years old, we're
allowed a total of $7,000 in child care expenses for
each one. The fourth is nine years old, so we're
allowed $4,000 in child care expenses for him.
That's a total of $25,000 in child care expenses we
could write off as deductions, but I, the mother, being
the nanny
now, only cost $16,000. What a
deal. Anyway, the government and its tax system would
be happy, and the father could fool around
with the nanny on the
side. Sounds great. Is this what a family must do to
be treated fairly in Canada if they choose to have one
parent not work outside the home but provide a
stable, loving,
caring, nurturing environment in that home?
Is this the value that Canada puts on marriages and the family? Does Canada want more troubled children and teens who are without consistent, loving guidance and supervision in their lives and who often have no direction in their lives and are not taking responsibility for their actions? And then, who is to blame? The parents are blamed, of course. Where were they? Don't the parents know what their kids are doing late at night? What kind of parents does that child have? Often parents are doing the best they can under the circumstances and the pressures of both parents working, which causes troubled marriages and leaves no time to tend to the children's needs and the demands of time.
In closing, I ask that you recognize the diversity of today's families and focus on creating genuine choices for parents. Everyone's situation is different: the demands from their jobs, the demands from spouses, the demands of having strong family values, the demands of running a household, the demands of having children.
Stop raising the child care expense deduction limit. Only the high-income earners can afford expenses like that in the first place. Our family has only gone further in debt by trying to keep up with the demands and the cost of child care. Since that deduction is not available to all families with children, I ask that the child care expense deduction be changed, possibly to a refundable credit that is available to all families with children. This would equalize the playing field for all families with children.
Also, make the spousal amount a respectable amount, at least equivalent to the basic personal amount. Don't spouses deserve to be equal in status, worth that of a basic person?
What about the choice of joint filing of income tax or income-splitting, allowing families to divide taxable income between both parents, thereby reducing their marginal tax rates and again equalizing the playing field for all families and their children?
This is not just a finance or tax issue. It's much deeper than that. In order for changes to be made to the tax system in Canada, you must understand the important issues surrounding our demands to be heard. All families and their children must be treated equally and fairly.
Thank you for your time.
The Chairman: Thank you, Mrs. Girard, for an excellent presentation and especially for taking the time to come to testify in front of the committee this afternoon.
Mr. Forseth, we'll start with five-minute rounds, please.
Mr. Paul Forseth: Thank you.
Looking at your submission from REAL Women of B.C., at the recommendation section, the bottom paragraph says that child care deductions should be changed to child care tax credits. Then you go on to say that
I'm wondering if you've thought about how that would actually work down the road. How do you calculate that? Certainly when you have receipts for paid day care you're able to calculate what is paid up to a limit or whether you purchased less than the cap at the top. How would you do that? Also, where you say whether they're at home with a parent, a relative, a neighbour and so on, can you just flesh out that recommendation a little bit?
Ms. Laurie Geschke: This one would actually be a secondary recommendation. Our first recommendation would be that children would receive the same personal exemption on a parent's income tax statement, so that all of our family members would have $6,460 or something like that. This amount is a personal exemption. Well, it should be a personal exemption for every person in that family, because we are all Canadians. The only thing that separates us is our ages and our relationships.
• 1600
So if
every one of the family members, including the
dependent children, had the same personal deduction as
the person claiming the income tax, then, we
feel there would not necessarily be a need for a tax
deduction or a child tax credit. The concern
we have with the child tax credit as
it is structured now is that it gives more of a
deduction to larger-income families because it's based
on a percentage. I'm not sure exactly how that
works; this is only my understanding of it, because I
am a stay-at-home mother and we have never been able to
claim it.
Mr. Paul Forseth: Looking at the submission from Eleanor Girard, at the last page, again there was a recommendation for a refundable tax credit.
I wonder if you've thought about the implications of a non-refundable tax credit versus a refundable one.
Ms. Eleanor Girard: I don't know the implications. I'm not a tax expert. I just feel that there needs to be some sort of change.
Mr. Paul Forseth: Yes, the whole problem often gets around us: how do we put money in the hands of someone who cares for children at home and has no income? How do we compute that?
The Chairman: Do you have another question? That was debated this afternoon.
Mr. Paul Szabo: A refundable credit...something like the child tax benefit...?
Ms. Laurie Geschke: Or you give the children a personal exemption so that the money exempted from the income of the parent who pays income tax could be used to beef up the family budget, buy them their clothes, buy them their Nikes, buy them their school books, give them skiing lessons, ballet lessons and piano lessons, and give them bus money to go to school and lunch money when they get there.
Mr. Paul Forseth: So you're talking about the basic personal exemption that a taxpayer has. What is it this year?
Mr. Paul Szabo: It's $6,456.
The Chairman: It's $6,456 for each child under 18.
Mr. Paul Forseth: Is that what you're saying? A $6,000 exemption for each child?
Ms. Laurie Geschke: Yes. For my family, my husband and I would each get the same amount. Right now, he gets $6,456, as Mr. Szabo has said, and I only get $1,700 or $1,640, I think, if I'm not making any money. As soon as I'm making more than $1,600, it goes down to zero.
Mr. Paul Szabo: The first $538 has no impact. Every dollar after $538 starts to reduce your spousal amount by one dollar per dollar.
Mr. Paul Forseth: Okay.
Ms. Laurie Geschke: Okay. So if I earn $2,000, which I did last year as a volunteer director of a credit union, by getting honorariums, then my husband has no deduction for me any more and there are no deductions for the children.
Mr. Paul Szabo: We'll talk about that in detail afterwards.
Mr. Paul Forseth: Okay.
Also, then, you're saying that the same basic $6,000 should be available for every child.
Ms. Laurie Geschke: For the children as well.
Mr. Paul Forseth: Have you figured out what the cost implications would be for the country? That would be a big bill, I would think.
Ms. Laurie Geschke: This is not a cost implication for the country. We see this as allowing the parents to keep the money that is rightfully theirs because they have worked for it.
Mr. Paul Forseth: So with that, then, there would perhaps be the elimination of the other programs.
Ms. Laurie Geschke: Yes.
Mr. Paul Forseth: The elimination of the child tax credit altogether.
Ms. Laurie Geschke: Yes.
Mr. Paul Forseth: So that would be the one program.
Ms. Laurie Geschke: Yes.
Mr. Paul Forseth: A basic exemption. That's interesting. We'll have to cost that out, then.
[Translation]
The Chairman: Thank you. Mr. Cardin, please.
Mr. Serge Cardin: Ladies, thank you for your presentation. I would like to specifically thank Ms. Girard for her testimony because it helps further the debate. She has given us realistic examples.
We received a lot of recommendations. It gave me some ideas about policies we could create, and I would like to know what you think about them. I would also like to know if some of these policies would encourage you to stay home.
• 1605
Take the example of total household income. It is often said
that children are sent to day care so that the spouse earning the
lower income can go to work. Normally it's this spouse who may
deduct child care expenses.
However, we know that the spouse who stays at home sacrifices her career. She "sacrifices" her career because, despite the fact that raising one's children is very fulfilling, she has to sacrifice her career since normally her husband makes more. So, we could say that the spouse who stays at home does so so that the family can live on the higher income. In this type of situation, income splitting might help reduce household taxes. Of course, this kind of policy would cost a lot of money, but that's the reality: it would allow the higher income earner to keep on working to support his family.
Some people have told us that they disagreed with income splitting between spouses, but I think it's a solution for many problems.
We could amend the Income Tax Act to lower household taxes by as much as possible. The money that would be saved could be given directly to the stay-at-home spouse. Other groups have told us that the stay-at-home spouse should receive the money to help raise the children.
Do you think this kind of measure would encourage someone to stay at home to raise the children?
[English]
Ms. Eleanor Girard: Income-splitting would be beneficial if you could split it equally between both parents and have it taxed as such, then, at a much lower tax rate. It wouldn't be a total answer, because it's not that much of a difference. There would have to be other things also.
[Translation]
Ms. Laurie Geschke: I would like to add that in the case of our family, it would be more advantageous to split my husband's income because he makes more than I do. But it would not be as beneficial for a couple where both spouses pull in approximately the same income. My husband earns less than $50,000 per year to support us. There is not much money in Maple Ridge, British Columbia, and any well-thought-out benefit would help. However, it's different for households where both spouses work.
Mr. Serge Cardin: Income splitting is obviously not the solution for every family. If both partners earn a good income, they may not necessarily benefit from income splitting. However, there are other measures to be considered, such as tax credits, which you've already mentioned.
The Chairman: Would anyone else like to add something?
Ms. Dockrill, please.
[English]
Ms. Michelle Dockrill: Thank you.
First, may I say thank you very much for being here with us today, and, Eleanor, I must say that you have, as all of my colleagues will agree, I think, given us a real sense of what mothers are facing today in trying to struggle to survive.
• 1610
One of the questions or comments that we continue to
hear about on a regular basis is with respect to
income-splitting. We had some presentations this morning
where there was a concern
that it was a gender equality issue. When I
look at some of the documents we've been handed over
the course of the last few weeks.... I highlighted
a couple of statements and I'd just like to read them
to you and
get your comments.
Here's the first one. From a gender equality perspective, income-splitting between the parent in the paid workforce and the stay-at-home parent raises several concerns: (a) it discourages sharing of unpaid work between men and women; (b) over the long term, it discourages women's paid labour force participation; (c) it benefits families with sufficient income or who, for various reasons, have decided to have a parent stay at home, while female lone parents or parents who do unpaid work in addition to paid work would not benefit.
I'm just wondering if you would like to comment on those observations.
Ms. Laurie Geschke: Well, there are several there. I think I would agree with some of them. I would like to reiterate that for REAL Women of B.C., our acronym includes equality in our name. We feel that women are equal to men but we also feel that they're different, and women choose different roles.
If my choice is to remain at home, raise my children, and do as I am doing right now—which is educating my children at home, as they do not go to public or private schools—I have a full-time job at home for which I am not paid. So then, I think, my choice should not be penalized by the federal government through taxation policies to support other families that have chosen to work for need—or otherwise—outside the home but are getting tax benefits we are not, even though I have the same number of children who really need the same amount of care. I have just chosen to provide it elsewhere.
I did speak a little bit about income-splitting. In our case, we would do it if it were available, because it would be better to tax two people at $25,000, I would suspect, than it would be to tax one person at $50,000. We would do it because it would be beneficial to us personally, but I don't understand the ramifications of that. That's your job: you need to look at it. We made our recommendations about the personal exemptions, and we feel that is the way to go to make all families equal and to make all children equal in all families in Canada.
Ms. Michelle Dockrill: Given the fact that, as we've said, there have been some concerns raised with respect to it being a gender equality issue and with respect to it not benefiting lone parents, do I hear you saying yes, you agree with income-splitting, or...? I'm trying to get a yes or a no, I guess, as to whether you agree with income-splitting.
Mr. Laurie Geschke: We have members who are single parents. My daughter has a friend whose mother is a welfare mother. She has not been to work since she became pregnant. Her daughter is now 14 years old. She had a second child, which she gave up for adoption to a distant family member. She has been trying for the last two years to get back into the workforce. It has been very difficult for her because her lifestyle is such that she finds it difficult to work to time, to get up in the morning, to follow a schedule. I don't see a lot of self-discipline in her life.
Now, that could be due to other factors as well. She has done a wonderful job of raising her daughter. I would not have wanted to force her back into the workforce just because she didn't have someone to support her. I'm glad that she had the support system supplied by the federal and provincial governments in order to be able to do such a wonderful job of raising her daughter, Leanne, but now I see the struggle that she is going through in trying to build some life skills into her life, skills that she hasn't been cultivating all along.
I think there will be some inequity with single parents because they are not a functional family unit, but I also think it's really important to look at the functioning family unit and make sure that it survives, because we won't be able to pay for everybody if we're all not functioning.
• 1615
The Chairman: Mrs. Cecilia von Dehn.
Ms. Cecilia von Dehn (Member, REAL Women of B.C.): Could I say a word about equality in that respect? There's also not an awful of equality for the mothers on welfare, the single mothers. We have been subsidizing a welfare mother to get into a job she really wants to get into, to get training as a legal technician. She was told by the government that she could only be a hairdresser or look after a group home. Therefore, we're not really encouraging even the single mothers to go out on their own and find a job that they would like to do and that they're perfectly capable of doing. So as far as equality is concerned, it's very difficult for single mothers, and for welfare mothers as well.
Ms. Michelle Dockrill: I think my concern is that although, as you said, we may eliminate inequities on the one hand, we're therefore creating them on the other. I think that's what you said. Inequity would be created with respect to lone parents and income-splitting. It doesn't affect them, right?
Ms. Laurie Geschke: I guess so, but as income-splitting wasn't one of our recommendations, I think that with respect to a single parent with one, two, or three children, if they were unemployed it wouldn't matter, because they don't pay tax. But if they're employed and they're allowed to have the same personal exemptions for their children as they are for themselves and their spouse—if they have a spouse—they would certainly be far better off than they are now under the present tax system. While it may not be fair because they don't have the spouse and they're missing that one exemption of $6,456, it would certainly be much better for them than the way it is now.
The Chairman: Mrs. Girard.
Ms. Eleanor Girard: Could you not treat a family like a business? If it's your own business, you can divide that income amongst your spouse and your children and be taxed a lot less because you're running it as a business. I'm not sure how that works, but that's part of income-splitting.
The Chairman: We're at eight minutes already. I apologize, but we have a very tight schedule.
Mr. Herron, please.
Mr. John Herron: I just have two quick questions. First, do you think that the current taxation system, given the choices that are available in terms of the taxation system...? A couple finds out they're going to have a baby. After the baby arrives and perhaps after the maternity period, after six months—which we currently have—they develop a choice. They say, okay, in our circumstances, what is the best way for us to look after our child? Do you think that the system right now penalizes one choice versus rewarding another choice, given what we have available in the system? Does it encourage parents not to provide direct child care in the home?
Ms. Laurie Geschke: Very definitely. There is a financial penalty for making certain choices. I'll use my sister as an example. They are a double-income family and have one child. Once her maternity leave was over, she had to make a choice about where she was going to have her child cared for. Her choices were commercial day care, which would allow her the tax incentive, or family day care. She made the sacrifice of losing that deduction in order to allow me to care for my niece.
I cared for my niece for several years. When she started school and I was teaching my children at home, I was too busy to be looking after a fifth child. My sister then went to my mother, and my mother has been caring for this child ever since. There have never been any deductions for that child. That is definite, blatant discrimination—and they are a two-income family and they make a goodly amount of money, so for them it is a definite sacrifice. They're making over $100,000 a year.
• 1620
The Chairman: Thank you, Mr. Herron.
Mr. Szabo.
Mr. Paul Szabo: Thank you.
Thanks to all of you for your presentations. I learn something every time somebody comes before us.
One of the focus points that you brought, to me, anyway, was when you introduced each other and reminded us that people don't always have just one and two children. There are sometimes three and four children, many children, and it is simply very difficult, if not impossible, for someone with more than two children to work. If the experts are correct and it costs $7,000 a year for quality child care, that would mean that you would have to earn $21,000 just to pay for that. Of course, why would you do that? If you do, there would be no win in your pocket.
So obviously the economics become virtually impossible unless there is a very good job out there, a very well-paying job that makes it worth your while to pay that amount. I want to thank you for reminding us that sometimes you can't get there from here simply because of the needs of children.
I did a quick calculation about giving everybody, every child, this personal exemption. It would cost the federal government roughly $7 billion, and it would cost the provincial governments about $3.5 billion, because their provincial taxes are based on the federal tax. Yet the child care expense deduction in 1996, in totality, cost the federal government $500 million.
Ms. Laurie Geschke: Did you say $7 billion?
Mr. Paul Szabo: Seven...well, in total, over $10 billion to do it. It's 20 times more than we spend on the child care expense deduction. I only raise this because I know what you're trying to do and it's very complicated, somehow, to get from here to there, but I wanted to ask you just two questions. I'll give them both to you and anybody can answer.
Number one, if we forget about how we deliver it—there are many different instruments—how much do you feel a family with one preschool child should get in their pockets so that the value of the contributions would be recognized? What do you see here? Is it $500? Is it $1,000? Is it $5,000? Is it $10,000? What do you think it should be?
Second, does anybody have comments with regard to the statement that any new measure targeted at parents who stay in the home to provide care to children would only further reinforce barriers to employment by reducing the incentive to engage in paid work, i.e., would a benefit for stay-at-home parents be a barrier to women entering the paid labour force?
Ms. Eleanor Girard: I don't think it would be a barrier. Women who want to work are going to work, and women who want to have careers will still pursue those careers, plus have children when they get married. I put off having children for 10 years. I pursued my career first. Then we decided, upon hitting that magic number, that either we would have children or we wouldn't. You're going to do what you're going to do, no matter what.
Ms. Cecilia von Dehn: A lot of us have put our careers on hold, I think. Ms. Rankin put her career as a hospital dietitian on hold for many years until she went back. I could have gone back as a registered nurse again if I hadn't had...my last child was handicapped. There are a lot of women who make these choices. They go back in later years. They can keep up with their career along the way with courses and late classes and so on and so forth. It's not as though we just go to sleep for the years we're raising our children.
Ms. Laurie Geschke: I would like to add that the statement is a philosophical statement that has an under-girding which states that women should not be given the choice, because if they are given the choice they will always choose to go home. It's a radical feminist belief that women should be out in the workforce in order to make them equal to men.
We do not, as REAL Women of B.C., believe that. We feel that women should be allowed to make their own choices, which should not be penalized in any way, whether my choice is to remain at home with my children, as I am doing, and work part-time, or whether a woman's choice is, like my colleague's over here, to go back to work and hopefully help make ends meet in that way. Neither of our choices should be penalized.
• 1625
So I would say, not knowing exactly where that came
from, that it is probably some kind of statement that has
a philosophical background that is anti-family.
Mr. Paul Szabo: Does anybody have a thought on how much of a benefit in your pocket you think would be reasonable or that would at least clearly recognize the value of...?
Ms. Eleanor Girard: The same value that you put on paying a caregiver, at least.
A voice: Market value.
Ms. Eleanor Girard: Yes, market value.
Mr. Paul Szabo: The average benefit in pocket is about $700 for the child care expense deduction.
Ms. Laurie Geschke: Is that $700 or $7,000?
Mr. Paul Szabo: It's $700.
Ms. Laurie Geschke: Per month or per year?
Mr. Paul Szabo: Per year.
Ms. Laurie Geschke: Per year...?
Ms. Eleanor Girard: No, it's not.
Mr. Paul Szabo: For 1996, the average deduction was only $2,600.
Ms. Eleanor Girard: That's not reality.
Mr. Paul Szabo: I understand, but the average for all people.... The reason that they're saying funny things here is that only one-third of two-earner couples actually claim the child care expense deduction. The others are doing something else under the table or whatever.
Ms. Eleanor Girard: That's right, and those who—
Mr. Paul Szabo: But even for those who claimed it, the average claim was only $2,600—
Ms. Eleanor Girard: Ours was $15,000.
Mr. Paul Szabo: —and a deduction of $2,600 at the mid-range is only worth $700 in your pocket.
Ms. Eleanor Girard: But if you have to go out and buy that service, that's at least what the stay-at-home mother should be granted, like I said in my presentation.
Ms. Laurie Geschke: As well, the reason there is that disparity. It's not a system that is workable. Most parents cannot afford to spend the big bucks on those expensive systems, or philosophically they just don't want to. They want to be able to look after their own children, as the studies that I quoted have shown, as have the Compas polls and those things. Parents want to be in charge of the raising of their children. They don't want to give it up, so they will work as hard as they can, for example, as you have, and they will work at night and work during the day and do shift work. Who gets to see who they're married to? But at least the kids are looked after at home by one of the parents for the majority of the time.
Mr. Paul Szabo: Are you basically saying to put the money in the hands of parents and let parents choose how they want to provide the care?
Ms. Laurie Geschke: Bingo!
Mr. Paul Szabo: Okay.
Thank you, Mr. Chairman.
The Chairman: Thank you.
Just to follow up on Mr. Szabo's question, then, why should the government give more incentive to stay-at-home parents? If we're talking about equity, if the government, through the taxation system, is giving a $7,000 credit, let's say, for a child care deduction to working parents, why should we give more to those who stay at home?
Ms. Laurie Geschke: I don't think....
The Chairman: Well, you were saying $15,000.
You, for example, were saying to give them market value.
Ms. Eleanor Girard: Yes, and I also said that with four children I could deduct $25,000. A nanny only costs me $16,000, and a nanny is cheap compared to outside day care. For four children, a nanny at $7.50 or $8 an hour is cheap market value.
The Chairman: But should we not be giving the same deduction to both, whether they're working or not?
If we choose not to fund totally, for one reason or another, but we choose to give $7,000, and the other one is $4,000, at how many children, Paul...? Paul, one is at $7,000 and...?
Mr. Paul Szabo: And $4,000.
The Chairman: Should we not give them the same?
Mr. Paul Szabo: I have a feeling what we're hearing is “level the playing field and let parents choose”.
Ms. Laurie Geschke: I will just add that if the children had a personal exemption equal to both of the parents', which would be equal under the law, then we wouldn't need those inequities and we wouldn't need to be fudging about things. Whether the child was in care or not, on the income tax statement the child would be worth a deduction of $6,456 from the parent's income. They could use that tax-free income to pay for day care or to afford, for the parent staying at home, the groceries and the other necessities that are needed in the raising of their children at home.
The Chairman: But you would replace that only with a child care tax deduction, not with other benefits. Is that correct?
• 1630
Ms. Laurie Geschke: No. The personal exemption would be for everybody, for all Canadians regardless of their age.
The Chairman: But what about the GST child tax credit, for example? Would you lump it in and remove that?
Ms. Laurie Geschke: I would like to remove the GST, but I don't think that's what we're talking about here.
The Chairman: No.
Mr. Szabo gave you the costing figures from your suggestion. I think it's a unique suggestion, but we have to find the funding elsewhere. So in regard to what you mentioned in your presentation—that we should be taking all the benefits together and replacing them with a personal exemption, like a child exemption, for example—I'm trying to find out what benefits we would include or exclude to get the sources of funding. Mr. Szabo mentioned the child tax deduction, which is only $500 million, so we still have a huge shortfall. Do we take it from elsewhere?
A voice: Yes.
The Chairman: From where?
Ms. Laurie Geschke: Well, if my children are worth $500, then, yes, I guess we'll need to take it from elsewhere if I would like them to be worth $6,456 on the income tax. But from my perspective, you're not taking money from the government and giving it back to me. This is my husband's income that we should be allowed to keep in order to raise our children. It's up to the government to allow the citizens to raise their children as they see fit and to make do with the income that comes in, which is non-penalizing to families and to women across the country. If it means that there is less funding to special interest groups or.... I don't know what else it has to be, but that's not my issue.
The Chairman: What I was also getting at is that we have to make sure that we also target programs at people who are not working, because the exemption is obviously good for only some families, for those that have income. We still have other areas like the GST tax credit for children, for low-income families, etc., which we have to address.
I thank you for your suggestions, both yours and Ms. Girard's. I think you've brought to light a clear example of a person.... Not only do we see it the other way around, where people, women especially, are contemplating going back to the workforce, you've done the reverse, and I see that maybe there are some failings in both systems which we have to address. The bottom line, as I always say to my wife—we have four children—is that I'd never switch places with her even though she chose to stay at home, because the demands of rearing four children—or seven children, in some cases—are tremendous. I take my hat off to you and people like you.
Thank you very much for your well-thought-out presentations. I know the committee has really appreciated them.
Ms. Laurie Geschke: Thank you, Mr. Discepola.
The Chairman: We have the cooperation to group the next three witnesses, so we'll get back on track.
We now continue our hearings with Father Joseph Hattie, from the Archdiocese of Vancouver, Mr. Tom Walker, appearing as an individual, and, from the Canada Family Action Coalition, Lucinda Cullen.
Thank you for your patience and thank you for agreeing to join your testimony together so that we can get through the session. We have a flight to catch at 7 o'clock, so by 5.30 we'd like to be out of here. I welcome you and will maybe ask you to make your presentation in five to ten minutes and leave as much room as possible for questions.
Ms. Lucinda Cullen (Representative, Canada Family Action Coalition): Good evening—or is it good afternoon? It's almost evening. Thank you for holding this meeting; I really appreciate the fact that you would consider what taxation is doing to the families, that you're looking at this.
• 1635
Our group would basically like to see the child care
expense deduction turned into a child tax credit for
all families. We do believe in equality for all
families. We would also like to see joint
filing or income-splitting in order to lower the income
taxes paid by the
one-earner family. We would like to see you make the
spousal exemption equal to the personal exemption to
show an equal valuation of the spouse who stays at
home, whether it be the husband or the wife. As we
know, in these days sometimes the husband chooses to
stay at home.
We'd also like to see stay-at-home parents be able to make contributions to RRSPs. I am a stay-at-home mom, but I do work for my husband. He has a trucking business. I do his books and look after the children full time. We have five children, ranging in age from 3 years all the way up to 21 years. We have a son-in-law and a granddaughter as well. We're very family-oriented people.
I've put a career on hold. It's been on the back burner so long I think the pot has boiled dry.
Voices: Oh, oh!
Ms. Lucinda Cullen: Earlier, I heard your statement about being a barrier, and I find that rather.... I would agree that it's a feminist statement, that they are the radical fringe of women. I really appreciate being able to raise my children myself without interference from the government.
I would like to be able to stay at home and have a tax exemption. We are taxed to death. In our family, we find it very difficult going from year to year. My husband has to pay the GST on his business, and that just seems like another big ton put on my husband's back. I just find it extremely difficult to watch this happening to my family. We live in a very modest three-bedroom home, and because our children have been so spread out, we've been able to rotate them; one's out the door now.
Voices: Oh, oh!
Ms. Lucinda Cullen: I feel that equality for all families is really important because, as we all know, the traditional family is the backbone of society. Most women I know choose to stay at home and choose to look after, nurture, and love their children themselves and not let somebody else do it for them. I feel very strongly about that from my own family.
In regard to this tax exemption that we don't get even though I do work for my husband, if I worked for somebody else my employer would pay for half of the medical plan. As an aboriginal person, I get my medical paid for by the government, but I still pay taxes. I don't live on the reserve. My parents brought us up not living on the reserve. My parents have always paid taxes, I've always paid taxes, and being aboriginal is another issue. That's a whole different bag of bones.
Here's what's really important. When I see these numbers and facts and figures showing that if I worked for somebody else, this exemption that I would get, the $7,000, $4,000, $4,000, $4,000...I'd have up to a $19,000 exemption for my children, which I don't get. That's unfair. I don't think this is equality at all.
Also, at the end of the year, we don't even have enough money to put into RRSPs. That's another struggling point that we have as a family. Also, we don't holiday. We haven't holidayed in nine years, and that's a stress on my husband. I just feel that it's unfair. I'd love to scream that: it really is unfair to the family.
• 1640
The family unit is the backbone of
society, and I'm the mom who stays at home. For all the
working women, I'm the mom who picks up their
children and takes them to all the different functions
that go on in school, and I'm the mom who
fundraises for the underfunded
schools. Meanwhile, we don't get any tax breaks that
would even allow me to be at home and do that without
feeling like it's these women who go off to work who get all
these different tax exemptions—which I do not receive.
I heard Hedy Fry say on Jane Hawtin Live that working women have to go out and buy nylons and work clothes and meanwhile these other women sit at home. Excuse me, Hedy! I think that working women as well as stay-at-home moms like to look presentable. The stay-at-home moms still have to buy nylons. They want to make an issue out of the fact that they have to run home and cook dinner. She said that stay-at-home moms get to have more nutritious dinners for their families. Well, that's not my problem, Hedy, that you can't make good choices about the nutritional value your family gets.
I just find it really amazing the way the tax structure is right now. I don't want to run out on my family to get a job so that I can get tax exemptions. That's not right. That is all wrong. My children are far more important to me than any old tax exemption, because, let's face it, in the end, if I've left my children to somebody else's care, nanny after nanny, until they've grown up, and then they pull crimes on society, I am responsible for that. Then the whole society becomes responsible for reforming the job that I didn't do.
I think it's really important that you guys take a good, long, hard look at this and see the value and the worth of the mother who stays at home and looks after society's children. It's really important. I really thank you, and I appreciate the fact that you are looking at it.
The Chairman: I'll have to talk to your husband and tell him to give you a higher salary. Thank you very much for your presentation.
Mr. Walker or Father Hattie, are you going to make a presentation?
Mr. Tom Walker (Individual Presentation): Go ahead, Father Hattie.
The Reverend Joseph Hattie (Director, Office of Marriage and Family Formation, Archdiocese of Vancouver): Thank you, Mr. Walker.
Mr. Chairman, I thank you and your committee for the opportunity to come before you today in this common cause of developing an income tax structure that puts all Canadian families on an even playing field.
Just as an aside, I'd like to compliment your committee on the charity with which you've conducted your dialogue. I've been sitting here listening for over an hour or so, and I'm impressed by the members.
I come before you today not as a tax expert but as one whose life, for its greater part, has been dedicated to preparing engaged couples for marriage and family life and also to walking through the storms of life with many of these families. Therefore, I come here as one who has a real interest in and a true concern about the impact of the income tax structure on single-income families.
My work gives me the privilege of helping over 500 engaged couples a year to prepare for marriage and family. The memo I received, and the fax concerning the parameters of this submission, I very much agree with:
There is evidence—and a lot of it, if you've been listening today—that single-income families with dependent children are being penalized by the present income tax structure. There are many intelligent people in Ottawa who can work out the technical details that are needed for tax fairness in this area. My contribution to the achievement of this fairness is underlining the need for it from a perspective that is more a philosophical perspective of parental and women's rights.
• 1645
First, in
terms of the freedom of choice, I again speak from
years of experience in preparing people for marriage
and the privilege of having so many families share
their stories with me.
Only last
evening at a marriage preparation class dealing with
family finances, 38 of the 39 engaged couples
participating in that class said they want to have
one parent
stay at home when they have their children.
So I'm speaking for them and for so many of the
ones we prepare.
This and other experience confirms the reality that thousands of parents who choose to have a full-time parent at home are penalized by the present tax structure. The present system undermines the freedom of choice that parents should have in choosing to be the primary caregivers of their dependent children.
The majority of these caregivers are women. A woman should be free to set her priorities for her life, as a man should. Likewise, parents should be free to set their priorities for the procreation and the raising of their children. Thus, a mother should be free to choose to develop her potential for love and self-giving by being the primary caregiver of her children.
But most of the women of our diocesan programs who choose to develop their potential in these ways, by becoming managers of active households, expert drivers, child psychologists, and volunteers, are penalized by the present system. They do have a right to choose to make a difference to their families—and beyond their families—by being the primary caregivers and educators of their children. A mother has the right to make her contribution to the common good of society, by volunteering at the school, for example, which, experience shows, helps the school to function better.
Via one parent being a full-time homemaker, parents have a right to choose to be the main influence in the lives of their children in raising them. They have the right to choose to be the primary educators of their children and teach them the meaning of love, of being a gift, and of the social virtues of justice, honesty, and forgiveness. Many parents exercise this right because they realize that children most often do not do what their parents tell them but what their parents do.
A suggestion for your consideration from this, therefore, is income sharing, which could be structured so that working spouses could pay stay-at-home spouses the going rate for day care, for example, as was mentioned earlier in the first presentation.
The family is an institution in our society and should be able to do what family businesses can do. For example, a wife running a business can hire and pay her husband. Such a structure would benefit families; it would help to level the playing field for families with dependent children. The current tax structure does discriminate, and it rewards a family of two wage earners. I would humbly ask you this: does the tax bias against the one-income families reflect a bias of the government? Jobs do mean more tax dollars for the government.
Secondly, to be taken seriously, I would also encourage you to continue your research into finding out how to value the unpaid work that is done in the home and for the family. Full-time homemakers want to and have a right to be taken seriously by our government and to be given a positive recognition for their service to society. The present tax structure does not take them seriously. It gives no economic value to their important work in the home and actually penalizes them. That kind of negative recognition they can do without.
In this respect, I would offer a suggestion. Over 10 years ago the American Council of Life Insurance used their skills to estimate the value of a homemaker's work, which they set at more than $25,000 U.S. a year. That's over 10 years ago now; it will have gone up considerably. The Canadian government could benefit from this expertise of insurance companies to move toward giving serious and positive recognition to full-time homemakers in the income tax structure of Canada. I would encourage you to recommend this because I think it would help the government level the playing field so that the choice to stay at home is a more equal and viable choice. It seems that it would also help to reduce the unemployment rate.
• 1650
It is our contention from my office that the family is
the basic and fundamental unit or cell of society.
As such, it is organically linked to society, and an
organic link means that there is a two-way
relationship. The family, by functioning as a healthy
cell,
contributes to the health of a society.
In turn, society contributes to the health of the family by doing the things that cells cannot do, like, for example, providing a transportation system—or a fair tax system. As these services are available to all families in society, so should the income tax structure be at the service of all families. Certainly one of the penalties of the present income tax structure—and you see this with couples preparing for marriage—is that it often prevents a one-income couple from buying their first home until a number of years after the two-income family buys theirs.
In conclusion, I quote John Paul II, who says, “The future of humanity passes by way of the family.” Tax equity for Canadian families with dependent children will help to give Canada a better future in the next millennium.
Thank you.
The Chairman: Thanks, Father Hattie.
Mr. Walker, please.
Mr. Tom Walker: If I may, I will just introduce myself first. I've been a social policy researcher for about the past 20 years and am currently the stay-at-home parent for a five-year-old son, so from what I've heard so far this afternoon, I'm fairly unique. I also do contract research, and my wife works on call.
That situation of “not full-time work and not necessarily full-time caregiver” is a situation that I haven't heard too much about yet, and I want to address it, because I think there are two ways of addressing the issue of tax fairness. One of them is whether the tax laws treat people in given situations equitably. The other is whether the tax laws actually inhibit the ability of people to change their circumstances. I think the circumstances that affect a lot of Canadians are transitions, the transitions into the labour force, out of the labour force, and in the level of intensity of participation in the labour force. That's the issue I want to really focus on.
I want to say that most of what I want to argue and what I would have to say has already been said to a federal advisory group in Collective Reflection on the Changing Workplace, by Lars Osberg. I've quoted extensively from Lars Osberg in an appendix to the document that I've handed out, but I'll just quote two brief paragraphs from him here.
—and we've heard a lot about levelling playing fields—
To say a bit more about part-time workers, the Canadian Council on Social Development recently looked at the levels of compensation and benefits received by part-time workers and found that they are very much less than those received by full-time workers. Statistics Canada looked at the structure of employment in Canada and found that there is increasingly a “hollowing out” of the middle. Less people are working, say, between 35 and 40 hours per week, more people are working exceptionally long hours per week—50 hours up to 60 hours—and more people are working extremely short hours per week, like 20 hours, without benefits, without the similar salary of people working full-time.
Just to sum up, I think there are two approaches, again, that this committee could take to looking at tax equity. One of them is the question of people in given circumstances and whether they're being treated fairly. The other one is to look at people when they're making those transitions. I think you'll find, particularly if you go back to the report of the Collective Reflection process that was conducted by the labour ministry, that those transitions are increasingly important, that today there's a very high participation of women with children—and with young children—in the labour force.
• 1655
You're really in the position of Solomon, of having to
decide between taking something away from a very large
number of women who are in the workforce and want to be
in the workforce, and the people, then, that are out
of the workforce and want to be out of the workforce.
But there are circumstances that are changing, in which
people want to go in, people want to go out, and people
want to change their level of participation. I think
that's a very important issue which I'd urge the
committee to look at and to consider carefully.
Thank you.
The Chairman: Thank you very much, Mr. Walker.
We have about half an hour at the most.
[Translation]
Mr. Cardin, please.
Mr. Serge Cardin: Thank you very much for your presentation.
Ms. Cullen introduced herself as a partner who works with her husband, who is very supportive of her work. We could compare a family with a business and help family members arrange their lives to help them raise their children.
However, there are so many different issues at stake. Choices must be made. One father told us that the value of stay-at-home work was $25,000. That's much more than many people make. People making minimum wage don't even earn that much. If stay-at-home women earned that much, it could create an imbalance. Everyone would want to stay at home if they actually got paid that much.
We have to find a balance. If the government wants to support families so that one spouse, be it the father or the mother, wishes to stay home, it will have to find a balance in terms of encouraging parents to stay home with young children.
That's why I can't see that happening. People like you have made suggestions, but government officials, for their part, tell us such a scheme might cost $10 billion, for instance. Now $10 billion might seem like a lot of money to support parents who want to stay at home, but it all depends on what your priorities are.
I'm just throwing out some ideas, and I would like you to tell us if you have any practical solutions in mind. We've talked about various issues over the course of the day. There's been talk of income splitting. Should incomes be split for people who don't earn a lot of money? If you split the income of someone earning $100,000 or $200,000, there would be an obvious advantage, but it would not really make a difference for people who earn very little. So I think there would have to be bigger incentives. The government will have to give a tax credit. I mentioned earlier that one father valued the work of a stay-at-home mom at $25,000 a year. How can we encourage a mother who wishes to stay home to do so?
[English]
The Chairman: Lucinda, do you have a comment?
• 1700
Ms. Lucinda Cullen: My husband and I split his income, so we are still a single-income family. Instead of having my husband hire somebody else to do the jobs I do for him, I do those jobs. I do those after I've done my family stuff. I do those in the evening, with the children in tow. I would really like to see us get a deduction for the fact that.... Working women have a deduction for their children, but we do not get anything other than.... For myself, for my four children, we get $243 on this GST thing, and that's a farce.
I've seen the figures. Yes, we don't want to have $10 billion and sort of say, okay, divvy, divvy, divvy to all the families because they have children. I know plenty of women who would stay at home if there were more advantages in looking after their own children. Then they would stay at home, and that would provide a job for some other family to be in that workforce. You have to try to balance that too.
Somebody has to look after the children, and there are times where I feel like I don't know what you guys are doing up there. Why are you so desperately trying to break the family and making out like women need to be recognized in their “job”, that it's the only way we're going to feel good about ourselves? I feel perfectly fine being a stay-at-home mom. I have no problem with saying that I am a mother who stays at home and cares for my children and looks after other people's children without pay. That's my choice.
Also, I look after people who work. I look after your old folks in the old folks' home. I don't get paid for looking after your parents either. It's sad. I go to these old folks' homes and visit with them, and they're all so happy to see a visitor. When their own children are so busy working for these double incomes, they don't have time to visit their old folks. I just find it really amazing.
Like I said, in the education department, nobody pays for my husband's gas, for the gas that I'm using to run the children down to the IMAX theatre. It comes out of my husband's pocket. I live in East Surrey, and those are things that I want to do for my children—and for your children while you're at work. Those are different things that we do, and we do not get any tax exemptions for what we do for you folks who work. It's just not fair.
I really don't know what the formula is, but I do know that when you do start looking in a nitpicky way at government spending...I have long hair, and my hair would be out to here.... If we look at some of the spending that the government does, I'd say to cut a lot of it. There are a lot of special interest groups and a lot of minority groups doing things that are totally against the family, and the government says okay.
I think it's all wrong, because it's our next generation that's going to carry you. It's our next generation that is going to carry us through our old age and will be looking after their own children. If we are teaching our children that “you're worth nothing, kid”, that they can go and stay with somebody else because we don't want to look after them on a regular basis through thick and thin, through the sickness, and when they come home excited over what they've done at school.... I think it's very important that mothers are there for their children, at least until they have all gone off to school.
I'm not an accountant by any means; I don't know what the solution is. All I know is that it feels unfair and that it feels like women who do work have more of an advantage over women who don't work. So yes, let's level the playing field here.
[Translation]
Mr. Serge Cardin: You're basically saying that the government should clearly indicate that families are a priority. Earlier on, you told us that politicians are not concerned with families. On the contrary, I believe that families are very important to us. Most of the people in this room have a family and are working as hard as they can at having a good family life.
• 1705
We do see eye to eye on one level, once the government will
have made family the focus of all its policies. In my opinion, you
are right in saying that if the government stopped spending money
on useless programs, it would be able to support a fairly strong
family policy.
[English]
The Chairman: Father Hattie, please.
Rev. Joseph Hattie: I have just a point of clarification on the idea about the more than $25,000 U.S. That was what the insurance companies were saying that you would have to insure your wife for if you were going to pay for her services if she were no longer there. That was what it would cost just to pay for those services if you had to pay for them, and those rates were from over 10 years ago. I'm not saying you have to give every wife $25,000.
The Chairman: Even that I don't see, because a wife is providing a certain level of services that equate to $25,000 annually, so you'd have to insure the wife for a heck of a lot more than that—
Rev. Joseph Hattie: Oh, yes.
The Chairman: —if you were to hire somebody to give you the same level of services. What Mr. Cardin was saying is that there is this whole debate on trying to come to a value for the work that's done at home, for example.
Really, the only inequity, Ms. Cullen, is that a working parent has the child deduction. That's the only inequity. Between the $25,000 that Father Hattie seems to imply versus the $7,000 in child tax credit that the working parents get so as to make it more equitable for those who choose to stay at home.... We're trying to figure out what the value should be, I guess, in order to make it more equitable for those who choose to stay at home.
It's a fundamental question and I don't know if we can get an answer in this committee. As it was this morning, the debate is also that just because, as you say, you work, for example, that doesn't mean your responsibilities at home stop the minute you walk out the door and then start up when you come back. So even though we would compensate those that choose to stay at home, there's still a certain amount of compensation that would also have to go to those who work, because they also take care of their families and their children even though they're doing it by actually combining both. It's that whole debate.
Ms. Lucinda Cullen: So in regard to me taking care of my children and whatever a working mom puts out for that type of day care, can I not get that as a deduction or get paid for doing that same job?
The Chairman: That's what we're trying to assess. How you do evaluate that?
Ms. Lucinda Cullen: Right. Well, I think you guys have a real tough row to hoe there.
Voices: Oh, oh!
The Chairman: Thank you.
Father Hattie.
Rev. Joseph Hattie: Thank you.
She shouldn't be limited just to this economic focus. You really can't put a value on the love that is given in a family—the love of a mother particularly. There is just so much that is involved; there is the willingness to give of herself so totally and to develop her potential for loving and for giving. You can't put an economic value on that, but if there's some way that the government can, in a very visible way, show that it does value the family and the vital service the family provides for the common good of our society.... An economic recognition is one aspect of it, but there has to be a bigger picture.
The Chairman: Thank you, Father Hattie.
Ms. Dockrill, please.
Ms. Michelle Dockrill: Thank you, Mr. Chair.
Father Hattie, in your comments there is this one line, “A mother has a right to make her contribution to the common good of society...”. One of the things that we've heard over the course of the last few weeks is that it is the responsibility of government to support women in their choice. I would hope—and please correct me if I'm wrong—that you would also support those mothers who feel that they are doing in the best interests of their children by entering the workforce. Sometimes those mothers don't have that choice, whether it be a lone-parent family or dual-income family with the father is at the low end of the scale. I think it's really important to kind of clarify that. I hear you saying that you support either/or.
• 1710
In a recent article in the National Post,
one of the many we've all read over the course of the
last couple of months, I think it is interesting to
note one of the comments made. I'll just read it to
you, and
maybe, Tom, you can give me your comments—and the
other two presenters as well.
It says:
I just want to know what you feel about that statement, whether you think that's relative.
Mr. Tom Walker: Really, I think we've been living in a fantasyland: that if you work more hours everybody should be making more money. Now, two-earner families might be working twice as many hours as a one-earner family was 20 years ago and just barely keeping up—with the same amount of income. Incomes are going down, expenses are going up, and everybody is left saying where did it go and what happened to it?
I think that one of the explanations is that we simply haven't realized the hit productivity takes because of the long hours and also because of combining long hours of work with increased responsibilities at home, like that double shift that women who are working full time work, that over 40 hours a week on average. Men who are working full time work 47 hours a week. You think of that as a dual-earner household. Somebody has to come home and do the laundry, somebody has to come home and look after the kids, and pick up the kids from day care, etc., so people are going to work the next morning stressed and fatigued, and they're not productive.
I think that Canada's productivity is way down because we've bought the argument that an hour is an hour, so if you work 40 hours it's four times as much as if you work 30 hours; if you work 50 hours, it's 10 hours more than 40 hours of work. I think that people are going to work stunned, fatigued, and stressed out, and they're just not producing a lot. The economists don't recognize this. It doesn't fit in their equations.
The government deputy ministers who I write to basically defend what the policies have been for the past 20 years: we can't change, they say, we've been doing this for the past 20 years. So everybody gets burnt out and everybody gets stressed out, and we don't look at the one thing that was acknowledged for decades: that as we improve the methods of production and the kinds of work, we don't need to spend as much time at work. Certainly when we have two people from a household going to work, we shouldn't be spending as much time at work. That's my answer.
Ms. Michelle Dockrill: Father Hattie.
Rev. Joseph Hattie: It's sort of out of my field, but I have just an observation from the feedback I get from the couples I work with.
It seems that many companies and businesses in Canada have followed the McDonald's policy of working so many hours, with no benefits; you hire a lot more people that way. That has been spreading. When they started they were allowed to get away with it, and it seems others are saying they can get away with it too.
Just as an example, one young man who married just recently is working for a company that has taken on that policy. He is working 38 hours a week, at $850 a week. He can do a little overtime, but they will not take him on full time and won't give him the benefits, and so on and so forth. I agree with you 100%: these policies are taking what they can earn, to pay for even their basic living....
• 1715
Ms. Michelle Dockrill: I have just one last comment, since the chair covered my first issue with his comments.
Thank you, Mr. Chair.
The Chairman: You're welcome.
Ms. Michelle Dockrill: In one of the presentations by the Status of Women, I found it really interesting that on their first page they said, “Dependent care is the key issue: how do families meet income and care needs?” I think their next statement is very important. “The answers may not all be in the tax system.” There seems to be a sense from a lot of the presenters we're hearing from that this is in fact the case if we're attempting to have a one-size-fits-all and given the fact that there are various family configurations and that some parents would prefer to work part time and have that flexibility. I just want to know if you agree with that statement that the answers are not all in the tax system.
Mr. Tom Walker: Oh, I definitely agree that the answers are not all in there, but I think there are answers in the tax system as well.
Rev. Joseph Hattie: I think I've tried to make that point in my presentation as well. The answers have to begin with our philosophical stance and our value of the family and what its real contribution is to the development of a healthy society.
Ms. Michelle Dockrill: Thank you, Mr. Chair.
The Chairman: Thank you, Ms. Dockrill. I promise not to take up more of your questions in the future.
Mr. Herron, please.
Mr. John Herron: I'll pass and let Paul have mine.
The Chairman: Thank you.
Mr. Paul Szabo: Ms. Cullen, thank you very much for your intervention. There's a lot of passion there and I think it's important that we continue to be reminded that it isn't just dollars and cents that we're talking about in terms of the contribution that parents make. You mentioned volunteerism, community service, helping the neighbours, charitable work, and visiting the poor, the sick, and the needy, not to mention forgoing income, educational opportunities, training opportunities, and, I guess, career advancement possibilities—or at least deferring them, delaying them.
Yet it all comes back.... Father, I think it's always good to have you in front of us, because you continue to put our feet back down on the ground, that family's there.... We have to be careful not to be judgmental about people's choices, obviously. There are cases where people must work. There are cases where people are not good caregivers, where we're better off as a society with them not caring for their children. That's a reality. We obviously have to be as inclusive as we possibly can.
Tom, your work over some 20 years...and you mentioned quality-of-life issues and productivity, and I think those are some of the same things that came out here as we think about families having to make decisions that will affect the quality of their lives. For some, the stress of not being with their children or of having to work around some sort of a caregiver's schedule may be more than they're prepared to sacrifice. Or it's just that the family value or a social value or a moral value—or whatever it might be—drives them, and inside in their hearts they have to feel it, so they make choices.
One of the areas, though, that I'm still trying to get some information on is one that you may have stumbled across in your research, It has to do with this group in transition, the part-timers. I want to know more about these part-timers.
We got some information from Human Resources Development and from Mr. Shillington. Regardless of the income level of the husband, whether it's a $10,000 annual salary or over $100,000, it appeared that, on average, one-third were in the full-time paid labour force, one-third were providing direct parental care, and one-third were in some part-time band of work that wasn't a full-time job.
Do you know anything about the characteristics or the distribution of this? Are these people who are trying to do both, to provide direct parental care and to work? Are they working night shifts? Are they sharing the day with the husband so that they continue to have at least one parent for the child's needs at least for the most part of the day? Tell me if you know anything about that.
Mr. Tom Walker: I'd say all of the above. In today's labour market, one of the ways people get full-time jobs is by working for sometimes an extraordinarily long time in on-call jobs or part-time jobs. I've heard of people working for 10 years in on-call jobs or part-time jobs before a full-time job comes up. It's very difficult for people to just decide they want to work full time and then necessarily have a full-time job.
• 1720
A lot of it is transition
into a full-time job; it's whether people want to work
full time or not. A lot of people would prefer to work
only half time, particularly when children are in
school and the parent wants to work part-time in order
to come
home early so that they're home when their children
come home.
One of the difficulties is that in order to be
able to work part-time, people often have to take not just the
proportionate reduction in pay but a complete loss of
benefits and a disproportionate cut in pay; the
wages that are available for part-time work are maybe
half as much as the wages for full-time work.
So there are both: there are people who are in part-time employment who want to be in full-time employment, so they're involuntarily working part time, and there are a lot of people who are working full-time, particularly parents, who would like to be working part time. This was something found by the Canadian national child care study in 1989 or 1991. I think it was about 20%. I quoted the number in my paper. They said,
That's a great number of people. For example, for a mother who takes time off from work to have a child and then returns to work, in many cases the choice is between returning to work full time or not returning to work. There isn't that choice that many people would like to make, which is returning to work part time. Part of the reason for that is that employers see it as more expensive to pay somebody who is part time with full benefits and full salary. You get the McDonald's type of job, with no benefits, low pay, and part-time work. But the job with full pay and full benefits is either full hours and long hours, or nothing at all.
Mr. Paul Szabo: So are those part-timers as stressed out as full-time workers?
Mr. Tom Walker: I can speak from my own case. My wife works on call. She's a librarian. She has a master's degree in library science. I work on contracts when they arrive and have to basically write proposals and so on and so forth when I don't have contracts. Essentially, we don't have weekends. She works on Saturdays and Sundays because that's when a lot of on-call work is scheduled, and she works a lot of evenings. I spend time going back and forth between writing proposals, doing the research work that I'm able to get, and caring for a five-year-old child, with basically very little in-between time, except for relaxing with my son when we go to the beach or go swimming. There's no real time for the family to just take it easy together.
Mr. Paul Szabo: Do you have any idea of how elastic those part-timers are to changes in benefits? We talked in the earlier panel about whether or not a benefit to a stay-at-home parent would be a disincentive to go to work. Presumably there's always somebody like this, and if you give them $100 or $500, at some point they will move. Are there many people who are kind of torn about why they are doing this?
Mr. Tom Walker: Yes. John Richards addressed this very well earlier. A lot of people are faced with very high marginal tax rates in that lower-middle range of income. If they do the calculations—a lot of people don't—they really have to consider whether it's worth working an extra hour for $4.
Mr. Paul Szabo: Yes. Isn't that a shame?
Thank you very much. You've all been very helpful.
The Chairman: Thank you, Mr. Szabo.
• 1725
That leaves me to conclude this
and thank you for a fine presentation. You've given us
an awful lot of food for thought
and also an awful lot of challenges on a very
difficult subject. We'll be consulting from
coast-to-coast this week and next and will hopefully make
recommendations that reflect what we've heard here for
sure.
I'd also like to thank the staff who've organized this very difficult trip. It's gone very well today.
I remind my colleagues that we will meet at 6 o'clock for the bus for the airport.
Thank you.