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DISSENTING OPINION OF THE PROGRESSIVE CONSERVATIVE PARTY
BROADENING THE SCOPE

The Progressive Conservative Party of Canada believes that families are in the best position to choose what is right for their children. The focus of this report ignored the larger principles of comprehensive reform that are necessary to provide Canadians with that choice without penalizing families.

Canada is the only industrialized nation that does not recognize the cost of raising children when determining the tax burden for families with dependent children relative to those without children. In fact, when compared with most other nations, Canadian families with children pay considerably more tax than those families without children.

The Sub-Committee's report states that ``dual-earner couples with the same family income as single-earner households likely pay more tax." This is the case regardless of whether or not they have dependent children. ``This is due to the progressive nature of our income tax system and the fact that taxes are levied on individuals and not families." (See section ELIMINATING THE DISPARITY BETWEEN SINGLE - EARNER AND DOUBLE - EARNER COUPLES)

The Sub-Committee believed it was beyond their mandate to challenge these basic principles. It is unfortunate that they failed to fully recognize and suggest that the Department of Finance undergo a comprehensive examination of the tax and transfer system in Canada in order to alleviate the financial strain on families.

Principal Recommendation

We advocate a comprehensive approach to tax reform, where the government examines all existing tax and transfer policies for their effects on families with dependent children.

The tax structure has been changed far too frequently by a piecemeal approach that has introduced many inequities and inefficiencies. The tax system is too complex to expect this patchwork type of solution to work in the long term. A broadbased review of the entire system is necessary.

The recently appointed Progressive Conservative Tax Task Force will examine the tax disparity of Canadians as a whole. The Task Force will be reviewing the impact of the current tax structure and offer a vision to Canadians for an effective tax system that contributes to our overall well-being and quality of life; something this government is trying to avoid.

The Progressive Conservative Party's Task Force on taxation is comprised of Party members and experts without partisan affiliation. They have been invited to serve on the basis of their expertise.

The Progressive Conservative Party supports the four points raised in the report but believes they do not address certain important inequities raised in the document. We believe that the Minister of Finance should consider, but not limit itself to, examining the following suggestions. It is important to note that the merits of these suggestions and comments would clearly have to be assessed within the context of our principal recommendation; that being a comprehensive examination of all existing tax and transfer policies as stated earlier.

Suggestions

1. A principle basis for inequity between different family configurations is the fact that parents who purchase third-party child care receive a deduction, the Child Care Expense Deduction (CCED), which is not available to parents who provide direct parental care and incur the opportunity cost of forgoing a second income.

Therefore we suggest, the Minister of Finance consider adopting a non-refundable tax credit for all parents who choose not to claim the Child Care Expense Deduction.

Two suggestions brought forward during hearings were a credit worth $2,000 per family as raised by the CD Howe Institute (total costs $3 billion) and $700 per family which replicates the average benefit received by a CCED claimant (total approximate cost $1.05 billion.)

2. As stated earlier, Canada is the only industrialized nation that does not recognize the cost of raising children. When a parent chooses to provide direct care for their children, Ottawa diminishes the value of work of stay-at-home parents by having the spousal exemption worth approximately 20% less than the basic personal exemption.

Therefore we suggest, the Minister of Finance consider equating the spousal exemption with the basic personal exemption for parents with dependent children.

3. We also suggest the Department of Finance consider examining the mechanism of income splitting, applied to families with children.

We raised this issue only because of the number of witness that advocated this concept. Income splitting allows couples subject to different marginal tax rates to even out their incomes in such a way that reduces total family taxes paid. By transferring income to the lower income partner, this technique has the effect of altering the basic nature of the tax system-the degree of progressivity is reduced and the unit of taxation becomes the family. (See section INCOME SPLITTING)

We recognize the fact that this concept is not a simple solution in all situations, given that this concept does not benefit one-parent families or parents already paying the lowest marginal rate. The Department of Finance estimates the cost of the program at $4 billion. The cost of the program is expensive but worthy of study.

4. The Progressive Conservative Party would like to see the government and the provinces jointly review the clawback rules for the National Child Benefit.

This Sub-Committee along with the Progressive Conservative Task Force on Poverty, frequently encountered testimony from lower income Canadian families who see their social assistance clawed back for every benefit dollar they receive. This punitive policy takes money away from those who need it most. The Committee chose not to recommend the Finance Minister review this measure. We believe it is important enough that he should.