STFC Committee Meeting

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

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

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 27, 1999

• 0912

[English]

The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): 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.

I am pleased to welcome this morning, from Equality for Gays and Lesbians Everywhere, Mr. Ron Chaplin, chair of the political action committee, and Mr. Todd Armstrong, as well as Marion Steele.

From the Canadian Union of Public Employees, I'm pleased to welcome the senior officer from the equality branch, Ms. Nancy Rosenberg.

Welcome to the committee. You are probably the last witnesses, and hopefully the most important, as they say.

The normal procedure is to allow each group five to ten minutes for their presentation so that we have ample room for questions from members.

I'd like to welcome you both and ask EGALE to make their presentation. Thank you.

Mr. Ron Chaplin (Chair, Political Action Committee, Equality for Gays and Lesbians Everywhere): Thank you very much, Mr. Chairman and members of the committee, for your very kind invitation to appear before you this morning.

My name is Ron Chaplin, and I am chair of the political action committee of EGALE, which stands for Equality for Gays and Lesbians Everywhere, Égalité pour les gais et les lesbiennes. Founded here in Ottawa in 1986, our organization is committed to the struggle for the equality of gays and lesbians before the law, focusing on the federal level of government. As such, we have testified before many parliamentary committees and government tribunals and made legal representations through the courts. We have a national board of directors with representatives from every region of this country.

Our organization is dependent on the efforts and financial support of hundreds of volunteers from across the country. We are here before you this morning as volunteers. We have a very modest budget and a single staff person. I should add, as your committee is concerned about taxation matters, that ours is not a registered charity, as we are committed to political action. None of our supporters receive a tax deduction for their contributions to EGALE.

With me this morning are Todd Armstrong and Marion Steele. Both are parents with same-sex partners and are here to testify about their experience with the federal tax and transfer system and how it affects families headed by gay and lesbian couples.

We noted with interest during debates in the House of Commons in the late winter that many MPs were concerned that Canada's taxation system deals inequitably with different types of families. We share this concern. Indeed it is part of EGALE's mandate to ensure that all Canadians, and in particular its gay and lesbian citizens, are equal before the law.

• 0915

Our presentation this morning is based on the following three principles.

Firstly, all families should be treated equitably under the tax and transfer system, maximizing the options for parents to provide the best material and emotional well-being for their children.

Secondly, the best interests of the child should at all times be paramount.

And thirdly, no one should be deprived of the equal protection and benefit of the law by reason of their sexual orientation. This includes the children of gay and lesbian couples.

In our presentation this morning we will not focus on the situation facing all gay and lesbian parents. We will not focus, for example, on the effects of the current tax system on single or divorced parents. We are confident that other witnesses have dealt with these groups. Our focus this morning will be on gay and lesbian couples who are jointly raising children. We are reasonably confident that other witnesses you have heard have not addressed this situation, and we are also reasonably confident that some of what you hear this morning may surprise you.

Finally, allow me to explain that we cannot tell you the number of people affected. All surveys that try to estimate the number of gay and lesbian persons in this country are highly suspect, let alone estimates of the number of children being raised by gay and lesbian parents. Frankly, data that could be provided to this committee by the Department of Finance or by Statistics Canada would be as reliable as anything we could provide to you.

The care and nurture of our children is a challenge for us all. One of the extra challenges faced by gay and lesbian couples when making financial choices regarding the care and nurture of our children is that by and large our relationships are not recognized under the law, although this is slowly changing.

Our courts continue to rule with remarkable consistency that under our Charter of Rights and Freedoms, gays and lesbians cannot be denied the equal protection and benefit of the law. Slowly our federal and provincial governments are responding by enacting appropriate legislative amendments. Sometimes, however, obligations imposed by one jurisdiction are not recognized by another. The fact remains that until there has been comprehensive reform of our tax and family law at both the federal and provincial levels, these anomalies will continue to bedevil gay and lesbian parents and adversely affect our children.

Understanding that we are among your final witnesses, I am sure you have heard about how the various tax expenditures and other transfers to parents of children are supposed to work in this country. Allow us to briefly review how many of these same programs affect gay and lesbian couples. My co-presenters here this morning, Mr. Armstrong and Ms. Steele, will be able to explain to you during questions how these programs affect them in real-world terms.

First is the Canadian child tax benefit. Normally this benefit accrues to the stay-at-home parent. This is not necessarily the case for gay and lesbian couples. The child tax benefit can be claimed by either partner who has legal custody, and that may be one or both of the partners in a gay or lesbian relationship. It would normally, however, be claimed by the partner with the lower income, because of the clawback provision, and it cannot, of course, be claimed along with the child care expense deduction.

Second is the national child care supplement. Because most gay and lesbian couples are treated under the law as two co-habiting single persons, many gay or lesbian parents qualify for social assistance benefits. We would note in passing that the national child care supplement, which was instituted in 1998 supposedly to address the needs of children living in poverty, is in Ontario clawed back by the province from all those receiving family benefits assistance. For these people, this is not a child care transfer; it is a federal-provincial transfer.

Third is the child care expense deduction. For heterosexual couples, only the lower-income partner can claim this deduction against earned income. For gay and lesbian couples, either of the custodial parents may claim this deduction. In fact some gay and lesbian parents claim a deduction for money paid to their same-sex stay-at-home partners. Revenue Canada has advised that this is perfectly acceptable as long as the stay-at-home parent claims this income on his or her tax return. Heterosexual couples cannot engage in such a transaction.

• 0920

Fourth is the spousal deduction. This deduction, normally claimed by the working partner of a stay-at-home spouse, is not available to same-sex couples.

Mr. Paul Szabo (Mississauga South, Lib.): Excuse me, Mr. Chairman. I think numbers four and six are the same item. There is no deduction; there is just a spousal non-refundable tax credit.

Mr. Ron Chaplin: Fair enough.

Fifth is the equivalent-to-spouse deduction. This deduction, which can be claimed by single, widowed, or divorced parents of dependent children, can be claimed by gay and lesbian parents whether or not they are employed and whether or not they have a partner. It can be claimed only by a custodial parent.

I'll skip number six, on Mr. Szabo's recommendation, and move on to number seven, employment insurance. Maternity benefits under the EI program are available only to biological mothers, and in this, the employment insurance program affects gays and lesbians no differently from anyone else. Because our relationships are not recognized, however, the parental benefits of the employment insurance program cannot be extended to same-sex partners. Similarly, because joint adoption is not allowed under most provincial jurisdictions, the employment insurance adoption benefit cannot be extended to a same-sex partner, even if both partners have been awarded joint custody by the family courts.

Number eight is the Canada pension plan dropout allowance. This benefit can be claimed only by the biological or adoptive parent, in our case, and not by a same-sex partner.

Number nine is pension benefits. Because the Income Tax Act and the Canada Pension Plan Act define “spouse” in opposite-sex terms, death benefits under public and private pension plans normally cannot accrue to same-sex partners. While this is a concern for all gay and lesbian pension plan contributors, it is a particular concern for gay and lesbian parents in structuring their affairs to ensure the financial security of their children in the event of the untimely death of one of the parents.

For those of you who are reading along in our written comments, I would like to add a couple of points to those.

I'll call this number ten, regarding the spousal RRSP. For opposite-sex couples, a working spouse is allowed to deduct against income certain amounts of money contributed by the opposite-sex partner to an RRSP. This is not allowed to same-sex couples.

And number eleven is the RRSP rollover. For heterosexual couples, on the death of one of the spouses, the funds in an RRSP fund can be transferred to the surviving spouse with no tax consequences. This is not possible in the event of the death of a same-sex partner.

Finally, under the subheading “Other”, we would just like to note in passing that, like many other couples, many gay and lesbian parents choose self-employment from a home-based business in order to provide better care for their children. In reviewing transcripts of other witnesses who have appeared before this committee, we have noted that they have commented about the inequities encountered by self-employed persons in terms of the security offered by the employment insurance and Canada pension plans. We would simply like to echo the remarks they have made to you previously.

• 0925

In conclusion, you've been able to see from our comments this morning that the effect of not recognizing same-sex partners of gay and lesbian parents is a bit of a mixed bag. Most often, more benefits or options are available to opposite-sex parents than to same-sex parents. In at least two cases, however, gay couples can draw benefits that are not available to opposite-sex parents.

We have not tried to be disingenuous in our presentation to you this morning but have tried to outline the disadvantages and the advantages of the current regime. When all is said and done, however, the fact remains that gay and lesbian parents are not treated equitably under the law. We of EGALE believe this inequity is unjust. Furthermore, we believe, given close to 20 years' experience now with the Canadian Charter of Rights and Freedoms, that it is unconstitutional.

We have also demonstrated in this short presentation how our unequal treatment under one law can affect the equitable treatment of others in the community. On Tuesday evening the House of Commons passed Bill C-78, which will make certain federal public service pension benefits available to same-sex partners. Because the Income Tax Act makes no such provision for same-sex couples, however, most private sector pension plans do not offer such benefits.

While we are encouraged that our governments, federal and provincial, are now moving to correct some of these inequities in legislation affecting us, we are discouraged that such reform seems to be proceeding in piecemeal fashion. Until comprehensive reforms are made, our children will face financial risks not faced by children in other families.

We look forward to reading the report of your committee, and we promise you we will be vigilant to ensure any suggested reforms treat all families equitably.

[Translation]

Thank you very much, Mr. Chairman. We'll do our best to answer all your questions.

The Chairman: Thank you, Mr. Chaplin.

I will now ask Mrs. Nancy Rosenberg to make her presentation.

[English]

Ms. Nancy Rosenberg (Senior Officer, Equality Branch, Canadian Union of Public Employees): Good morning. I'm happy to be here today. Thank you for the opportunity to be here and present our views on the issues before you.

I am here on behalf of the Canadian Union of Public Employees, better known as CUPE. CUPE is the largest trade union in Canada. We represent workers in the broader public sector, including municipalities, school boards, hospitals, public utilities, social services, and so on, from coast to coast. We represent workers in the child care sector as well.

Of course we represent many members who are parents and who are workers, and we struggle daily with the challenges created by those two roles and by the combination of those two roles. We represent every kind of family configuration you can think of, including same-sex families of course.

I want to talk a little bit about the background to all of this as I see it, and then I'll get more specifically to the mandate of this committee. It's important to remember the background and the context in which we're looking at these issues.

Our members, like all Canadian families, are looking at a very difficult labour market. We're looking at lots of marginal employment, falling family incomes, and rising child poverty. That's the context in which we're operating. The struggle just to earn a living is paramount for most of our members. That's the broader context.

When we talk about some of the issues of unpaid work, which have been discussed for a number of weeks now before this committee, I want to make the following point. It must be remembered—and I'm sure you've heard this before—that all parents do a great deal of child-oriented unpaid labour, all parents. Mothers in the labour force don't just go to work and then come home and relax. Mothers in the labour force also do a great deal of unpaid, child-oriented labour in the home, as do mothers and/or fathers who stay at home with children, as do fathers who are in the labour force. The greater burden of course is on mothers, as we know. Maybe that is changing somewhat.

• 0930

But certainly all parents are doing unpaid work. If we're going to look for ways to value that work, we need to look at ways of valuing all of that work, and not just look at folks who are out of the labour force for any period of time.

With respect to family configurations, part of the mandate of this committee as it's been expressed—I don't know how you're interpreting it, but I hope you're interpreting it more broadly than it was set out originally—was to look at different family configurations and how they are affected by the tax and transfer system.

It's important to remember that families are not in one configuration or another necessarily for all time, throughout the entire life of a family, or even throughout the entire life of the child-raising years of a family. The reality is more of a time continuum, whereby you may have a stay-at-home mother in the very early part of child-raising, and then that changes when the mother returns to work, and so on. That period can be shorter or longer in different families.

Also, family configurations are not static; they change. They change with respect to raising children and they change with respect to the labour force. You can have a dual-earner situation, and then one party is laid off, so you have a single-earner situation and a stay-at-home spouse, not by choice, but due to labour force elements that the parties have no control over. You may have a divorce or a separation, in which a family can go from being a dual-earner family or having a single earner with a spouse at home to being a single-parent family. All of these things are not static; they change.

Given that family configurations are not static and given the labour force context in which we're working, it's dangerous to look at several elements of the tax system in isolation, and it's dangerous even to look at the whole tax system in isolation from other elements. Looking at family configurations within the tax system, this is just one small piece of the puzzle.

What we need very clearly is an overall, coherent family policy that will provide some level of support for all families with dependent children—all families, regardless of the status of their labour force participation.

A policy such as that, which we would promote, would include three basic elements.

First, it should include vastly improved employment standards designed to help parents do that juggling act between work and family. Some examples are greatly improved parental leave, maternity leave, family responsibility leave, and so on, including adoptive parents, same-sex parents, and all of that. All parents who are trying to raise children need greatly improved provisions of this type.

Second, it should also include tax measures. I certainly don't want to say the tax system is irrelevant to the discussion, but it's one piece out of what I would see as three major pieces. These tax measures should be designed to assist all parents and all children.

And third, the cornerstone of a coherent family policy would be a comprehensive and coordinated early childhood care and education system. I'm sure you've heard this suggestion before. I hope you've heard it from lots of parties, because first and foremost, the best way to support and benefit all families with children and all children is a system of quality, affordable, federally funded child care.

• 0935

I'm sure you've heard this many times, because this has been the view of the labour movement for a long time, and also the view of the child advocacy movement and of organizations interested in advocating for the rights of children. We've been saying it for a long time. We still need to say it. It is still absolutely the best thing that can be done, and it has to be looked at very seriously.

This also of course applies to parents who have the choice and who stay home with children. Child care is not only for parents who are in the workforce. These families as well would benefit enormously from such a system. Many studies have been done on the effects and the outcomes of early childhood education, and I'm sure you're aware of them. I know you've heard about them from other presenters. Studies have been done on school performance related to early childhood education, and they show that regardless of socioeconomic background and regardless of the mother's employment status, children who participate in those early programs do significantly better in school.

When we discuss the idea of valuing unpaid work and valuing the sacrifice of mothers who stay at home with their children, there's often a subtext in that discussion that should be addressed openly and that we should talk about openly. The subtext I sometimes hear in that discussion is an implicit assumption that child care isn't really good for children, that it's really second-best, that really the very best thing for children is to have a mother staying at home with them. Certainly that form of child care is an absolutely valid choice, but the implicit assumption that somehow child care is an institutional second-best for people who can't afford to do something else is still there. It's still a big part of our social assumptions when we discuss this.

The Chairman: Excuse me, Ms. Rosenberg. You're already at 10 minutes, and you're not even halfway through your presentation, so if you could wrap it up in about three or four minutes, I would appreciate it.

Ms. Nancy Rosenberg: Sure.

The Chairman: Thank you.

Ms. Nancy Rosenberg: We need to debunk this assumption that child care is not the best choice for children. High-quality, affordable child care is in our view the very best outcome for children. It's good for kids. It's also good for mothers, i.e. for women. It's good for women's participation in the labour force. And it's good for society; all of society benefits.

If you look at our written submission, we've referred to some studies that have been done and that I know you've heard about before, which have taken a cost benefit view of quality child care. The conclusions of that study are enormously in favour of such a system.

With respect to the tax issues, the child care expense deduction that has been under discussion is in no way a form of discrimination against single-earner families. It's an element of tax fairness. We see it as an employment expense. It is a necessary expense for a two-earner family in order to earn a living. That is why it's recognized by the Income Tax Act, and so it should be.

Saying that, however, is not to say we think the child care tax deduction is good tax policy. It is an element of tax fairness, but it's not the way we would choose to do it. Again, it does nothing to promote good child development. It does nothing to give children access to good child care. It does none of that. Given the studies that have shown the positive outcomes of quality child care, only policies that promote that can be seen as good ones, in our view.

• 0940

Child care cannot be delivered through a tax deduction. We shouldn't be looking at the tax system at all to deliver that quality care. We would prefer that the child care expense deduction in fact be eliminated and the money put towards a comprehensive child care and education program.

As for the Canada child tax benefit, we would prefer a return of the family allowance at a sufficient level to actually cover the cost of raising children. We prefer a universal program. However, given the history of how that has evolved and where we're at today, the child tax benefit is an acceptable compromise, in our view. There are many specific problems with it, which need to be changed, but the approach itself we view as acceptable.

It is too small. It phases out too quickly. Lower-income and middle-income families are not receiving the benefit they should from it. So that needs to be changed. Also, of course, the provinces are allowed to deduct it from social assistance, so the very poor families are not benefiting. Obviously those are serious problems that should be fixed.

On individual versus family taxation, we would absolutely oppose any change of the system towards a system based on family or household income. Obviously such a change would have huge negative implications for women's participation in the labour force. Proposals of this nature make assumptions about women's access to family income that are not necessarily true. Simply, such a system negatively affects the economic independence of women, which is a very important element and something that can exist only with an individually based taxation system.

I'm over my time, so I'll wrap it up there. Thank you.

The Chairman: Thanks very much.

Mr. Epp, please. We'll go with a six-minute round.

Mr. Ken Epp (Elk Island, Ref.): Thank you, Madam Chairman.

The Chairman: Mr. Chairman.

Mr. Ken Epp: My apologies. Why would I say that? I don't know. I guess I'm thinking about mothers here. You make a great mother.

The Chairman: Thanks.

Some hon. members: Oh, oh!

Mr. Paul Szabo: You have four minutes left.

Some hon. members: Oh, oh!

Mr. Ken Epp: Ms. Rosenberg, I'd like to ask you about your presentation. You said something about these assumptions. On page 4 it says:

[It's an] implicit assumption that child care is not good for children—that it is, in some way, inferior and second best.

Why do you say that? When people come out and say they would like to make it possible for those parents who want to so choose to have one of the parents stay at home, why would that imply that it is inferior to an institutional day care system? Where do you get that assumption from?

Ms. Nancy Rosenberg: As I said before, the proposal itself for a mother to stay home with children is an absolutely legitimate choice and one I would certainly be in favour of. If someone wants to do that, it's an absolutely legitimate choice.

What I was referring to was simply that in the debate, in the discussion, one often hears that kind of implicit assumption. I'm not saying it's there just because of a choice some people make to stay home or a choice the government may make to assist that choice in some way. No, that in and of itself does not carry that implicit assumption. That's not what I am saying. What I'm referring to is the discussion. In the discussion and the debate globally, as we all talk to each other in meetings such as this, in the media, and so on, one hears that assumption played out.

• 0945

Mr. Ken Epp: But in the very next paragraph, you say:

What is lost in this mythology is the fact that quality child care and education is good for children.

What mythology are you talking about? When you use the word “myth”, what you're saying is it's like a made-up fairy story.

The Chairman: What Ms. Rosenberg is saying, Mr. Epp, is both sides of the equation are trying to categorize that their alternative is the best.

Mr. Ken Epp: No, that's not what she says.

The Chairman: She's reflecting that in her testimony. That's the way I understood it. It's unfair for one person to say the stay-at-home choice is the best for their children, and for the other group to say child care is the best. That's the myth she's referring to.

Anyway, I'll let her—

Mr. Ken Epp: Okay, but you talk about mythology and assumptions, and you've also stated here, “Studies have shown this again and again”. I've seen opposite studies. What studies do you have? Can you name any specific studies for us that indicate it is better for children to be raised in a child care situation than at home? Do you have any studies for that?

Ms. Nancy Rosenberg: No, I'm not saying it's better for children to be raised in a child care setting than at home, necessarily. There are definitely studies that have shown, for instance, that participation in early child care and education programs has had excellent outcomes in school performance later in life, regardless of the mother's participation in the labour force. That's what I'm saying.

So there may be a stay-at-home mother, but the child participates in an early childhood education program, say three mornings a week, or if the mother in fact is at work, the child is in an all-day program. In both of those situations, studies have shown the child's participation has excellent outcomes for child development for that child. That's what I'm saying.

Regardless of the labour force participation, child care and education are actually good for children. That's why I'm saying the main reason we should support that kind of system is that it in fact supports all families, including those with stay-at-home mothers.

Mr. Ken Epp: But that is your assumption, and your statement that studies have shown this is.... I'm not aware of any studies that have shown it, and I would like to know what empirical studies you are referring to.

Ms. Nancy Rosenberg: Okay. I can certainly send you them. I don't have studies here, but yes, there are certainly many studies that have shown that. I can send them to you. Would you like me to do that?

Mr. Ken Epp: If you would send us even just a bibliography of them, we can always get them.

Ms. Nancy Rosenberg: Okay, sure.

Mr. Ken Epp: But I'm not aware of those studies.

Ms. Nancy Rosenberg: I will.

The Chairman: Make this your last question.

Mr. Ken Epp: Okay.

The last question I have, if I'm out of time, is this. I would like to know something explicitly from you. Say two families are living side by side, family A and family B. Do you really think the family that has one parent working, trying to make ends meet to meet the needs of the family, should pay more taxes than the family next door, where both parents are working? I get that from your presentation. You say this is fair. On page 6, right at the end, you indicate that there should be no difference.

Ms. Nancy Rosenberg: Yes.

Mr. Ken Epp: You say:

We would be absolutely opposed to a change to a family or household income based system.

Again, I'm making an assumption, and I'm asking you to clarify. Based on that statement, what you're telling us is that the present system is good, even though the family with one income ends up paying more income tax than a family earning the same money with two earners. You're saying that's fair.

Ms. Nancy Rosenberg: I'm saying the individually based tax system, yes, is the preferred option, absolutely, for the economic independence of women.

• 0950

First of all, women don't necessarily have access to family income. We can't assume that. Secondly, what a family-based tax system means is that a second earner, usually a woman and usually a lower-income earner, is taxed at her husband's tax rate, or the higher tax rate, which is usually the husband's. That means there's a tremendous barrier for the second earner. There's a tremendous barrier then for a woman's participation in the labour force. If she's going to work and make $30,000 a year and be taxed at a tax rate appropriate for a $70,000 income, it's a tremendous barrier for participation in the labour force at all.

[Translation]

The Chairman: Mr. Cardin, you have six minutes.

Mr. Serge Cardin (Sherbrooke, BQ): First, I'd like to thank our witnesses for their presentations.

Mrs. Rosenberg, the mandate our committee has been given leads us to think there are tax inequities between Canadian families which have one income and those who have two. You said at the start that you didn't think it was the case. We do not necessarily suggest that it is fair for a family to pay more taxes because of its configuration but we think that there is no inequity there because the tax system is based on individual income.

[English]

Ms. Nancy Rosenberg: I'm not sure I understand the question. I said there was no inequity just with respect to the child care expense deduction. Is that what you're asking about?

[Translation]

Mr. Serge Cardin: Our committee had been given the mandate to identify inequities, which according to you and your organization, do not exist. You seem to say that there is no inequity in the way families with one or two incomes, or in the child care expenses when one of the parents stay at home, are taxed.

I'm only repeating what you have said so that you can tell me whether I understood you correctly. I have roughly the same point of view that you have.

You have raised two important aspects concerning unpaid work and the valuing of that work. Could you tell us how we could value unpaid work done at home? You said we should value any non paid work. What solution would you recommend?

[English]

Ms. Nancy Rosenberg: To answer your first comment first, no, I don't see an inequity in the tax system between single-earner and dual-earner families. The child care expense deduction is a legitimate employment expense. Again, though, as I said, it's not that we think it's good tax policy. It's not the way we would choose to support families. We would choose to support families primarily through a child care program. But we certainly don't see it as inequitable or an element of discrimination between those two types of families, no.

With respect to your second question, no, I'm sorry, I don't have any bright ideas about valuing unpaid work. I do think it's important. We all do a lot of unpaid work. It's very important that it be recognized and valued. It's the competition between time and money basically, and often we only have one or the other.

Concerning some of the things we've put forward, certainly the idea of a child care program is going to help that situation. Expanded maternity, parental, and adoption leaves—or maternity and parental leave, but ensuring that they're available for adoptive parents and same-sex parents as well—all of those things would assist people to balance, to juggle their family life and their work. But beyond that, in terms of valuing unpaid work, I have no specific suggestions to make.

• 0955

[Translation]

Mr. Serge Cardin: Unfortunately, I have not had the time to read your brief but I noticed that you deal with family benefits. You wish that the support given to families with children be mostly focused on children and that those families receive family benefits which would be universal and more generous.

[English]

Ms. Nancy Rosenberg: Yes, we would like to see a return to a universal program of that nature, absolutely. That is not to say there could not perhaps be a clawback at very high income levels. When I say “universal”, we wouldn't say necessarily that couldn't be the case. But certainly there's a lot of merit in a monthly cheque that goes out and is paid to the primary caregiver of children, specifically for children. It benefits all families in different ways. Higher-income families can put that money in the bank and save for education, and lower-income families can use that for food and clothing for the child. Whatever the case, it benefits all families. It's a clear-cut and universal benefit for children.

To aid with the problem of child poverty, yes, that would certainly be better than tax deductions. It would be better than looking at the child care expense deduction, for instance. Only a very small minority of people actually benefit from that. Higher-income earners benefit from that more than lower-income earners. It comes off the income of the lower-income earner, so in a family where you have two high-income earners, that's the family that most benefits from the child care expense deduction. Lower-income families don't benefit from that.

Because of the lack of affordable and accessible child care, many families use child care that doesn't provide receipts, that is outside the system of regulated child care. They can't benefit from the child care expense deduction.

All of these things create a patchwork. Something like a universal family allowance system, with a cheque every month to every family with children, is not a patchwork. It benefits all families.

[Translation]

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

[English]

Just to remind you, in the old family allowance system, if you're supporting that concept, the family allowance was declared as revenue also. So it was indirectly clawed back.

Ms. Nancy Rosenberg: Oh, right.

The Chairman: It was taxable.

[Translation]

Michelle, please.

[English]

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

Nancy, I have one question for you, to pick up on something Mr. Epp said about the mythology. I've used the term “assumption”. In the resources that you obviously have available to you, have you seen studies that show children do benefit from good-quality child care, whether it's provided in the home or by a third party?

Ms. Nancy Rosenberg: Yes, I've seen a number of studies that indicate that. That is the one factor that's crucially important to outcomes in the future, and it's the very early years of course that are most crucial. Yes, I have studies, and as I said to Mr. Epp, I'll send them along to the committee.

Mrs. Michelle Dockrill: Being one of those working moms, I agree with your position that there is an assumption that children are better off with a stay-at-home parent, so I'd be really interested to see those studies. I've seen some of them, but I'd be really interested to see the ones you have available to you.

Ms. Nancy Rosenberg: Okay.

Mrs. Michelle Dockrill: I have one more question. I'll first go to Mr. Armstrong and Ms. Steele, and then, Nancy, you can give me your comment.

• 1000

Some of the individuals who have made presentations have talked about the advantages, the disadvantages, and the inequities. Obviously it's a complex issue, depending on the family configuration, which, Ron, you've pointed out very eloquently today. I'm wondering what your opinion is. Should we be focusing on parental activity, or should we be focusing on the child in dealing with the inequities? Because as you've pointed out this morning, there are various family configurations within this country, and by correcting some inequities for some family configurations, we will be creating more inequities.

So what's your opinion? Should we focus on the child within the family, as Nancy said, with a universal program, perhaps some kind of dependent child exemption? I'll use the family allowance as an example.

Mr. Ron Chaplin: Could I just point out something in terms of general principles? Again, we were quite explicit in the principles that our submission was based on. We believe the best interest of the child is paramount, but we also believe, given that this is a free and democratic society and given certain fundamental beliefs we all share, that the best people to make the decisions about what is in the best interest of the child are in most cases the parents. So we would support the greatest flexibility possible under tax law and under family law to make sure the best interests of the child are served, rather than engaging in some sort of social engineering to determine what families should look like.

Mr. Todd Armstrong (Equality for Gays and Lesbians Everywhere): I can only talk from my experience. I have two sons who are very different from each other. One is very able and one has some intellectual and physical difficulties. Their needs were very different. My oldest son benefited greatly from early childhood education. I stayed at home with my younger son, because he would never have coped with that life experience. The system has to reflect that I had to make that determination for my family and for my children. We have to have a system that would support both of my children.

Mrs. Michelle Dockrill: I just want to clarify. Ron used the word “decision”, and that's where I'm coming from. I'm not saying parents shouldn't have the right to decide. What I'm saying is, given that you decide what's best for your children, the systems should be there to support that decision.

Mr. Todd Armstrong: That's right.

Mrs. Michelle Dockrill: That's where I'm coming from. I'm just wondering if you agree with that.

Mr. Todd Armstrong: Exactly.

Ms. Marion Steele (Equality for Gays and Lesbians Everywhere): I'm a parent of five children. I also run a licensed home day care facility, so it's kind of interesting. I've been a working mom for many years.

As far as children's needs are concerned, they have to come first, absolutely, and it's the parents who need to decide that. We need to stop looking at who the parents are. No matter what format that may take, the care-providers, the nurturers, of the children make the decisions for the children.

To me, this seems almost unnecessary. This should be basic social structure. The fact that my partner is a female should be irrelevant as to what is best for our children and the raising of them.

Mrs. Michelle Dockrill: Nancy.

Ms. Nancy Rosenberg: Yes, certainly first and foremost we have to look at the children and what is in the interest of the children. With respect to tax policy, however, we also have to look at women. For instance, with respect to individual or family taxation, if a change in that regard is going to seriously affect the economic independence of women and their ability to participate in the labour force, then that's an important consideration and one we have to look at. While it may not have to do directly with the children, it has a tremendous impact on the children as well.

So it depends on how you look at it, directly or indirectly. Having women be able to be economically independent within the family unit and not dependent is good for children, but it's an indirect benefit.

The Chairman: Thank you, Ms. Dockrill.

Mr. Herron, please.

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

I want to pick up on a couple of comments made by Ms. Rosenberg. Referring to the family allowance formula, she said it's more universal, it's not a patchwork, it applies to all families regardless of income, and that kind of thought. I want to keep that caveat out there for a second, with where my line of questioning is going to go.

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I'm glad that in the last set of comments, it came out that this should be a child care issue as opposed to anything else—as opposed to a tax issue in that regard. Ultimately I'm quite comfortable with the concept of choice, that parents are best fit to determine how they should provide for their own children, be it third-party or directly.

Having said that, I can go along with the argument easily, as most would, that the child care expense deduction is an employment expense. That's what the taxation system has deemed it to be in order to have more persons participate in the workforce. I actually try to stay away from the male-female part of it, because in this era now, the information age, upward mobility can be just as probable into the future for either sex in that regard.

It's an employment expense, so that means dollars.

On the other side of it, no matter how you slice it, the single-earner family is forgoing money—cash—by providing direct child care. That's a choice they're making. When they look at it from that standpoint, the argument is that one family is getting something for their choice of child care and the other one-earner family is not getting anything for their choice of child care. That's where their argument is with the child care expense deduction.

It's patchwork in a way, because it's not universal. One family doesn't get anything, and one does. So an argument could be made—and I'd like to see what your reaction would be—for having two parallel systems. You could opt into the child care expense deduction formula or you could receive a $700 or $800 refundable tax credit, either/or. So the one-earner family could have access to that $700 or $800 cash.

Where that dollar value is coming out, as Mr. Szabo has been rather articulate in pointing out throughout the hearings, is that only one-third of families who are eligible actually claim the child care expense deduction, and of that one-third who do, the average claim is about $2,600, which means about $700 in your pocket.

So even though it wouldn't make it entirely equitable, it would be a recognition for the work that's done inside the home, a token. It would also make some money available to the primary caregiver to allocate funds for their child.

Do you like that concept?

Ms. Nancy Rosenberg: Not really.

Mr. John Herron: How come? It's a choice still.

Ms. Nancy Rosenberg: Yes, it is a choice, but I don't see it as one family getting something and one family not getting something. The child care expense deduction is not getting something. It is a legitimate employment expense. It's out-of-pocket money that a two-earner family simply has to pay for child care in order to earn a living. It's an expense. It's not something they're getting. That's the reason it's recognized in the Income Tax Act. That's the structure of the act.

There are a whole lot of other employment expenses that we can deduct, and I find it interesting that no one is claiming those other expenses, for instance.

Mr. John Herron: This is being triggered by that debate. There are other expenses, but I'm trying to look at this from a child care perspective. The more money you provide to the families, the more apt the families are to spend more of the disposable income they have on their children.

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I want to make a segue into joint filing, which I know you weren't all that comfortable with in that regard. Given that the GST expense or deduction—I'm not sure of the exact term—is based on family income and the child tax benefit is based on family income, given that we base most of our deductions on family income, don't you find it a little bit schizophrenic that we base our taxation system on personal income?

I still think when you have partnerships, regardless of the configuration, they're partnerships; they're teams. I am a little bit uncomfortable with the terminology you used, “economic independence”, because you don't know if the money would be equally shared. Well, ultimately, when the money ends up being equally allocated, it's toward the children themselves. So I see nothing wrong with providing more for family units, from the joint filing perspective, so that they have more money to spend on their children.

Would you like to comment on that?

Ms. Nancy Rosenberg: I'm sorry; I missed your last....

Mr. John Herron: Ultimately what I'm saying is the deductions are based on family income, but we tax on an individual basis.

In your section (d), you say one of the problems you have is it would take away the economic independence of women. I'm still judging this from a child care perspective. I say the more money they have in the pot, the more apt that money is to be spent on their children. I'm trying to take this as a child care issue or a family issue in that regard, as opposed to saying we don't know if the money would be shared equally between the two partners.

I still believe that in that partnership, as a family, regardless of configuration, that would be a better way to go.

Ms. Nancy Rosenberg: Well, in my view, the problem remains. It may be that a little extra money will get spent on children, but the problem remains of women's economic independence, and the problem remains of the barrier to women's participation in the labour force. I can't get around that. If women usually earning a much lower income are going to be taxed at a much higher rate because of their husband's higher income, that's a problem. That's a serious barrier to women's participation in the labour force. That to me is the crucial element.

Going back to your earlier question, you're looking at a little bit more money in this family configuration to match up with what you see as a benefit to this family. I don't see it as a benefit, as I say. I just see it as simply an employment expense that is partially recouped.

But as I say, and as we said in our written submission, I don't see it as good tax policy. It mostly benefits higher-income earners. I'm not at all here to promote the child care expense deduction. As I said, we would get rid of it. Rather than looking for a way to get another $700 or $800 into the other family configuration, we would get rid of all that.

In our written submission, we quote the Cleveland and Krashinski study. I don't know if you have had a chance to look at that, but that study looks at the costs and benefits of a child care program. It looks at the idea of taking money from the existing child care expense deduction, from existing child care subsidies, from allowances to parents in training programs, and so on, and putting all of those things towards a child care program. That's what we would support, absolutely.

If you do that, you bring down the $7.9 billion figure that they estimated as the cost of such a system to $5.3 billion, less than 1% of the GDP. That's doable. That's a doable comprehensive universal child care program. That's what we would support—not tinkering with a deduction here and a credit there, but taking all of those things. Let's get all of these kids to have access at least to affordable child care—the kids of stay-at-home families and the others.

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The Chairman: Thank you.

Mr. Paul Szabo, please.

Mr. Paul Szabo: Nancy, the committee has really tried to think of some principles on which we would try to guide policy in the future.

Because of the complexity of family structures, urban versus rural, accessibility, affordability, and all kinds of things, and because the number of permutations and combinations is very large, it's very difficult to pigeonhole everybody into two or three things. There's a broad range of issues. Therefore it's almost necessary to acknowledge that parents are in the best position to assess their own situation and make the choice of the best possible care arrangement for their child. That's one overriding thing.

Given that, we need policies that neither penalize nor compel or reward any of the choices, and in fact are not judgmental about parents' choices, but respect parents' choices. Does that cause you any difficulty?

Ms. Nancy Rosenberg: Not at all. Are you talking about them as two general principles?

Mr. Paul Szabo: Sure.

Ms. Nancy Rosenberg: No, not at all.

Mr. Paul Szabo: Okay.

Also, I'm sure you're not going to deny that you're here speaking a little more strongly on behalf of the position of women with regard to participation in the paid labour force. You talked about barriers to entry. It sounded to me—and please correct me if I'm wrong—as if you were suggesting that the dollars somehow are really the barrier. If you didn't have, for instance, a child care expense deduction or something similar, fewer women would go into the workforce, or something like that.

We received some credible testimony from witnesses from Human Resources Development and from a gentleman called Richard Shillington. He showed us a graph on which was plotted a husband's income, in the classical sense, from $10,000, $20,000, $30,000, right up to $100,000 and over, and on the y-axis were plotted three caregiving choices: both working full-time, one working full-time and one part-time, and one being a full-time caregiver. So there were three scenarios.

The data shows that regardless of the husband's income, on average the choice of caregiving was as follows: in one-third of the cases, both parents were in the paid labour force as full-time employees; in one-third of the cases, one was full-time and one was part-time; and in one-third of the cases, one parent chose to provide direct parental care. In other words, the parental care choice was really insensitive to the level of family income.

That really contradicts what you said, based on what actually happens. This was described by I think Status of Women as one of the myths, that only rich people have a stay-at-home spouse. In fact the data shows it is not so. I just wanted to point that out to you, and if you have any comments, I'd like to hear them.

Ms. Nancy Rosenberg: I've seen that data actually. I've seen Richard's data about that. What I was talking about, though, in terms of barriers to women's participation in the labour force, was family versus individual taxation.

Mr. Paul Szabo: Okay, fair enough.

Ms. Nancy Rosenberg: That is with or without children. We can be talking about a family without children, but—

Mr. Paul Szabo: The last half of my questions I'll address to EGALE.

Thank you for your presentation. You've raised some very interesting points here. I want to give you my quick thoughts on this, and then maybe you'd like to respond to any of the things that catch your fancy.

With regard to the child tax benefit, the way it happens now, married couples have a clawback based on family income. Same-sex partners aren't subject to that. In fact if they're both legal custodians, they can choose the lower-income-earning partner and therefore get a lower clawback and therefore higher child tax benefits. So in this regard, you're better off being a same-sex couple than a married couple, in all cases. You're at least equal, if not better off, in all cases.

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On the national child care supplement, we've heard that a lot. You're quite right.

You talk about the child care expense deduction in point number three, and you pull in the spousal amount and the employment insurance amount. This is a situation where under the tax law, at least at this point, until the laws are changed, same-sex partners are not able to have a spousal relationship, and therefore income-splitting can and does happen.

I quickly worked out a calculation that if you had a same-sex couple with one preschool child in their joint custody, and the paid labour force participant made $67,000, as an example, they could pay their stay-at-home partner $30,000. We've had testimony that the value of a third party providing direct care for that child is $25,000 to $30,000, that that is not unreasonable. So you could in fact pay $30,000 to a stay-at-home partner, and that $30,000 effectively would be taxed at the lowest marginal rate. Of the remaining income, the worker can claim up to $7,000 of the child care expense deduction, because they're deemed a lone parent.

So I did a quick calculation, and subject to check, it looks as if the difference in taxes between being a married couple with a stay-at-home partner caring for a child and a same-sex couple with one partner staying home is between $5,000 and $7,000 less for the same-sex couple.

On top of that though, because you can split income, the stay-at-home partner of a same-sex couple also gets to participate in CPP and EI and buy RRSPs, because they have earned income, because their partner paid them. Because there are clearly benefits of CPP and EI participation, that offsets it.

I think you're here representing same-sex partners with a child. I would assume that the ability to split income so that in fact both partners have earned income, as well as the ability to not only be able to claim the child care expense deduction but have both able to participate in CPP and EI and buy RRSPs, basically throws out all of your points. You have the best of all worlds; you really do. And you're going to lose big-time, I can tell you, with regard to most of these points.

The equivalent-to-spouse deduction, or non-refundable tax credit, is neutral. It has no impact, because it's only available where there is one custodial person, and it's available regardless of relationship.

As for the Canada pension dropout allowance, actually you have no options for who can claim it. And it's not a claim you make. It's available to any person who participates in the Canada pension plan, and if they should have low-income-earning years to care for a child, they make an adjustment. So you're going to get penalized by averaging down your benefit. So this is not applicable in any case.

Concerning the pension benefits about the death benefits, you're quite right on that one.

The spousal RRSP is not a factor, since you can split income and buy your own. The rollover on death, though, is a factor. That is only to “spouse” as defined. But it's not a permanent inequity, in that the rollover simply further defers the taxation, but that money is still taxed. It never becomes tax-free, because of the rollover. So we're just talking about the additional value of deferral of taxes into the future.

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Having said all that, you raise some interesting points, but it would appear that, all things said and done, a same-sex couple earning $60,000 or $67,000, with joint custody of one child, is probably about $10,000-plus, cash in the pocket, better off than a married couple.

Mr. Ron Chaplin: I'd like to say first of all that I think my colleagues here may well ask for Mr. Szabo's business card at the end of the hearings.

Voices: Oh, oh!

Mr. Paul Szabo: I'll have to do your tax return.

Mr. Ron Chaplin: He has some very good advice for same-sex parents.

We acknowledge in this brief that you are quite right. In many ways the current tax system favours gay and lesbian couples who are raising children.

We are here this morning, though, because we believe that system is inequitable, and we are also concerned about stability and financial planning. One of the points we want to stress with you this morning is that as our legislators, federal and provincial, respond to the court rulings on the implications of the Canadian Charter of Rights and Freedoms, we are finding legislative change proceeds in piecemeal fashion. For all of us, this causes some concern in doing our financial planning. Certainly for a family with children, for a gay couple with children, this makes that even more paramount.

That being said, do my colleagues have anything to say on income-splitting?

Mr. Todd Armstrong: Did you do my taxes?

Voices: Oh, oh!

Mr. Paul Szabo: I'm hoping you are here to recommend that we should change the law so that all families can enjoy the same benefits.

Mr. Todd Armstrong: Well, quite frankly, that would be my position.

It's interesting that you pick these numbers, because that's almost exactly my family, and in the end, this is essentially what we did: split it all and work it all out.

To address one of the issues that was raised, this really is supporting families and it's supporting choice for children. It put us in a position where that was a viable option for us, where for many families it wouldn't even be a viable option, because you lose that income—you lose the $10,000 essentially.

You're really quick. You can do my taxes.

Mr. Paul Szabo: Thank you.

Thank you, Mr. Chairman.

The Chairman: Can either you or Mr. Armstrong clarify how you can split T-4 revenues?

Mr. Paul Szabo: T-4?

The Chairman: Yes. How do you split income?

Mr. Paul Szabo: You can pay them. And you get up to the $7,000 at least, if you're self-employed, though.

The Chairman: Ah, up to the child care expense deduction limit. There's a maximum.

Mr. Paul Szabo: There's a maximum, but if you're self-employed, you can pay someone to be able to earn—

The Chairman: This is a different conversation. I thought you meant anybody who had a T-4 income could split their income with somebody. I don't think that's the case.

Mr. Paul Szabo: No, no.

Mr. Ron Chaplin: No, the case here is paying your same-sex partner for child care.

The Chairman: That's right, which heterosexual couples—

Mr. Ron Chaplin: —cannot do. That's right.

The Chairman: Thank you.

On behalf of my colleagues, I'd like to thank you for your testimony here this morning. This brings to a conclusion the list of witnesses. We would now like to go in camera and start working on the draft report.

Again, thank you very much for being with us this morning.

[Proceedings continue in camera]