Thank you, Mr. Chairperson, members of the committee. We wish to thank you for this opportunity.
We are partners in the national Campaign 2000 to end child poverty, and we've reflected this concern in our brief.
We argue that five principles should be considered in designing Canada's taxation systems.
First is the maintenance of a vibrant and competitive economy to support the achievement of our national goals. Second is alignment with our collective societal values, building a just, caring, inclusive, and responsible society. Third is that revenue generation should be based on fundamental Canadian values of fairness and equity. The taxation system should play a central role in enhancing vertical equity through revenue generation based on ability to pay, and allocation of benefits based on economic need. Fourth is consistency with international commitments such as the UN's International Covenant on Economic, Social and Cultural Rights. Fifth is the capacity to adequately finance essential public goods and services.
Taxation, we think, should be looked at comprehensively, not only as a cost to household and corporate economies, but also as financing for essential public services that deliver real benefits. Central to this essential package of public goods and services are those required to implement an ambitious poverty reduction strategy. For example, the child poverty rate in Canada, using the post-tax low-income cut-offs indicator, was 11.7% in 2005, the latest year for which we have data. The trend has been stable for almost 30 years, and the rate was exactly the same in 1989 as in 2005.
Based on these principles we make a number of recommendations. I'll highlight just a couple of them in the time allotted.
First, we think there should be an immediate review of the progressivity of the federal personal income taxation system. We believe there should be an intention to restore productivity in order to improve the system as an instrument of redistribution and poverty reduction. The system has become less progressive over time. For example, in 1988 there were ten brackets, and these were reduced to three broad intervals. The overall weakening of taxation systems has led some analysts to describe our system as proportional rather than progressive, with low-, medium-, and high-income earners paying between 30% and 35% of their incomes in taxes of various kinds.
Broadly based personal income tax reductions have further diluted progressivity. A 2004 analysis by Mitchell and Shillington shows that half of the benefits of reductions have gone to the 10% of families with incomes over $100,000. A 2006 analysis by the Canadian Centre for Policy Alternatives demonstrates that this pattern continues.
Second, we think fiscal capacity should be restored by putting a moratorium on across-the-board corporate and personal tax cuts and increasing progressive tax rates where necessary. The evidence is that corporate rates in Canada are competitive, and further reductions are not necessary. For example, a 2007 analysis by KPMG found that among G-7 countries, Canada's rate was third lowest, below that of the U.S. and below the G-7 average. The evidence from Scandinavian countries demonstrates that progressive and relatively high personal taxation rates can be consistent with strong global competitiveness and low levels of poverty. The key is to invest in human capital through income supports, social services, and skills development.
In the area of income support, we recommend that an integrated child benefit be increased to a maximum of $5,100 in 2007. This very year we will see the last of the planned increases to the Canada child tax benefit and the national children's benefit. It will reach the planned $3,200. The increase we recommend will cost approximately $5 billion, and it will yield a 37% reduction in the after-tax child poverty rate.
Finally, we think that federal work tax credits should be increased to $2,400 per year. We'd like to see reinstatement of a federal minimum wage. We'd like to see it at $10. We think this would show leadership to provinces.
We'd also like to see restoration of employment insurance eligibility. This is necessary because fully one-third of poor children in Canada live in families producing the equivalent of a full-time, full-year worker.
Thank you very much.