Good morning, everyone.
My written submission focuses on concrete policy measures that are meant to speak to the fifth of the committee's terms of reference, to “provide recommendations on how best to improve equality of opportunity and prosperity for all Canadians”.
I take equality of opportunity to mean that children can become all that they can be regardless of family background. In particular, adult outcomes like earnings and incomes are the result of talent and energy, not position or privilege. Parents play the central role in determining the life chances of their children through the quantity and quality of time they spend with them and by the monetary resources they have to invest in them. Money is not everything, but money matters.
The recommendations I would ask you to consider are intended to support families in their role as primary caregivers. They are intended to offer insurance against inequalities in both monetary and non-monetary resources, and to offer adequate support to the least advantaged.
Firstly, the committee should give consideration to significantly increasing the working income tax benefit, the WITB. The design of this program is a best practice in the provision of income support. It should be the main instrument for preventing inequalities at the lower end of income distribution from becoming too great. The committee should examine the implications for expenditures and work incentives of raising the benefit level so that most working Canadians will take home roughly one-half the median income. It should also consider reducing the rate at which benefits are phased out, so that the WITB extends into the range of lower-middle family incomes.
Secondly, the committee should give consideration to doing this in conjunction with the reform of the employment insurance program that changes part of the program into wage insurance, particularly for longer-tenured workers suffering a permanent layoff. This would in effect deliver benefits for the design inspired by the WITB. This would encourage laid-off workers to accept new, lower-paying jobs, knowing that wages will be topped up to some significant fraction of their old wage.
Thirdly, if tax and transfer policy is to encourage increased engagement of parents in the labour market to obtain adequate income to support their children, then there is also a need to recognize that families are increasingly time-stressed. Parents face not just labour market risks, but also a host of demographic risks associated with marital disruption, child illness, the onset of disabilities, or other non-market activities. The committee should give consideration to building and generalizing recent changes in the EI program by allowing parents to take a leave from work throughout their lives for reasons they deem important for their family.
The committee should give consideration to introducing a system of personalized accounts in the EI system from which families could draw, depending upon the extent of their surplus. The eligibility rules of the program could be relaxed and lower-income families could be given more of a public subsidy in these accounts. All families would have the flexibility to use their surplus to support a leave from work according to their own timing and purpose.
Finally, the committee should be aware that there have been significant increases in the fraction of total income accruing to a small minority of the population. In part, this has increased income inequality, but its importance for equality of opportunity is that over the longer term it will also change wealth inequality.
Wealth inequality has also been on the rise in Canada, but up to now this has been driven by increases in home equity and pension assets. Inheritances have played a role, but not a major role. This may well change in the future because the increase in top income shares is likely to persist. At some point, this concentration of income will be felt in wealth, and eventually in bequests. In the federal system of taxation, this will become a significant gap that contributes to inequality and inequality of opportunity.
Accordingly, the committee should examine more complete taxation of all sources of income, including all sources of capital income. Alternatively, it should give consideration to an inheritance tax and the disincentives of that in the manner discussed by, among others, the OECD.
Thank you, Mr. Chairman.