Thanks very much for inviting me. I submitted a brief that you will have access to. I will take my five minutes just to highlight the main things that come out of that brief.
What I would argue is that the tax transfer system has become less redistributive, while inequality has increased, and that not enough targeting exists in the system. Too many tax expenditures are going to the better off. As the federation becomes more decentralized, groups of persons for whom the provinces are responsible have fallen behind and obtain little support from the federal government. More generally, horizontal imbalances in the federation threaten our social fabric.
I made several specific proposals, which are discussed in more detail my brief. Let me just run through them very quickly. These are intended to make the tax transfer system fairer and more resilient to economic shocks, while at the same time maintaining efficiency and tax revenues.
Here's my wish list. I would make all tax credits refundable, including the current non-refundable ones. I would condition many of them to income, the way we condition the GST credit. I would enhance disability tax credits and make them available to all provincial disability recipients. I would improve the EI-welfare nexus, so that the transition from one to the other is smoother.
A far-ranging reform would be to make the EI system two-tiered at the federal level. The first tier for a certain period of time would be like the current system, which replaces lost income. The second tier, for people who stay on a little longer, would be based on need. Then the fallback would be the provincial welfare system. I would make training and employment services available to all workers, whether they're on EI or not. I would finance EI from general revenues, rather than from the current regressive payroll tax.
On the capital income side, I would eliminate the dividend tax credit and make the taxation of dividends, capital gains, and interest more even. I would rationalize the corporate tax to make it distortion-free and make it a tax on supernormal profits, or so-called rents.
With respect to federal-provincial tax room, I would do everything to prevent further erosion of the federal share of tax room. I would return the equalization system to a formula-driven system. I would make sure that the social transfers to the provinces grow at the average rate of growth of provincial program spending, and I would make them conditional on provincial tax capacities to enhance the equalization system.
With respect to equality of opportunity, the current post-secondary education programs at the federal level serve middle- and upper-income persons quite well. Low-income persons would benefit from more targeting of tax benefits and from enhancing the Canada learning bond and Canada student grants programs. The post-secondary education system in Canada is actually in crisis, and I would consider creating a post-secondary education grant parallel to the CHT and CST, the Canada health and Canada social transfers.
That's my five-minute wish list.
Thank you.