Mr. Chair, members of the committee, I am really pleased to be joining you today.
This is especially so on a subject of such great importance to a large majority of Canadians, and especially, I note, today, when tax returns of all Canadians are due.
I want to make two points at the outset. The first is that extreme inequality undermines democracy and the common good. The evidence is in. Very unequal societies do much worse, including in such fundamental terms as health and the real equality of opportunity for children.
Second, I want to underscore that the level of inequality in a nation is ultimately a matter of political choice. Despite common exposure to globalization and other forces of economic change, which are real, a good number of advanced industrial countries have clearly been able to remain much more equal than others. They're all facing the global circumstances, but politically, they've made adjustments to that. So I repeat, a number are much more equal than others.
Canada used to do quite well at achieving broadly shared prosperity, but changes in the job market, changes in our tax system, and cuts to social programs from the mid-1990s have pushed us strongly, I believe, in the wrong direction. As a result, Canada today has a major inequality problem.
Part of the solution lies in achieving a fairer distribution of market income by creating more good, middle-class and unionized jobs. Another important part of the solution is to make major changes in our tax transfer system. Experts have shown us that its redistributive impact has shrunk significantly, to the point that it is now one of the least fair in the OECD.
Our institute says that the goal should be to reform our income security system so as to eliminate poverty and significantly narrow the growing gap between low- and higher-income Canadians. This goal should be met by building incrementally on existing income support programs targeted to different age groups and by promoting greater tax fairness. The maximum level of income-tested child benefit should be raised to cover the full cost of raising children.
We should significantly increase the federal working income tax benefit to support the working poor and deal with the growing reality of low pay and precarious work.
I want to give credit to the government for creating the working income tax benefit, a new form of benefit here in Canada that can promote employment as the best path out of poverty. However, the current benefit is extremely modest, as members will know, and is lost completely at low levels of employment income. I believe it should be increased significantly and phased out more slowly as income rises.
In addition, we should eliminate poverty in old age by raising the guaranteed income supplement. Canadian seniors, on a global basis, technically and statistically, are the best off in the world right now. But we still have a number of Canadian senior citizens who need assistance and we should be providing that.
Finally, a long-term goal—this would clearly involve complex negotiations with the provinces—would be to abolish welfare as it currently exists and replace it with an income support program for working-age adults, delivered as a negative income tax. This approach, as again I'm sure members will know, has been broadly championed across the political spectrum, including by my once friend and colleague from a different life, Senator Hugh Segal, and by the late Tom Kent.
To pay for change, these improvements to our income support programs can be financed by making our income tax system much fairer. We have proposed a number of approaches in our discussion paper, which the institute produced on inequality.
We should scale back special tax breaks that deliver huge benefits to the very well off, such as the exclusion of 50% of capital gains income from taxes and low tax rates on gains from stock options. For a functional market-based economy, I believe these existing benefits are not necessary.
We should be looking to more progressive income tax rates, and we should be cracking down on tax avoidance.
Revenues can also be gained by more broadly applying the principle of polluter pay.
In summary, Mr. Chairman, concrete steps can be taken to make our tax and transfer system a much more effective vehicle for closing the growing gap in Canada between the very rich, on the one hand, and the middle class and the poor on the other. Priority, as I've suggested, should be given to fundamental reform of our income security system.
Thank you very much.