Finance Committee on May 28th, 2015

[Aaron Wudrick]

Thank you for the question.

I obviously agree with your characterization. The money is Canadians' money. The default position is it's their money. The government then takes it from them. To suggest that giving it back to them means that government has lost money, I think is a mischaracterization. I think that for every time we hear the government forgoes $2 billion in revenue, what we hear is that's $2 billion back in the pockets of Canadians.

We can debate what the right level of revenue is, but to characterize that primarily as a loss for government rather than a gain for Canadians is misleading, I think.

[Mark Adler, Conservative, York Centre, ON]

Thank you. I'm glad you said that.

Mr. Laurin, I want to talk a bit about sick leave. Letting employees indefinitely bank sick leave is becoming anachronistic, would you not say? We don't really see this in the private sector. Even in the public sector we see that in the OSSTF, the Ontario teachers' union, new hires are now not allowed to bank sick days.

Could you comment on this whole concept of banking sick days and how anachronistic that is? Do you think we should be moving away from that kind of a model in the public sector?

[Alexandre Laurin]

As I said before, it is simply a non-wage benefit, and it's a non-wage benefit that has a cost. It's a cost in the total compensation package of employees.

I know I'm repeating myself, but what's happening here is that the average total compensation cost—and that includes non-wage benefits of federal employees—is now totally out of proportion with the average employment cost of a private sector employee with similar qualifications. The best way to resolve that problem is to reduce a little bit through time some of the non-wage benefits, and sick leave is definitely a great place to start.

[Mark Adler, Conservative, York Centre, ON]

So you advocate then that we really need to level the playing field between the private and the public sectors.

[Alexandre Laurin]

Yes.

[Mark Adler, Conservative, York Centre, ON]

Okay.

Could you comment on our government's decision to increase the TFSA contribution level from $5,000 to $10,000?

[Alexandre Laurin]

I'm in favour of it. I think it's a good policy.

TFSAs have great benefits for seniors and also for people at lower income levels who would like to save for their retirement—I'm sure there are some—and right now they don't really have the incentives because the benefit they will get in retirement from those savings that are tax deferred will be greatly clawed back, so they basically don't really do it.

What the TFSA does is that, if there is a big chunk of money coming their way, it could be an inheritance or anything else, they will be able to put it in there and have a tax-efficient retirement. I don't see why that's a bad thing.

Another thing to consider is that the interest rates right now are extremely low, and if you want people to be able to save and earn in safe financial instruments and earn a decent income, then TFSAs are a great way to do that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

Colleagues, we have at least 15 minutes left, so we'll go to Mr. Côté, s'il vous plait.

The floor is yours.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Laurin, in your written presentation, we read that, if the objective of this tax relief for families is to provide support to families with children, this will give still more benefits to those who likely need them least.

Is that still your position?

[Alexandre Laurin]

It is a fact, as I see it. The financial benefit will clearly be greater for high-income families because the very nature of income splitting makes it so. If the objective is to provide families with support, this may not the best way to go. But if the objective is horizontal fairness, in this case, the changes, the new income splitting measures, are much better than in the original proposal.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much.

Mr. Heath, my neighbour is an accountant and a tax expert. Clearly, he did a huge number of tax returns this spring. We get on well. We have known each other for four years. He was telling me about warning his daughter about the changes to the universal child care benefit or the replacement of the Canada child tax benefit. He told her not to spend the whole cheque that she will be receiving in July because she is going to have to get used to the idea of sending a cheque to the federal government in the spring of 2016.

Do you want to comment on the Greeks bearing gifts, or should we say the government bearing its new formula?

[Jason Heath]

My understanding may be wrong. The Canada child tax benefit, as I understand it, is set to expire as of July 1. I thought it was to be cancelled as of July, as opposed to next year, but I think it's an unfortunate situation. Those taxpayers that are receiving, and have become accustomed to receiving, the Canada child tax benefit now, upon losing it, presumably may have access to the new universal child care benefit or the enhanced universal child care benefit, but it might not be as lucrative as it was previously. I think that's unfortunate, as part of this change, that it could mean a reallocation of moneys from low-income single parents, in particular, who would have received a higher Canada child tax benefit. For people like myself, for example, I've never received the Canada child tax benefit. I'll benefit from the universal child care benefit, but quite frankly, I don't need it and it won't make an impact on my day-to-day life.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much.

Ms. Decter, thank you for your presentation.

There have been reports all over Canada about the difficulties that families are having in finding private daycare where no public daycare is offered.

I remember a story on Radio-Canada about the situation in Newfoundland and Labrador that was quite disheartening. Clearly the universal child care benefit is a long way from making up for the costs that can result. I was astounded by the astronomical costs and the major disparities there can be from one end of the country to the other. If I recall the report correctly, Newfoundland and Labrador has the misfortune of being the province with the second highest daycare costs.

Can you testify as to the huge burden placed on families who have no other option but to have their children looked after in a private daycare when there is no public daycare program that can provide affordable places for them?

[Ann Decter]

You're correct. The costs are extremely high, and for many families the option of having one person stay home and take care of the children is not viable. We know while the wage gap between men and women has narrowed, the salary gap over a lifetime has not. That is usually because women take time out of the workforce and forgo advancement in employment. I think if we saw men taking up more of the child care responsibilities, we might be in a different situation, but we're not seeing that. At the same time, women surpassed men as graduates of universities in 1990. You have a very educated female population. As public policy you want them to have labour force attachment. You don't want them forgoing their careers.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm going to take the next round as the chair.

Mr. Heath, I appreciate your columns. I read them quite regularly.

I want to get you to respond to Mr. Cross's analysis, though, because I think you and others on the panel are suggesting we should not move to more programs or benefits that are universal in nature, that we should means test them.

One of your statements was, “I would be inclined to instead consider an increase in the Canada child tax benefit to provide more benefits for low-income and middle-class Canadians while reducing or negating benefits for those whose income exceeds a certain threshold.”

How do you respond to Mr. Cross's analysis, which says that the progressivity of transfer payments and taxes has led to a situation whereby the top two quintiles are putting more in than they're certainly getting out, and the bottom three are certainly receiving more benefits than they pay in taxation.

He has launched a fairly substantive analysis here. Do you disagree with his analysis, or do you think we should go even further in terms of...

[Jason Heath]

I don't know that I can either agree or disagree with his analysis. I take it at face value that the analysis is sound.

I would consider myself to be a high-income earner. Many of my clients are. Many of the people who read my columns are.

I didn't realize that we were giving so much to other parts of the Canadian population through transfer payments, but I can tell you that having three children ages five, six, and six, where the universal child care benefit would have otherwise stopped and all of a sudden now I'm going to get it for the next 10 years for all of them, I don't need that money and I know it's coming out of the pockets of people who do need it, people whose Canada child tax benefits were probably much higher than anything they're going to get from the universal child care benefit.

That part of it seems unfair from a personal perspective.

[The Chair, Conservative, James Rajotte]

That's your analysis, because the analysis by the Department of Finance is those people will not be receiving it. In fact, they will be receiving more benefits under the new program.

[Jason Heath]

Oh, that's interesting. Okay.

Perhaps then I'm making an assumption that is not justified.

[The Chair, Conservative, James Rajotte]

Okay. In your opinion as a financial planner, I wonder whether there's a certain point where you get concerned because the marginal rate of taxation becomes too burdensome on those in the upper incomes, so they work less and thus the issue of it affects overall economic growth, which obviously affects us all.

[Jason Heath]

Yes. I think it's fair that you reach a point where the high-income earner is overtaxed to the point where there is a disincentive to work. That's probably not something that you want to do, in particular when some of those high-income earners are people like doctors, for example, who are important to us as a society, or entrepreneurs, who may otherwise be taxed at a high rate and again could otherwise build jobs and companies and contribute in another economic way to our society if they weren't so heavily taxed.

I see both sides of the coin, but I have a hard time getting my head around the reallocation or potential reallocation of moneys for children from people who need it to people who don't.

If it's such that the low-income earners, based on the Department of Finance's research, are not left high and dry and are in more or less the same situation, I would still prefer to see more moneys going to those people, if anything, at the expense of people like me.

[The Chair, Conservative, James Rajotte]

I don't have the page in front of me, but a page in the budget shows who has benefited from which tax measures, including a million lower-income Canadians being taken off the tax rolls completely, items like that. I'd be happy to talk to you about that later.

Mr. Cross, can you respond on that item as well, and further substantiate what you said in your presentation?

[Philip Cross]

I would encourage people to read the paper. I don't have anything to elaborate on what's in the summary there.

If I can indulge the chair, I would like to say something about sick leave.

[The Chair, Conservative, James Rajotte]

Sure. I have 30 seconds left.

[Philip Cross]

There have been two questions asked about it, and if I don't say something I'm going to damage some internal organs here.

[The Chair, Conservative, James Rajotte]

Be very brief.