Finance Committee on May 28th, 2015

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Fair enough.

At the end of your presentation—and you didn't do it verbally, but you provided it to all committee members—you talked about studying the share of income. You wrote:

The best policies are those that would encourage our ability to fully benefit from more vigorous economic growth in the U.S., notably through fostering a better climate for business investment.

Could you expand on that, sir?

[Philip Cross]

In the debate about the economy, everything seems to be fixated on redistributing income, and I think we've become so wrapped up in that analysis and a lot about who's going to benefit from income splitting and so on, we forget the number one solution to all these problems is good economic growth. The one key to that, and I think the Bank of Canada's emphasized that in its research, the thing that's been missing from the recovery so far has been business investment. I think we should be doing more to stimulate business investment in this country.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

In your message, we get that good economic growth is very important, so thank you very much.

Forgive me, but we were just talking briefly about people getting buried in the numbers. A previous witness had made a reference. Could you expand on the econometric piece we were talking about earlier?

[Philip Cross]

There are a couple of things. People talk about our knowing the marginal impact that the changes in income splitting are going to have to the labour supply of women as if we know it to the decimal point. One of the problems with that type of analysis, one reason I was never a fan of this when I was at Statistics Canada and am still not a fan, is that it assumes other things are equal. Well, other things aren't equal.

We know, for example, that the lowest women's labour force participation in the country is in Alberta. Why? It's because with husbands who earn more than $100,000, women tend to stay home more often.

That's changing rapidly in Alberta. If Alberta raises the minimum wage from $10 to $15, that's going to have big impacts on labour supply.

There are many other things moving.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Bateman.

Mr. Dionne Labelle, you have the floor.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

Ms. Decter, I appreciated your testimony a great deal.

I am going to share my experience with you. I feel it may be helpful for everyone here who may have not lived in Quebec.

I have been in two different situations with this issue. In the first, there was no daycare service and we had to find people to look after our child in a basement. We did not know whether we were going to get daycare at the right time. My wife was incredibly stressed because she did not know whether she was going to be able to work or not.

With my daughter, the experience was the opposite. There was a daycare in the early childhood centre, the CPE, as we call it in Quebec. It had set hours and the people who took care of my daughter were college- or university-educated. The groups were set up in an intelligent way. The hours allowed my wife to work and then to come back to pick up our daughter in safe places that were designed for the purpose.

It is pure ignorance to think that a daycare system like that is not superior to having to chase around in a way that undermines the confidence of parents looking for support.

In your testimony, you mentioned some figures that showed the impact that the daycare system had on women in Quebec. For those listening to us, and even those not listening to us, I would like you to repeat those figures, because they illustrate the positive impact of that daycare system.

[Ann Decter]

This is for the period between 1996 and 2008, the first 12 years of low-cost child care. Almost 70,000 additional mothers joined the workforce; it was, I think, 69,700. Employment rates for mothers with children under the age of six increased 22%. The number of single mothers on social assistance dropped from 99,000 to 45,000, so by more than half. The after-tax median income of single mothers rose by 81%. The relative poverty rates for single-parent families headed by women declined more than a third—the figure is actually 36%—to less than a quarter. It was down to 22%.

From YWCA Canada's point of view, with child care I believe we are at the point that the country was with public schools in the late 1800s, when that was a system that was coming in and that was going to be accessible to everyone. You see it across the country: provinces struggling to make a response, increases in full-day kindergarten.

We'll never have an equal system unless the federal government shows some leadership. We're not talking about the federal government providing child care; clearly that has to come through provinces and locally. But as with other things for which there is shared responsibility, the government can work on agreements and they can support this. We just think the money is much better spent in that direction, because the fact is you have between 66% and 80% of women in the workforce.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

I completely agree with you.

I told you about my personal experience and about the quality of the services we received in that kind of network. My vision is completely opposed to what has been presented to us in this budget, that is, an amount of $160 for child care costs. Introducing a measure like that and telling parents that it could help them in their search for child care, is almost an insult to their intelligence.

It is incredible that people can think in that way, given how amazing the experience in Quebec is. Everyone benefits, and the economy benefits too. The 80% increase in income for women is incredible for a dynamic consumer economy. Do you have any figures on the economic impact of women’s participation in the workforce?

[The Chair, Conservative, James Rajotte]

Make just a brief response, please, Ms. Decter.

[Ann Decter]

That same study indicated that with women's greater participation in the workforce, GDP in Quebec rose by $5.1 billion, or 1.7%. Quebec's investment in low-cost child care generated $104 for the provincial government for every $100 investment, plus $43 for the federal government without any federal investment whatsoever.

[The Chair, Conservative, James Rajotte]

Thank you.

We will go to Mr. Cannan, please.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, lady and gentlemen, for being here this morning.

My first question is for Mr. Laurin, just following up on the issue of child care. I am the father of three adult daughters and have three grandsons now ages eight, three, and one. Two of my daughters are married. This aspect, child care, is an issue for all of us.

We respect the jurisdictional aspect of the social transfer payments to the provinces. Transfer payments, as Mr. Cross and others alluded, are at record highs.

I am just wondering, Mr. Laurin, whether from your experience and research you find that providing funds to families for their child care needs is the most efficient way to help alleviate the cost of having children.

[Alexandre Laurin]

Child care is one of the costs of having children. There are other costs.

I tend to agree that the UCCB is not going to cover the cost of child care for even one kid. It's not enough, but it's a benefit. It helps.

Quebec has gone a totally different way, whereby child care is almost totally subsidized by taxpayers, and that has led to some economic benefits. I don't think it's self-financing, but the evidence is there.

Quebec also started at the low point, when mothers had one of the lowest participation rates in the country, so Quebec had some catching up to do.

Now, if you're asking me whether the UCCB is a support to families with children, obviously it is.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks.

Let me go over to Mr. Wudrick from the Canadian Taxpayers Federation. I know Jordan Bateman, from British Columbia. I represent Kelowna—Lake Country in British Columbia. I appreciate the work.

I always say that there is only one taxpayer and that we all need to maximize tax dollars and respect that they are the taxpayers' funds and not government's. Taking that into consideration, do you believe that allowing Canadians to keep more of their money is not only the right thing to do, but the logical thing to do, since it is indeed at the end of the day the taxpayers' money?

[Aaron Wudrick]

I think the debate fundamentally comes down to a debate about who is best placed to make these decisions. I respect the view of some of our progressive friends who suggest that it's the government's role to fully subsidize the care of children. We dispute that. They've been bandying about the fact that $160 does not cover the full cost of child care. That is not necessarily a bad thing. We think it's entirely appropriate that the government support families and make it easier for them; we don't think it's necessarily incumbent on them to bear the full cost of child care. That's a fundamental difference in the point of view.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Totally. It's a balancing act, and I respect.... It is the freedom of democracy. We can agree to disagree on the fact that parents have a choice, we believe, of how they would like to raise their children.

Moving on, another section of the budget implementation act concerns the Canada Small Business Financing Act. It's something that's very important to small business owners. We had the Canadian Federation of Independent Business, in the panel before, say that small business is the economic engine that drives our communities across the country.

In the bill, we're proposing, within small business eligibility criteria, to increase the limit for purchasing or building real property from $500,000 to $1 million, of which $350,000 could be used for leasehold improvements or equipment. These measures are expected to enhance the ability of start-up entrepreneurs and small businesses across Canada to secure much-needed capital, generating economic growth and job creation.

I wonder whether you've had a chance to look from a small business financing perspective at whether that's a positive initiative.

I'll start with Mr. Laurin and then go across the panel.

[Alexandre Laurin]

There are already many subsidies to small business in the tax system. I didn't review the part of the bill that you just mentioned.

At the C.D. Howe Institute we published a study on the small business tax deduction very recently and came to the conclusion that it was not an impediment to growth, as many economists have been saying, but that nonetheless the small business deduction, which is a tax preference for small businesses, was not providing a marginal benefit that is superior to the marginal cost of the preference.

With respect to the part of the bill you mentioned, I wouldn't have any comment specific to it.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I appreciate it. It's access to financing, which we hear often is a challenge for small business.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cannan.

The floor is yours, Mr. Côté.

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

Thank you very much, Mr. Chair.

My thanks also to the witnesses for joining us today.

Mr. Cross, you heard me laughing just now when we were talking about the bill on balanced budgets. I gather that we somewhat see eye to eye on that. In my opinion, that bill demonstrates a lot of hypocrisy on the part of the government. However, that is not the subject I want to raise with you.

I was sitting on the Standing Committee on Finance in 2013 when we passed Bill C-48, which expanded the Income Tax Act by 1,000 pages. Canada’s tax system is quite staggering in its complexity. This is nothing more than fiscal clientelism, the effect of which is a huge fragmentation of the real clients. Tax breaks for families is one example of that. Unfortunately, they make things more complicated.

One phenomenon that I find disturbing is that fewer and fewer individuals are doing their tax returns themselves. I do not know which organizations measure that, but the fact remains that only a third, a little less than 40%, of individuals prepare their tax returns themselves. The rest go to professionals or to family members to do those returns.

Could you talk to us about that complexity and what families lose as a result? Canadian households actually often have to pay for their taxes to be done.

[Philip Cross]

I completely agree with you. The tax system is too complex. I do my personal tax return myself. It is quite simple. However, my business is set up as a company. As a result, I have to pay an accountant $3,500 a year for him to be aware of all the details. It kind of brings us back to what we were saying about the tax rate of small businesses in comparison to large businesses. As we were saying earlier about family income, there is no real justification for the fact that the tax rate is different depending on whether one person or two people are involved. I agree with that.

Following the same logic, the gap between the tax rate for small businesses and large businesses should be smaller. At the moment, the gap is a major one. It is difficult to see the economic logic in the fact that the tax rate is so different for one as opposed to the other. That is sometimes an incentive for businesses to remain small.

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

Do you know if any studies have been done on the losses that individuals or companies have suffered because of the complexity of our tax system?

[Philip Cross]

I think that Alexandre could better answer that question.

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

Okay.

[Philip Cross]

I think that studies done in the United States talked about huge losses for that reason.