First, Mr. Chair and members of the committee, good afternoon and, again, thank you for allowing us to appear before the committee.
As you know, I work representing the Canadian Labour Congress, the largest labour central in the country. We represent the voice of 3.3 million workers across the country, representing national and international unions, both provincial and territorial, and 100 district labour councils across the country.
The CLC has made a detailed written submission to the committee's pre-budget consultation. I won't be able to speak to the full range of issues raised in the written submissions today. Instead, I will speak primarily to two issues: tax fairness and child care.
On tax fairness, the tax reform must address two issues: tax fairness and the increasing fiscal capacity to support investments in housing, indigenous communities, and social programs like health care and child care. I welcome the federal government's plan to close some of the loopholes for very high-income earners.
This tax proposal is an important first step towards bringing more fairness to the Canadian tax system. The current tax rules make it possible for someone earning $300,000 to save more on their taxes than the average Canadian worker makes in a year. This is fundamentally unfair.
The labour movement supports the federal government's proposal to address three ways of using CCPCs to avoid higher tax rates. On income sprinkling, high earners who own CCPCs can split or sprinkle their income among family members with lower incomes, paying them salaries or dividends to take advantage of lower tax rates. This is something that other working families can't do.
Regarding exploiting capital gains, high-income earners who own CCPCs can pay themselves capital gains, only 50% of which are taxed at the personal tax rate, instead of dividends that face higher taxes.
On passive investing, CCPCs offer the wealthiest Canadians another tax advantage that others don't have access to, more capital for their investment portfolio. CCPC owners can park income in their businesses so that it's taxed at a lower business rate, leaving them more capital to invest in passive investments like mutual funds. Lower tax rates for businesses are meant to encourage investment and job creation, not to help the wealthiest Canadians make more out of their retirement portfolio.
This kind of tax avoidance is costing the federal government as much as $500 million plus a year. Taxes pay for the vital services that we rely on such as physical security, food safety, health care, education, and disaster relief, and Canadians expect everyone to pay their fair share.
As difficult as this process has been, reforms can't end here. We need to ensure that the top 1% of corporations pay their fair share, too, which means an aggressive clampdown on tax havens and corporate tax dodging. This would include eliminating regressive and ineffective tax loopholes by cancelling stock option deductions, fully including capital gains in taxable income, cancelling the flow-through shares deduction, taxing foreign e-commerce companies at the same level as Canadian providers, increasing taxes on banks and finance that have received windfall profits from corporate income tax cuts over the last decade and a half, introducing wealth taxes, and making income taxes far more progressive.
The government's 2015 platform commitments included generating some $2 billion annually by 2018 through the elimination of unfair tax breaks. Budget 2017 declined to take this step and instead projected that revenues would remain essentially flat between 2016-17 and 2017-18.
We hope the 2018 budget will take on some of those most regressive and wasteful tax breaks that favour tax benefits that go disproportionately to a small group of high-income earners.
The committee has asked that submissions to this process address two very important questions: what federal measures would help Canadians be more productive, and what federal measures will help Canadian businesses be more productive and competitive?
The answer to both of these questions is a national child care strategy that includes the key principles of universality, high quality, and competitiveness.
The CLC supports an expanded public investment in affordable, universal, quality child care as a way of stimulating economic growth and raising private sector labour productivity growth, while improving child development and labour market outcomes for mothers, and of course, for families on the whole.
The 2017 budget allocates some $7 billion over 10 years for early learning and child care, starting next year. A much-needed, ambitious federal commitment to universal, quality, public child care in Canada is both necessary and feasible. Federal child care funding could be increased tenfold, significantly expanding the number of child care spaces available, and reducing fees as rising labour market participation among mothers and associated taxes offset the cost of this program.
The government's commitments to date are far too conservative. Canada's spending on early childhood education and child care at just $82 U.S. per child in 2015 remain the lowest among the advanced economies. The federal government has also failed to comply with the orders of the Parliament and of the Canadian Human Rights Tribunal to eliminate the gap in child welfare funding for indigenous children.
The CLC joins other civil societies and organizations in insisting that the federal government live up to this obligation and end the discrimination against indigenous children and youth across this country.
I welcome any questions on behalf of the committee.
Thank you so much.