Thank you very much.
Canadians for Tax Fairness, which many of you are already familiar with, advocates for fair and progressive tax policies aimed at building a strong, sustainable economy, reducing inequality, and ensuring that there is adequate funding for the quality public services that Canadians both need and want.
In Budget 2018, there are many steps forward, which some of our best speakers have already spoken to, such as the working income tax benefit and the action to tackle the gender gap. We at Canadians for Tax Fairness have particularly applauded the Liberal government's efforts to close unfair tax loopholes related to private corporations as a step forward on tax fairness, but it's important to note that we consider this a small step.
We urge the government to follow this up by closing other loopholes such as the stock option deduction, the capital gains exemption, the business entertainment tax deduction, and others. Further, in the budget, we again applaud action taken on trusts and banks in terms of loopholes, but real action is needed on tax havens where corporations and the wealthy are able to avoid paying their fair share. Examples include an economic substance rule.
There are four really important reasons why Canadians for Tax Fairness is pushing for the government to go further in closing loopholes and other measures for tax fairness. The first is that Canadians want action. Poll after poll for years have shown that Canadians are deeply concerned about inequality and bias in the tax system, and want action on tax fairness. This includes polls by Angus Reid, EKOS, Mainstreet, Environics, and others. Even after the pointed campaign against the private corporation tax reforms in last fall's consultations, more Canadians still supported the proposals than opposed them. Some of the support for change has been very high. Last fall an Environics poll found that 87% of Canadians want to see the law changed to make it illegal for corporations to use tax havens to avoid paying their fair share. Ninety per cent said it was immoral, although legal.
The second major reason that we want to see more ambitious change in terms of tax fairness is that Canada is in the bottom third of OECD countries for what we collect in taxes as a percentage of GDP. The same is true for social spending: we lag well behind other developed countries. The government has been seeing criticism of the gender and anti-poverty measures in this budget as tepid, from child care to pharmacare, from pension security to safe drinking water. Infrastructure and programs that Canadians need and want are being underfunded due to inadequate revenues. We are already running a deficit in our current programs. As the resource transition on climate change and new technological change impact our economy with automation, we will need more, not less, social spending.
The third major reason we're advocating a more ambitious agenda on closing loopholes in tax reform is that inequality is dragging down our economic growth and impacting the well-being of everyone. Research shows that not just the low-income people but also the wealthy suffer, in outcomes from education to health, even in less equal societies. On the economy side, the International Monetary Fund, the OECD, and others have determined that the current level of inequality in countries like Canada is negatively impacting economic growth.
Surveys have found that the main factor inhibiting the ability of small businesses to increase their sales and production is insufficient domestic demand—not tax rates but lack of purchasing power by Canadians.
Investing in social programs is an important way to boost consumer demand. I have a great example with regard to Norway. They save their own gas revenues and put it into a fund that they convert to a pension fund. When the financial crisis hit, Norway had the shallowest dip and exited the soonest with the highest consumer confidence in the OECD. So what we see is that pension security and broader programs for coverage of pharmacare, child care, and other social programs stabilized their economy and built back consumer confidence. Of course, they also have a higher tax to GDP ratio than Canada.
The fourth reason we need a more ambitious plan on loopholes is that they're very unfair. The government did proceed with closing some of those loopholes in the 2018 budget, but even as modified, the tax structure still disproportionately benefits the wealthy. For example, the threshold for the small business deduction for passive investment starts at $50,000, which is an estimated $1 million in assets at a 5% return, and fades out at $3 million.
By comparison, Canadian families held $259,000 in net assets in 2016. A third of that is housing, much of which is in overheated markets, which potentially means that the number is inflated. Also by comparison, median individual income was just $27,000, and the maximum for RRSPs was in the $26,000 range.
Those loopholes as restructured in budget 2018 are out of reach for most Canadians. Some would argue that these boutique tax preferences are compensation for the risks that business owners take—they don't have pensions, sick leave, maternity leave—but it's not just business owners who lack these benefits. Increasingly, work is precarious for most workers. Most private sector workers lack a pension, and increasingly are being forced into precarious work arrangements where they have no benefits, no sick leave, no maternity leave, no EI, no CPP, no paid vacations. And they're not getting more compensation for this shift of risk; they're getting less. Automation is predicted to make this situation much worse, and inequality, economic security and precariousness are driving the rise of extremism and authoritarianism.
The solution to what is fast becoming the overarching crisis of our time is not to provide boutique tax treatment for a small portion of privileged Canadians, but to provide universal child care, sick leave, and pension programs that will be available to all workers as well as low-income business owners who are falling through the cracks. For this, the polling shows that Canadians want to see much more aggressive action on closing unfair loopholes, shutting down tax haven use, and having a much more progressive tax system.
Thank you. I'll answer any questions the committee may have.