This is not just a case of apples and oranges logic. This is apples and sour grapes logic. It is attempting to make night equal day. In reality, the rationale for the child care expense deduction is to prevent discrimination and unfairness. It does this by recognizing for tax purposes the child care expenses that taxpayers must incur in order to earn income or to study.
In other words, the deduction is a way for the tax system to acknowledge that when both spouses work, these taxpayers generally have less of a capacity to pay taxes than other taxpaying families with identical incomes that do not have these child care expenses. That may sound a little bureaucratic but it is not.
Of course families with a stay at home spouse has child care expenses. That is why in addition to the regular child tax benefit of $1,020 for each child, the tax system also provides a supplement to
help modest income parents who choose to remain in the home to raise preschool aged children.
The fact is when both spouses work they will have higher child care expenses than families where one spouse stays at home. Those additional expenses will include day care, work transportation for two people and other costs incurred in earning income.
This takes me back to the bottom line. Despite Reform's implication, the child care expense deduction is not anti-family social engineering. It has nothing to do with providing a benefit or acting as an incentive for people to participate in the workforce. Instead the child care expense deduction seeks to ensure that families where both partners must work or study do not suffer a disadvantage by being taxed on gross income when child care costs mean that they have reduced capacity to pay.
Incidentally, I should point out that the child care expense deduction parallels the approach applied to business. Firms do not pay taxes on expenses they incur to generate income but only on their profits. By the same logic, the child care expense deduction does not tax-up to a certain limit-the expenses incurred when both parents must work to generate income.
I have established that this motion clearly fails to recognize the real purpose and process of the child care expense deduction. That purpose is to deliver neutrality, in effect, real fairness, within the tax system.
I will address the more fatal flaws of today's proposal: fiscal irresponsibility and rewarding affluent Canadians at the expense of those in real need. The motion seeks to extend the child care expense deduction to all families of all income levels and convert it to a credit.
This raises an obvious question which the hon. member has not answered. What is the cost? Assuming we use the current structure of the deduction, which is $5,000 for children under seven years of age and $3,000 for children between seven and fourteen, the cost in lost revenue will probably be in the vicinity of $5 billion. That compares to about $400 million under the existing deduction system.
That $5 billion can only come from one of three places: adding $5 billion to the yearly deficit, not just this year, not just next year, but year after year after year; or raising other taxes by the same $5 billion; or cutting federal spending by a further $5 billion, which would be on top of the most dramatic government spending cuts in Canada's post-war history. Inevitably that would require new cuts to transfers to provinces for social assistance and health care.
Who would be the real beneficiaries? There would be some benefits to families with stay at home parents, a group which is less than 25 per cent of Canadian families. This benefit would have little to do with real need and the problem of child poverty which should be the priority issue in family policy.
Let us look at Reform's priority. The simple fact is that under this motion every professional and executive, people who earn $75,000, $100,000 or $1 million a year, those who can best afford a stay at home spouse probably with housekeeping help and a nanny to boot, would enjoy a nice fat tax break. But this motion adds nothing for the low income family where both partners must work or choose to work.