Madam Speaker, I will be sharing my time with the hon. member for Souris—Moose Mountain.
We appreciate the good intentions of the motion to address the indexing of the child tax benefit and the increase of the threshold on when people begin to pay taxes.
Part of my concern is that a motion like this couched in the terms of addressing poverty is perhaps not comprehensive enough. To take a small part of the issue, a piecemeal approach, probably does not serve all Canadians well. That is part of the reason why Reform has done such a diligent job in our budget alternative package we presented to the House, to various members and to people across the country.
It is prudent for us to pause for a moment to reflect back as we are in the throes of this debate on poverty and ask what we can do in the tax system to address it. In Canada over the last 15 or 20 years we have incurred a $600 billion debt, the highest debt ever, massive tax increases combined with that. There has been lots of money drawn from the taxpayer and also borrowed and yet we are in a country where we talk about one in every five children is supposedly in some state of poverty.
When we think about that it does not seem like getting more money both through borrowing and through taxation into the hands of government has really done much to address poverty if it is true that one in five is in a state of poverty as some would claim. We had a debate on poverty.
It is time to review quickly some of our own points that are more comprehensive. I do not have time today to go through our complete budget submission but there are some things I want to highlight to show it is more than just the components that are in this motion before us today that would address some of the challenges of the less fortunate in Canada.
Certainly our budget submission calls for very substantial tax reduction with the surpluses that are available. As well we call for a very substantial reduction of the debt which is really borrowing on the future of our youngest Canadians. The core programs that are so important to Canadians must be strengthened.
One of the speakers today quoted from the recent Vanier Institute study. The study states that in 1996 family incomes were only $600 above their 1980 level, 16 years. Family incomes on an after tax basis declined by over 5% in real terms from 1989 to 1996.
Taxing is impacting families. We are talking about poverty today and it is within that context I would like to talk on the impacts of taxation on the financial future of Canadian families. I want to quote from another study in 1998 by the National Foundation of Family Research and Education talking about bracket creep which we just heard some comments on. It says bracket creep and the clawing back of tax credits from families with incomes as low as $20,000 per year means that families earning between $20,000 and $40,000 per year are now paying the highest marginal tax rates in the country.
What we are creating with this heavy level of taxation is a type of a working poor scenario. That is of real concern to me as it is to many Canadians and I know many members House share that concern.
It is interesting also from the Vanier report that in 1980 financial stress on families was relatively low. In the 1990s this most current report states that most measures under financial stress are reaching record highs.
Families in Canada are under financial stress and I think it is incumbent on members of the House to find ways to relieve that stress and tax reduction is certainly one of the most obvious and straightforward ones that I know we could find a lot of agreement on in the House.
I want to talk a bit about some of the specific proposals in Reform's budget alternative better way budget. One of them has to do with reducing or at least considering and investigating the impacts of the current tax legislation on marriage. One submission states that single income families may pay considerably higher amounts of federal tax than two income families with the same level of family income.
Take a family earning $30,000 annually. While a dual income family splits the income 50:50, the single income family will generally pay about $4,317 a year in federal and provincial income taxes, whereas the dual income family pays a combined $3,492 a year. So it is 24% more in tax for a single income family. These are the kinds of inequities that I think should be investigated to bring some greater fairness and equity into the way families are treated and taxation is applied.
As a specific step we could take in this direction, we are suggesting that one of the easiest and most straightforward things to do is to increase the married credit by setting it equal to the basic personal credit at $1,098 from its current maximum of $915. The proposal provides for a tax reduction when coupled with the increase to the basic personal credit that we advocate of $675 for single income families across Canada. This is an important proposal for a couple of reasons. It is important because why should the spouse who is in the home and maybe not employed in the private sector have some type of exemption that is less than the basic exemption? We are advocating that it should at least be equal.
Another important point we call for to address some of the taxation impacts on family is that the current system allows for deductions of $7,000 for children under seven and $4,000 for children aged seven to sixteen. That is the current situation. We propose to replace this system with one where all families with children become eligible to receive a refundable child care expense credit of 17% of $7,000 or effectively $1,190 for all children up to seven years of age. Further, a credit of 17% on $4,000, or $680 in hard cash return, will be made available for parents of children seven to twelve years of age. The credit would be available to all families with children whether they are earning income or not and provide benefits for each child under the age of seven and for children seven to twelve.
There are costs I could provide on that. We have quantified that. We have examined the impact of that recommendation to make sure that it is consistent with our overall budget proposal.
Another area I would like to address is directly related to the impacts of capital gains taxes in Canada. Let me quickly touch on a reduction of capital gains and how that could help us strengthen opportunities for the less fortunate. The increase in economic activity which would result in a reduction of capital gains taxes would lead to greater employment and thus higher income tax revenues. In other words, the economic benefits of a reduction in the capital gains rate far outweigh the short run costs of them. There are a number of studies I could quote if I had the time to do so.
To sum up, the thrust of the motion today is to alleviate the burden of poverty and calls for two specifics on tax policy. We must meet the needs of those who are not able to help themselves and are facing harder times. However higher taxation and increasing debt are not working.