Mr. Speaker, in this prebudget debate we have heard every aspect of fiscal policy conceivable addressed. Many of my colleagues have quite adequately spoken to our critique of the government's misplaced fiscal priorities with respect to taxes, health care and debt reduction. We have also articulated our view about different priorities to place greater emphasis on health care, tax relief and debt reduction.
While I recognize the Reform Party is fallible, nevertheless we have worked hard as an opposition party, harder than any other opposition party that I am aware of in my political experience to present constructive details on substantive alternatives to the government on fiscal policy.
In that respect we have released a lengthy paper “Taxes and Health Care: A Critical Prebudget Submission of the Official Opposition”, of some 60 pages, that complements the paper we released last year “Beyond a Balanced Budget” which analyses in some detail the fallacious claims of the government to fiscal prudence. It goes into some detail into offering the kinds of tax relief we would like to see, ideas like legislated debt reduction, legislated balanced budgets and an increase in health care funding by reallocating spending from lower priority areas. I encourage people interested in these issues to give us a call and receive a copy of this paper.
The government has claimed that it is about to provide tax relief to Canadians in the upcoming budget. I am more than a little skeptical when I hear the comments of the Right Hon. Prime Minister who in 1996 said in response to a question on whether he preferred across the board tax cuts: “I do not think it is the right thing to do in a society like Canada”. He did not believe it was right to provide Canadians with tax relief in a society like Canada.
I do not know what he meant by that, but perhaps we got further clarification last week when the Prime Minister was at the economic summit in Switzerland and said that he agreed with the previous Conservative government's policy of steeply raising taxes in the midst of the 1991-92 recession.
This was the same Prime Minister who as Liberal leader castigated the then Conservative government for having raised taxes, for having deindexed the tax system and putting into play the vicious logic of bracket creep. He criticized that same Conservative government for having introduced the goods and services tax and for having raised taxes on corporations, businesses and individuals through the various 3% and 5% so-called high income surtaxes. That very same Liberal leader who six or seven years ago went across the country criticizing the then government for raising taxes, we now discover, secretly admired the deadly tax and fiscal policies of the then government.
It does not surprise us when we look at the record of his own government, a government which is rhetorically committed to the notion of tax relief but has committed itself to a policy of tax increases. We know, as the hon. parliamentary secretary admitted in questioning earlier this evening, that about three-quarters of the fiscal progress, the deficit reduction achieved in the government's mandate is attributed to revenue increases.
A fair chunk of that is attributable to higher tax rates through the pernicious, invidious tax of bracket creep which sucks about a billion additional dollars out of the pockets of middle income Canadians every year; through the $10 billion 72% increase in CPP payroll taxes, the single largest tax increase in Canadian history; and through some 36 other tax increases levied by the government on individuals and businesses. Yet the government still claims that it is committed to tax relief.
The government has perpetuated in Canada a shrinking standard of living, a shrinking level of disposable income. Never before in Canadian history have individuals worked harder and longer. Never before have we had more families with both parents earning two or more incomes. Never before have we had individuals, according to Statistics Canada, working longer hours and longer work weeks under greater pressure reflected in many of the social problems we are experiencing. Never before have we had Canadian families earning more in gross pre-tax dollars.
Yet, while people are working harder to get ahead, they are falling behind, not because of their own lack of effort and diligence and fortitude, but because federal tax policy keeps taking more of what they earn. We now have the atrocious situation where Canadian middle class families have seen their after tax disposable incomes on the decline for over 15 years, working harder year after year to try to get by economically and falling further and further behind. They are powerless to change it because only the government has the ability to undo the damage.
That is why the OECD says that Canada has the worst record among its 26 member nations with respect to per capita GDP growth, the worst record in terms of standard of living. Imagine that a country that ought to be the most prosperous, the most productive nation in the world given our enormous resources, human and natural, finds itself falling further and further behind. Relative to our G-7 partners, the personal income tax burden in Canada is a full 56% above the average. The corporate income tax burden in Canada is 9% higher than the average of our G-7 partners.
If we were to roll back the personal income tax burden to the level where it was when the government took office in 1993, it would require an $8 billion reduction in federal income taxes. Canada has the highest property tax burden in the OECD. We have the highest total tax burden in the G-7 when we remove social security taxes, with a total tax burden 28% higher than the average of our major six economic partners, a whopping 48% higher than our single major competitor, the United States, where we conduct 85% of our trade.
In 1996 the average Canadian family paid a total tax bill of $21,242 or 46% of income. The average family was paying 46%, not the high income families. It was more than they paid for food, shelter and clothing combined. However in 1981, in constant dollars, the same family paid only $11,000 and change in taxes.
In the first six months of 1997, just a couple of years ago, governments in Canada took 67% of the increase in the personal income of Canadians. Of every $3 in additional income received by Canadians that year, governments took $2, leaving one for the individual who earned them. Since the government took office the average Canadian has lost 155% of the increase in real income to taxes.
These may sound like just figures and statistics to you, Mr. Speaker, but I know you have a heart and understand the very real frustration many people feel because they work harder and yet fall further behind and the government takes two and a half times the actual increase in their real income.
The top marginal tax rate in Canada kicks in at about $60,000 Canadian, whereas in the U.S. the top tax rate kicks in at about $420,000 Canadian. This is an enormous discrepancy. When the Americans tax the rich they are taxing people who earn over $420,000 Canadian. When we tax the rich we hit middle class people who earn over $60,000, and hence such an enormous drain of human capital from our country in the brain drain. As I mentioned the CPP is going up, consuming any relief we see on employment insurance premiums and then quite a lot again. That is why we are proposing an ambitious program of tax relief which would provide an average taxpayer with an annual $1,300 pay raise and more than $2,500 for a one income family of four.
I would like to focus for a moment on a particular issue that is of increasing concern to me. That is the question of the inherent unfairness in the tax system for families who make the choice to raise their children at home. I cannot understand for the life of me why the government would adopt such a policy. It is not a partisan matter as the government is continuing the policy of the previous Conservative government. It is a policy which says that if Canadian families decide to make an economic sacrifice to forgo a second income and have one of the two parents stay at home most of the time or all of the time to raise young preschool children, they will be penalized. On the other hand, if they decide to raise their children in part through third party institutional day care and go off to earn the second income or extra income, they will receive a benefit from the federal government.
This is an absolutely perverse social and fiscal policy. It gets Canadian families all wrong because the vast majority of Canadian families want to have the option to stay at home and raise young children.
I know some members from other parties will say that this view is just some antiquated neanderthal view of Reformers who do not understand that the state of the family has changed and so on and so forth. I would submit that it is those folks who do not understand the nature, the desires, the longings and the dreams of Canadian families.
I refer to public opinion research recently undertaken on the issue. Compas Research recently did a poll indicating that 92% of respondents say that families with children today are under more stress than families 50 years ago. Most Canadians attribute this increase in the level of stress to economic pressure and consequently the impact the stress has on family breakups, rates of domestic violence, divorce, child abuse, et cetera. Many of the social pathologies with which we attempt to deal in our criminal justice system and our social programs are caused by economic stress in families.
What about the family tax burden? Eighty-two per cent of Canadians, not Reform Party members, felt it should be a priority for the government to change the tax law to make it easier for parents with young children to afford to have one parent at home. Eighty-two per cent is about as close as we get to unanimity in public opinion polling. Seventy-nine per cent felt it should be a priority to allow couples with children to pay lower taxes by filing joint income tax returns. Nearly eight out of ten Canadians say “Let us file our taxes jointly so that we are not discriminated against if we are a single earner in our family”. Eighty-one per cent felt it should be a priority to change the tax law to make it easier for families to take in and care for elderly parents.
To quote the pollster, he summarized it by saying that by an overwhelming margin Canadians wanted governments to slash the tax burden on families. They call for more favourable tax treatment of families supporting the elderly, joint tax returns and especially adequate cuts in family tax burdens to allow one parent to stay home with the children.
It is not the only interesting finding. We have seen that other polls have reached similar conclusions. Ninety per cent in a Compas poll indicated that a family setting was preferable to day care when raising a preschool child. Again it was not some crazy ideological agenda but the near unanimous majority of the Canadian people.
A 1991 poll conducted by Decima Research of working women indicated similar findings: 70% said that if they had the choice they would stay at home to raise their children as opposed to 27% who said they would rather work outside the home.
By a margin of seven to three Canadian professional working women say they would rather have the choice if they could afford it to stay at home and raise their preschool children.
What happens when these very same families look at the tax code? What do they see? They see that if they give up that second income and the father or mother decides to stay home with two or three young children and raise those kids at home, they will be forgoing the child care tax deduction. That deduction is available to people who take their kids out to third party institutional day care. The government increased it in the last budget. I think it amounts to $7,000 per preschool child. That is a huge subsidy that family is giving up. At the same time it is giving up the second income.
Similarly, if that father stays home while the mother is working, he will only be able to claim a spousal tax deduction as opposed to the full personal amount. The spousal amount is $2,000 less than the full personal amount.
If the same family were to divorce and reconstitute itself as a common law couple, then both parents could claim the full personal amount. That is a penalty against marriage, while the child care deduction is a penalty against rearing children at home, which 90% of Canadians and 70% of professional women would like to do. It makes no sense. It really is bizarre.
All sorts of credible organizations have spoken to this issue. The National Foundation for Family Research and Education, an organization on whose board I once served, has publicized the results of some very interesting academic research. After having conducted a lengthy meta analysis of child rearing researchers Violato and Russell in their 1994 paper on the effects of non-maternal care in child development concluded that non-parental care for more than 20 hours per week has a negative effect in three areas of social pathology, social-emotional development, behavioural adjustment and bonding. Furthermore, 20 hours per week of non-parental care such as institutional daycare has a minor negative influence on the cognitive realm, learning. These are significant findings.
They are telling us that the explosion we have seen in our society in the past three decades in youth and teen suicide, the second highest level per capita in the developed world, the explosion in youth violent crime which has increased by 150% since 1986, all the related pathologies and social problems can at least partly be traced to the increase in non-parental care which this parliament chooses to subsidize through the child care deduction and other similar inequities in the tax system.
These subsidies add up. Let us imagine a scenario where a married couple has two wage earners. The husband earns $40,000 and the wife earns $20,000 per year and they have a relative who takes care of the kids. They pay a combined total of over $6,000 in federal income tax.
A similar couple across the street with one income earner bringing in $60,000 will pay $10,000 in income tax. That is $4,000 more than the two income family. That is a significant difference.
Finally, a two income couple earning $60,000 and paying for third party care outside the home will have to pay $10,000 less in federal taxes than the single income family raising their children at home.
In effect, couples who choose to marry legally and raise their children at home seem to be signing a guarantee of tax discrimination when they put their names on their marriage certificate.
What then is the solution? The solution is very simple. The solution is for parliament to decide to allow the practice known as joint filing of tax returns so that single income families can split right down the middle the income of the one main earner, thereby moving their total taxes into a much lower marginal rate and allowing them both to claim the full personal exemption.
This would make an enormous difference in the taxes paid by single income families. Another major change would be to create equity in the child care system by converting the current deduction into a refundable credit which would be very progressive. It would be available to all families, regardless of how they choose to raise their kids, whether at home or through institutional care, and regardless of their income.
I close by inviting the government to look much more closely at the need for family tax fairness. I know that in the last parliament the member for Mississauga South had Motion No. 30 passed which called for the same kind of tax treatment that I am proposing. It was actually passed in this House by a majority of members.
There is a consensus in this parliament and a consensus in this country. There is no good reason to continue to discriminate against Canadian families working so hard to do best by their children.