FINA Committee Report

SUPPLEMENTARY OPINION OF THE NEW DEMOCRATIC PARTY OF CANADA

The report: Income Inequality in Canada, provides an all too brief summary of the disturbing growth of income inequality in Canada over recent decades and the social and economic ills associated with its escalation. Unfortunately, this study was limited to a mere three public hearings. It was also limited in scope: the Committee only sought recommendations on how to improve equality of opportunity. New Democrats believe that both the limited hearings and the limited scope of the study were grossly inadequate to address such a fundamental problem facing Canadians.  And although the report successfully details many of the key elements of the income inequality problem, we believe that the recommendations of the report fail to truly confront the problem. For this reason, the New Democrat members of the Finance Committee have been compelled to submit this supplementary opinion.

It is clear to all Canadians, as it should be to all Parliamentarians, that income inequality in our country is spiraling out of control. The incomes of the top 1% are surging, while the typical Canadian family has seen their income fall over the last 35 years. And it matters. As was made clear in the witnesses’ testimony, high levels of income inequality slow growth, destroy communities, and prevent millions of Canadians from achieving their full potential. It hurts our economic prospects, our health, and the opportunities available to our children.

It is not enough to simply acknowledge that this problem exists. In order to find solutions, we need to look to the historical and ongoing causes of escalating income inequality. Both Liberal and Conservative governments have made decisions that enabled this dire situation to escalate. According to Professor Robin Boadway, the David Chadwick Chair in Economics at Queen’s University:

“There have been secular changes in the tax system, such as changes in the tax treatment of capital income, changes in the structure of labour markets and unemployment, and the effect of changes in federal-provincial transfers on provincial social protection programs. All of these have reduced the automatic responsiveness of the tax-transfer system to income shocks, and this has been particularly noticeable at the top and bottom of the income distribution.”

Professor Boadway’s analysis concludes that government is fundamentally responsible for the surge in income inequality. This is consistent with work by Drs. David Green, Kevin Milligan, and Marc Frenette who have determined that changes to the tax and transfer regime in the 1990s and early 2000s led to a drastic increase in after-tax income inequality. As the gap between the ultra-rich and the vast majority of Canadians began to escalate in the 1990s and early 2000s, Liberal and Conservative governments did nothing to solve the problem.  It's no surprise, sadly, that when the data is examined, 94% of the increase in inequality over the last 35 years occurred under federal Liberal governments.  

The tax and transfer regime is only part of the problem. There are also important institutional features at play that have allowed inequality to escalate. Collective bargaining is perhaps the most effective method to impact pre-distribution income inequality. Successive Conservative and Liberal attacks on free and fair collective bargaining, have made it more difficult for Canadians to take advantage of this fundamental right, and this basic tool. In addition, many witnesses made it clear that a stagnant minimum wage and deregulation have further increased inequality.

New Democrats believe that we can build an economy that brings shared prosperity to all Canadians. We need a tax system that is fairer, simpler and more progressive. Instead of boutique tax credits used disproportionately by the wealthiest Canadians, we should be looking to boost the wages of the working poor with the Working Income Tax Benefit. Rather than clawing back health transfers, we need to fund health care properly and to expand coverage for prescription drugs in an effort ensure that all Canadians can live happy and productive lives. And instead of driving seniors into poverty as the Conservatives have done with their totally unnecessary cuts to Old Age Security, The government should ensure that no senior lives in poverty.

New Democrats strongly believe that we need concrete solutions to contain and reduce escalating income inequality to benefit all Canadians. A failure to do so will lead to a less prosperous Canada for us all. To that end, New Democrats are proposing a series of recommendations to reduce income inequality in Canada:

Taxation and Transfers

·        We recommend that the government implement a thorough review of Canada’s tax and transfer system to determine, which changes to the regime have resulted in the greatest increases in income inequality.

·        In addition, we recommend that government review all tax expenditures to assess their cost-effectiveness and fairness.

·        We believe that we should take immediate action to limit tax evasion and close unfair tax loopholes. To this end, we recommend that the government enact the recommendations from the NDP’s supplementary report on tax evasion.

·        We believe that the Conservative government’s announced “income splitting” plan should not move forward. This is a giveaway designed for political purposes that will almost entirely benefit the highest income earners while excluding most Canadians entirely, thus, exacerbating the income inequality problem.

Retirement Security

·        We recommend that the Conservative cuts to OAS-GIS, which will throw tens of thousands of seniors into poverty, be immediately reversed.

·        We recommend that the GIS be further expanded to help eliminate seniors’ poverty and to reduce income inequality.

·        We recommend that the government move forward on proposals from provincial and territorial finance ministers to increase basic public pension benefits under the Canada and Quebec Pension Plans, and implement a plan to begin phasing in increases without delay.

Poverty and the Working Poor

·        We recommend that the government consider proposals to expand the Working Income Tax Benefit to help reduce income inequality and encourage labour force participation.

·        We recommend that the government move forward on the NDP’s call to implement a national strategy to eliminate poverty.

·        We recommend that the government reinstate the federal minimum wage.

Collective Bargaining

·        We recommend that the government immediately halt its attack on collective bargaining rights for Canadians, as exemplified by bills C-377, C-525, C-60, and C-4. Restricting access to collective bargaining will only further exacerbate the increase in income inequality.

·        Rather than attacking collective bargaining rights, we  recommend that the government consider measures to protect free access to collective bargaining, by: increasing penalties for unfair labour practices and by strengthening first contract arbitration

Child Care and Early Childhood Education

·        We recommend that the federal government work with the provinces and territories to increase the number of good quality, accessible and affordable early-learning and child care spaces in Canada.

Youth

·        We recommend that the government develop a comprehensive strategy to deal with persistent structural youth unemployment and underemployment.

·        Furthermore, we recommend that the government work with the provinces to limit the illegal use of unpaid internships and ensure that young Canadians are paid for the work they perform.

Gender

·        We recommend that the federal government rescind the Public Sector Equitable Compensation Act and implement the recommendations from the 2004 Pay Equity Taskforce.

·        We recommend that the federal government take a leadership role and work with relevant partners to end the gender income inequality gap

Aboriginal Canadians

·        We recommend supporting aboriginal communities by lifting the 2% cap on social funding for aboriginal communities and ensuring that funding for on reserve schools is on par with funding for other schools.

Employment Insurance

·        New Democrats recommend that protections be put in place to prevent governments from using the EI fund for general revenue, as was done previously by both Liberal and Conservative governments.

·        Furthermore, we recommend that the government reverse changes to the Employment Insurance system including damaging new rules requiring Canadian workers to accept as much as a 70% reduction or risk losing benefits.

Housing

·        We call on the federal government to develop a national housing strategy and commit to investing in social and affordable housing.