To the Editor:
Justin Trudeau’s plan to achieve greater fairness for middle-class families, and all those working so hard just to get to the middle-class, is a constructive mixture of progressive social policy and sound economics. Announced two weeks ago, it was the first of several Liberal policy initiatives coming this spring and summer. Stay tuned for more.
The plan is progressive and fair because it’s related to income levels and focused on “need”. In other words, for those on lower incomes where needs are greater, more support is provided. The plan is good economics because it’s simple, efficient and transparent in putting more dollars into the hands of lower and middle income families who will quickly reinvest that money in the economy. Reducing inequality is good for economic growth.
Carefully costed to be fiscally responsible, accounting for all revenues, expenditures and offsets, Mr. Trudeau’s plan has two components:
(a) a targeted and much improved Canada Child Benefit (CCB) to help families defray the costs of raising kids up to the age of 18; and
(b) a Middle-Class Tax Cut which lowers the tax rate on that portion of Canadians’ incomes between about $45,000 and $90,000.
The new CCB would provide some $22-billion in targeted financial assistance annually to families who need it. That’s $4-billion more than current federal child benefit programs.
The money would come from consolidating three existing family “benefit” schemes, adding in the annual saving from not proceeding with the flawed Income Splitting idea that the late Jim Flaherty said was too expensive and unfair, and then topping that up with tax dollars saved by cutting such things as wasteful government advertising and exorbitant spending on external consultants.
The existing programs are a hodge-podge of inconsistencies. Some are means-tested, others are not. Some are taxable, others are not. Because some are dribbled out in small equal amounts across the entire income scale, top to bottom, they are inadequate for some families and superfluous to others.
The government’s tax rules add further complications, some of them quite perverse. Families with the same number of kids and the same incomes, can end up being treated in sharply different ways, depending on whether they have one-parent or two, or one-income or two. Income splitting on top of that provides a further bonus of $2,000 to some of those with earnings of a quarter-of-a-million, but nothing at all for the single mom or dad at the poverty line.
By rolling all these funds together, topping them up with money saved from eliminating waste, and then targeting lower and middle income families, the new CCB would provide a lot more help per child every month, completely tax-free, to nine out of ten Canadian families.
Mr. Trudeau’s plan starts at $6400 per year for every child under six years of age in the lowest income families (i.e., those with a total family income below $30,000). For children over 6 but under 18, these lowest income families would receive $5400 annually. The new CCB would be gradually reduced as family incomes get bigger. The benefit would phase out entirely at $160,000 of income (if the family has one child over 6) and at $190,000 (if the family has one child under 6).
Take the example of the statistically “median” Canadian family – two parents, two kids (4 and 8 years old), with a total income of $90,000. Under current child benefit programs, such a family gets about $3300 a year. Under Justin Trudeau’s plan, they would get $5875 – better than $2500 per year MORE.
Repeat: Because it’s focused, linked to income/need, and tax-free, Mr. Trudeau’s plan would provide MORE to nine out of ten families!
The other element of the plan – the Middle-Class tax cut – is pretty straight-forward. The tax rate applicable to the “middle” income bracket (approx. $45k - $90k) will be chopped by 1.5 points, from the existing 22 per cent down to 20.5 per cent.
To cover the cost of providing this tax break at the middle level, we will ask the top one-percent of high-earning Canadians to pay a little more. A new upper income tax bracket would be created. The top rate would be 33 per cent on that portion of higher incomes above $200,000.
People in this upper income range contribute a great deal to the success and well-being of this country, economically and otherwise. They include many generous nation-builders. We’re asking them to do a little more to achieve greater fairness and strength for the middle class and all those working so hard just to get there. A successful middle class with expectations of progress and upward mobility is good for all of us.
Ralph Goodale
Member of Parliament Wascana
