In the fall of 1999 one might have thought that fixing the focus of the 2000 budget would be a battle between advocates pushing for increased investment in Canada’s social programs on one side, and business lobbyists and high?income earners pushing for tax cuts on the other side. But the terrain had dramatically narrowed by January 2000. The terrain for budget debate no longer included the question of whether taxes would be cut at the expense of increased investment in social programs. Instead, it was dominated by a discussion of which taxes would be cut and by how much.
This shift in debate was foreshadowed by the release of the Finance Committee’s pre-budget recommendations in December 1999. That document recommended personal and business tax cuts to be phased in over five years including: an increase in the basic and spousal exemptions by 15%; a cut in the middle tax rate from 26% to 23%; a 15% increase in the thresholds at which the middle and high?tax rates take effect; an increase in RRSP contribution limits to $15,500 (from $13,500); a reduction in the taxable portion of capital gains to 65% from 75%; a reduction in the general corporate income tax rate by 5%; and the elimination of the 5% individual surtax on high-income Canadians. The Finance Committee dismissed any new spending by the government until Canada’s debt is further reduced.
Paul Martin’s seventh budget was delivered on February 28, 2000. The tone set by the Finance Committee in December – tax cuts at the expense of increases in social spending – was reflected in the budget resolutions. The budget proposes to reduce federal corporate tax rates from 28% to 21%; lower the capital gains inclusion rate from 75% to 66 2/3%; and eliminate the surtax on high-income individuals.
Despite the fact that the deficit was largely eliminated through cuts to social programs, new infusions into Canada’s social safety network were limited. The Canada Health and Social Transfer, the mechanism the federal government uses to transfer funds to the provinces for health and education, will receive an additional supplement of $2.5 billion. This limited infusion of funding was provided despite evidence that although federal taxes increased slightly from 15% to 16% of national income under the Liberals, program spending has been dramatically cut from 16% to 12% of gross domestic product. In fact, Canada’s program spending fell faster than that of all other G-7 countries (United States, Japan, United Kingdom, Italy, Germany, and France) between 1992 and 1998 – falling 8.3% relative to the gross domestic product. Federal program spending is now at the lowest level since 1949?1950.
What was perhaps more surprising about budget 2000 was the absence of significant measures directed at reducing child poverty. The Liberal government has made much of its commitment to Canada’s poor children (generally ignoring the fact that these children have poor parents and often, poor single-parent mothers). Although Paul Martin announced increases to the Canada Child Tax Benefit in the budget, that benefit is currently clawed back by provincial and territorial governments where the recipient is not working in recognized, paid employment (with the exception of Newfoundland and New Brunswick). Therefore, most families living on low incomes will not benefit from this limited spending measure.
NAWL made several submissions to committees in 1999 dealing with issues related to the “children’s agenda”. Notably, we addressed the lack of government commitment to supporting women by working to eliminate the social deficit created in the wake of the 1995 introduction of the Canada Health and Social Transfer and the repeal of the Canada Assistance Plan.
Our concerns have not been heard.
The NAWL Alternative
In a press release on February 16, 2000, NAC and NAWL, supported by other women’s organizations, set out 17 recommendations for reinvestment that would begin to address women’s needs, and take women’s inequality seriously:
1. Stronger social programs and a more progressive tax system that addresses the growing gap between the rich and the poor in Canada;
2. Reinstatement and expansion of core funding for women’s equality-seeking organizations;
3. Increased funding of the Status of Women Canada’s Women’s Program to $30 million;
4. Allocation of the promised $50 million to grassroots, feminist services to deal with violence against women;
5. Abolition of the $975 head tax to which new immigrants have been subjected to for the past 5 years, reinstatement of funding for immigrant and refugee settlement programs, and commitment to fair and just immigration and refugee policy;
6. Enhancement of funding to: legal aid for family law, immigration and refugee law, and other non?criminal matters; programs to combat violence against women, including counselling services, shelters and second stage and transition housing for women leaving abusive relationships; and attendant and respite services for people with disabilities and their caregivers;
7. Restoration of funding for health, education and welfare to levels in place before the 1995 budget cuts with national standards (outside Quebec). In the case of Medicare, this requires a determined defense of the standards in the Canada Health Act, and a parallel act to introduce homecare and pharmacare. In the case of welfare, it means prohibitions against workfare and the provincial claw back of the Child Tax Benefit from those most in need, including single mothers receiving social assistance;
8. Guarantees that the provinces cannot claw back the Canada Child Tax Benefit from social assistance payments. From there, begin to enhance the actual benefit, by such measures as reinstating the universal family allowance;
9. Introduction of a National Early Years Education and Care Program, a child care program with national standards (outside Quebec) which would provide universal, non-profit, high-quality services to all parents of pre-school children regardless of the parents’ labour force status;
10. Extension and enhancement of parental leave benefits under Unemployment Insurance;
11. Repayment of $26 billion the government has borrowed from the UI (EI) account surplus since 1994;
12. A publicly-funded training program for the unemployed, including those on social assistance who want to re-train or upgrade, with special initiatives for those most disadvantaged in the labour market, including women, based on national standards (outside Quebec);
13. Increased and adequate funding for the Canadian Human Rights Commission to enforce human rights and pay equity claims;
14. Allocation of 1% of the federal budget to the creation of social, affordable and subsidized housing as part of a new social housing initiative with national standards (outside Quebec);
15. Stronger public pensions that would assure women’s economic well?being from OAS, GIS and CPP/QPP;
16. Extension of all public benefits and tax-subsidized private benefits to gay and lesbian couples; and
17. Student grants, not loans, and new measures to phase in the elimination of the tuition/courses fees that have left too many students with record levels of debt. The promise of limited tax cuts for some Canadians provides only marginal relief for Canadian women when achieved at the cost of dramatic cuts to social programs. Eliminating the fiscal deficit at the expense of the social deficit is not good enough. The Liberals should not bask in tax-cut glory. They must be held accountable for the damage done as a result of the dramatic cuts to social programs in 1995.
NAWL’s Working Group on Fiscal Policy