According to recent statistics, the traditional nuclear family is no longer a reality for more than 50% of Canadians. As taxation systems have largely been built on the old model,
The first requires analysis of where the budget lies on a broad political spectrum. At one end, the budget may follow the mantra of cutting taxes, reducing the deficit and the overall size of government, while focussing on economic competitiveness, the military, and law and order. At the other end, the budget may allow the government role and its expenditures when there are important social, environmental and economic initiatives needed to build a sustainable and inclusive society. Both approaches require a sense of balance, but the fulcrum between investing in public goods and services and freeing the individual will be differently located.
The second requires an analysis of a budget’s gender impact. This may appear to be a relatively simple task. Just examine individual measures to see if their impact on men and women is similar, and if not to determine how they should be adjusted to achieve greater equality of result. In reality, it is never that simple. Expenditures, taxes and debt can be too high or too low for long term wellbeing, for the individual and for society. Add the nation’s role in the international context – peacekeeping, investment, trade and aid – and you have a more formidable task.
The current aim is to restrict the analysis in the interest of gender equality to the gender impact of various tax measures, with some reflections on recent Canadian budgets. Much of my information comes from Kathleen Lahey, a Queens Economics professor I met through FAFIA in New York, and Armine Yalnizyan who FAFIA engaged to analyze the 1995-2005 decade in terms of gender impact.
The Context:
1. While Canada enjoyed #1 spot in UNDP’s Human Development Index (HDI) during the ‘90’s, we have now sunk to #3 in ;01 and #7 in ’06. Our rating on the Gender Development Index (GDI) has been consistently below that on the HDI.Other top ranking countries have continued tom improve their rating.
2. The UN World Economic Forum Gender Gap Index (GGI), based on economic participation and opportunities, educational attainment, political empowerment, health and survival, told a similar story: #14 in ’06, #18 in ’07.
3. These declines have been attributed to women’s different political economy: lower wages, more responsibility for unpaid work, more single parents.
4. Even women with advanced education experienced lower wages, glass ceilings, more child care hours (13/wk for men, 35 for women).
5. The large gender income gap persists until late in life when inheritance and longevity effects appear.
6. Women are less economically competitive throughout their lives, leading to proportionately more: 2nd class incomes, economic dependency, marginalized and interrupted work, poverty, smaller savings , lower retirement benefits, constrained rights to EI, smaller CPP and fewer opportunities for advancement. Race, class and disability further aggravate the inequality.
Taxation and Gender Budgeting (analysis of different impacts on men and women of revenue and expenditure)
1. Income and assets vary by gender; so does taxation even though it may appear neutral. Its impact is affected by economic status and women’s greater need for social services; tax principles, the total impact of the mix of taxes, and the types of credits and deductions (tax expenditures).
2. Governments should report impacts of tax expenditures as they do now giving economic and social impacts of many tax items (estimates of impact, projections of fiscal impact, how calculated and why considered tax expenditures).
3. Graduated income taxes are seen as “progressive”, “fair” or “redistributive” but the way they are graduated makes the difference.
a. In ’89, the number of tax brackets was reduced from 13 to 4, and all shared an exemption of $9600. People with incomes close to $15,000 paid the same tax rate of 15% (+GST/PST of 13-20% depending on the province or territory) as people with incomes close to $30,000. Many more women than men earn at the lower level so more women spend proportionately more of their income on tax.
b. In ’08, the tax rate was reduced from 17% to 15%, still a higher rate than before the above change.
c. Gender Budget Analysis should analyze the impacts on the majority of men and women using pre-1989 rates as their baseline.
4. Payroll taxes:
a. CPP and EI taxes are paid by contributions from both employers and employees (currently CPP $2.475 each = 4.95 % of income; EI $2.42% by employers + $1.73 by employees + 3.9% income, 8.85% in total) with caps for higher income people.
b. Because of these caps, more women will pay a higher proportion of their income for CPP and EI.
c. Because women on average are paid less than men, and are more likely to experience interrupted or marginal work and have lower lifetime income, their benefits and capacity to save are less.
d. Federal income tax rates and GST are common across the country but provincial income tax rates, PST, and other payroll taxes vary so total tax rates will vary.
5. Income Tax Provisions:
a. Women can experience additional disadvantages when adult relationships (spousal or partner) are embedded in the tax structure; e.g. dependent deduction or credit, as women’s economic dependence is reinforced without her having actual control of any funds.
b. Marriage and co-habitation ‘penalty’ taxes such as GST tax credit and Canada Child Tax Benefits (CCTB) are currently the largest forms. They are really social welfare benefits administered through the tax system for lowest income people, among whom women outnumber men. If there is a couple total income limit, the woman who generally has the lower income does not benefit directly unless the partner shares it equally.
c. Joint tax provisions: joint filing or income splitting is the ultimate form but is not yet in the Canadian tax system except for seniors.
d. Other provisions that reinforce women’s vulnerability, economic dependence and poverty (disincentives to enter the labour force and reduce the labour supply) are:
i. Dependent spouse/partner tax credits
ii. Transferable credits
iii. Tax exemption for unpaid work
iv. Caregiver tax credit
v. Child care deduction expense limits
vi. Tax-back of child care expense deductions in the CCTB
vii. Non-deductibility of work-related expenses
viii. Universal child care allowance
6. Urgent Issue: Income Splitting
a. May appear under guise of softening impact of income trust controls
b. No guarantee that lower income person, generally the woman, actually
has control of half the combined income
c. retirement income splitting introduced in 2007 breaking Canadian tradition of capping joint tax instruments to ensure high income people contribute to neediest.
i. single income couples with a single high earner benefit most
ii. the lower income person will have no incentive to take on paid work unless able to earn enough to offset the benefits to the higher income spouse
iii. half the combined incomes may even push both into a higher tax bracket, as well as depriving the unit of unpaid work..
iv. no benefit received by low income people or people needing more retirement income
v. only of slight benefit to middle income people
vi. low income people subsidize high income people
d. Should be top priority if gender budgeting introduced as it changes
principle of entire Income Tax Act (taxing the individual’s income); joint ownership should require a legal agreement, as with CPP splitting and spousal/partner RRSPs.
e. Legally married and common law partners would be affected differently: a spouse reports a fictional share of the other spouse’s income but retains liability for tax owed; if either spouse refuses to pay both portions of the tax, the other spouse will have no legal entitlement to the income of the other spouse from which to pay the tax until death or legal separation
f. A common law partner (in most jurisdictions) will only have a “moral” right to the property, a disincentive to shared ownership, and contrary to the principles of gender equity incorporated in family law since the ‘70s.
g. Pension income splitting benefits higher incomes more (with incomes of >$70,000) higher income married and co-habiting couples at the expense of single and widowed persons, the majority of whom are women. It also weakens the state’s ability to fund other social programs like child care
h. Gender responsive budgeting should focus on the dangers of income
splitting and the negative effects of all other taxes, credits and deductions.
So how does Budget Canada 2008 stack up for women?
Slight gains were made:
1. Tax relief for lower income (women predominate) , but overshadowed by large
tax cuts for upper income
2. Tax free savings plan – benefits some upper income women but of little help to
lower income women who require all their income for basic needs
3. Arm’s length crown corporation established for Employment Insurance gives
fund some more independence, but no changes made in criteria for qualifying or
level of benefits to remove the current disadvantage faced by most women; the
$2m. allocated the crown is very little when compared to the $57.5m.
accumulation in the fund that remained in general revenue
But Major losses were also there:
1. Service expenditure devolved to provinces, abdicating strong role for federal government in providing services of particular value to women largely because of their family caretaking role.
2. No expenditures on a National Early Learning and Child Care program; military expenditures were increased.
3. Role of central government in funding services curtailed; equalization transfers to provinces shifted to per capita base rather than compensation to provinces with lowest per capita tax base.
4. Large allocations to debt reduction potentially of benefit all but of no help for people living below the poverty line.
In balance, the current gender income gap between women and men was widened by Budget 2008 rather than reduced.
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