A tax policy expert has told the New Brunswick government that its proposed changes to the tax system would widen the gap between women’s and men’s incomes and would seriously destabilize New Brunswick‘s tax base.

Queen’s University law professor Kathleen Lahey says the government’s Discussion Paper is not really a tax policy analysis so much as an attempt to sell specific tax changes that fit into a particular focus – promoting economic development. Professor Lahey, in Fredericton to speak at a noon hour conference, said if the Government had begun by asking whether the current provincial tax/transfer system is optimal, the analysis would have considered whether the system was progressive – made people pay according to their ability to pay – and whether it was fair, efficient and provided adequate and stable revenues.
“It would also have included gender impact analysis and if that had been done, the proposals may well have looked very different.”

The government’s current proposals “will widen the existing gender gap between women’s and men’s total incomes, taxable incomes, and consumable (aftertax) incomes. They will seriously impair and destabilize the existing tax bases, with the result that the government will be able to plead poverty when faced with demands for adequate childcare resources, low-income supports and development projects that are capable of helping N.B. women overcome their disadvantaged economic status.”

She said the real problem arises not just because of greater tax cuts for higher income taxpayers, nor out of the 2% increase to HST, but out of the interaction between those two proposals. The result is to slice 28% of the personal income tax load off at the highest income levels, replace only two-thirds of that lost revenue, and replace it with the most regressive type of tax.
“This will make it more difficult in the future for women to move toward economic equality, widening the aftertax gender gap.”

The increase in HST plus the proposed universal income tax rate of 10% would leave men with $316 more in aftertax income for 2008 on average, women with $198 more. The HST increase plus the proposed lower two-tier income tax rate leaves men with $300 more, and women with $119.

Kathleen Lahey was principal investigator in a study commissioned by the New Brunswick Advisory Council on the Status of Women to respond to the government’s Discussion Paper on New Brunswick’s Tax System in June 2008.

Ginette Petitpas-Taylor, Chairperson of the Advisory Council, said, “As Professor Lahey concludes, the government should not consider tax proposals that increase inequality between the sexes, given its heavy obligations to eliminate remaining areas of disadvantage faced by N.B. women.”

The study, What About Women? Gender Analysis of Discussion Paper on New Brunswick’s Tax System, believed to be the first gender analysis of a major prospective tax policy document in Canada, has been submitted to the Legislative Committee’s Select Committee on Tax Review.

The study says women in New Brunswick live in a very different social, economic, and political world than men.

“Women have substantially smaller incomes, heavier workloads, and limited access to critical resources. The overall ‘gender income gap’ in N.B. was at least 35% in 2005 and is estimated to reach 36.4% by the end of 2008. The single biggest barrier to women’s economic security and equality is lack of access to adequate childcare resources. Unlike men with wives/partners, substantial numbers of women, about 23%, opt for part-time work, often in order to balance the low money return for their labour with the high after-tax value of their own unpaid childcare and domestic work. Women who work outside the home habitually assess their earning capacity by treating childcare expenses as a cost of working, which can discourage some from paid work. At the same time, men who expect to be able to support their families on a single income can count on the untaxed and unpaid care work of their wives/partners.”

Professor Lahey says several of the benefits proposed by the government would not go to those most in need, since about 41% of all N.B. women who filed income tax returns had no tax to pay at all, nor did 27% of men.

New Brunswick’s proposal to increase the personal exemptions for taxpayer and spouse to $12,000, would create one of the largest personal tax-free zones in any province and would add to the invisible barriers to women’s paid work. The larger the tax-free zone for a high-income single-income couple, the more income the second partner has to earn to financially justify paid work.
The government’s proposed non-refundable child tax credit of up to $400/child, which Professor Lahey termed a very expensive tax benefit, would be more fully available to male taxpayers. Combined with the proposal to increase the exemption to $12,000, few lone mothers would be able to take advantage of the child tax credit. The solution would be to make it a fully refundable tax credit, based on the income of the parent with the lowest income. Similarly, the proposed Universal Child Care Benefit for every child under 6 would have a strong negative impact on women. It would not improve availability of fulltime regulated childcare, and so becomes a luxury payment to parents who can live on one income and do not have childcare expenses.

The proposed Tax-Free Savings Accounts would also have a negative impact on women, since they would be used by those with the highest incomes; and unlike spousal RRSPs, allow ‘pretend sharing for tax purposes’ without requiring actual legal sharing.
“The proposed increase in the HST would fall more heavily on those with the lowest incomes – the same group that will not be receiving any benefits from cuts to the personal and corporate tax rates, from increases in tax credits and exemptions, and will be exposed to carbon taxes and the inflationary effects of those taxes. Increasing the HST rate to 10% would produce about two-thirds of the amount of revenue lost if either of the proposed cuts to personal income tax were adopted. Women, having lower incomes, spend a greater portion of it on HST-taxable goods and services.”

For further information, contact Ginette Petitpas-Taylor or Rosella Melanson at 1-800 332-3087 or 506 444 4101 or rosella.melanson@gnb.ca.

The document, What About Women? Gender Analysis of Discussion Paper on New Brunswick’s Tax System, is on the Advisory Council website: www.acswcccf.nb.ca/english/acsw1.asp