Submission to the Standing Committee on Finance and Economic Affairs regarding Bill 218, An Act to implement 2009 Budget measures and to enact, amend or repeal various Acts

December 7, 2009

Presented by
Michael Creek, Voices from the Street
Greg deGroot-Maggetti, Mennonite Central Committee Ontario
Co-chairs of the 25 in 5 Network for Poverty Reduction

Background

The 25 in 5 Network for Poverty Reduction is a multi-sectoral organization comprised of more than 450 provincial and Toronto-based organizations and over 1,000 individuals working on the elimination of poverty in Ontario. We believe that making good on the province’s commitment to reduce child and family poverty by 25 percent in the next five years is key to addressing the challenges facing Ontario today and into the future.

It is critical that Ontario apply a “poverty lens” to any new initiative that it is bringing forward. Be it fiscal, economic or social policy, new proposals must be subject to questions about how they will contribute to, or undermine, Ontario’s Poverty Reduction Strategy.

Poverty reduction must be top of mind because:

More and more people are hurting. Action on poverty reduction is crucial to support hard-hit Ontarians right now, so that we can ensure that we can all get back on our feet as quickly as possible. Now more than ever inaction isn’t an option.

A focus on poverty reduction is key to Ontario’s economic recovery strategy. Policies to tackle poverty lay the foundation for a stronger, well-equipped workforce where all hands are on deck ready to take on the challenges of a 21st century global economy.

Social investments will continue to stimulate the economy and help to prevent a longer recession. Investments in economic stimulus targeting the poor are helping to stave off the worst of the recession and create jobs.

Poverty Reduction Benchmarks for HST

The 25 in 5 Network has identified five key areas that must be addressed to ensure that the HST contributes to the objectives of the poverty reduction strategy:

1. Introduction of mitigating measures, such as:
   • indexed tax credits for low income families; and
   • the exclusion of key household items from any tax increases.
2. Regular payments of credits to ensure that low income households have access to regular cash flow. These credits should be staggered with the GST credits to ensure a more even distribution of income throughout the year.
3. Outreach efforts in partnership with communities, including First Nations communities, to ensure take up by low income Ontarians of the refundable sales tax and property tax credits.
4. Monitoring of the impact of the HST and related mitigating measures on low and income households (including annual reporting in the Budget), and a commitment to further action if it is found that there are negative impacts on low and modest income households.
5. Careful consideration of the cost of the proposed personal and corporate income tax cuts proposed in Bill 218.

Mitigating Measures

We note that the Bill 218 proposes a refundable sales tax credit of up to $260 per adult and child per year for low and modest income individuals and families. In addition, Ontario is also committing to $270 million in annual property tax relief for low- to middle- income homeowners and tenants.

We recommend that the Government move ahead with these measures, to monitor their impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

Bill 218 also sets out to exclude key household items—including diapers, feminine hygiene products — and low-cost meals from the provincial portion of the HST.
We recommend that the Government move ahead with these measures, monitor their impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

We also recommend that the Government consider increasing the refundable sales and property tax credits as a way to improve income security for low and modest income households and thus contribute to the goal of poverty reduction in Ontario.

Payment Schedule

We note that Bill 218 proposes to provide HST credits quarterly starting in August 2010, to be staggered with federal GST credits, to ensure a more even cash flow to help lower-income families.

We recommend that the Government move ahead with this measures, to monitor its impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

Take Up by Low-Income Households

In order to benefit from the HST credits, households must complete annual income tax returns. Many low income people do not file tax returns, for a variety of reasons, yet will be required to pay HST on many daily items.

We recommend that the Government of Ontario work with community partners and First Nations communities to implement strategies that will ensure maximum uptake of the refundable sales and property tax credits by low and modest income households. For example, providing funding for annual tax filing clinics would both ensure uptake and support the work of these partners in their local communities.

Monitoring

Advanced planning is critical to ensure that the HST aligns with poverty reduction objectives. Such attention must be sustained throughout the roll-out of the new initiative to ensure that the proposals are having their intended impact.
We recommend regular monitoring of the impact of the HST and related mitigating measures on low and modest income households, including annual reporting in the Budget.
We also recommend that the Government commit to further action if it is found that there are negative impacts on low and modest income households.

The Cost of Corporate and Personal Income Tax Cuts

In addition to the sales tax credit and the property tax credit, Bill 218 proposes reductions to personal income tax and corporate income tax rates. We understand that the aim of these tax cuts is to make the introduction of the Harmonized Sales Tax revenue neutral for the Government, to ensure that the HST includes mitigation measures for all households across the income scale and to create low corporate tax rates.

The 25 in 5 Network feels it is important to emphasize that taxes are the way we all – individuals and businesses – contribute to the public services and public programs that set a foundation for a prosperous and inclusive society.

As we look toward the recovery from the current recession, for example, we need to be sure that people have the education, skills and training to take up the jobs that will be created. Businesses will need to be able to find people with the skills to do the jobs they have available. And businesses benefit substantially from the public investments that are put into everything from early learning and child care, to primary school, high school, colleges and university, as well as training programs. Corporate income taxes contribute to having a well educated and highly skilled workforce. The lost tax revenue due to corporate tax cuts depletes the resources needed to ensure businesses can find the people they need with the skills they need.
In a similar way, as individuals and households we benefit from public education, public healthcare, public transit and public income security programs. Many of the jobs that were created in the last two recoveries did not provide extended health insurance – to cover dental care, prescription drugs, and vision care. The few dollars in personal income tax cuts that individuals and households will receive will not be enough to meet those expenses. That is why it is so important to develop public dental, prescription drug and vision care for those who do not have private coverage. Public revenue from personal and corporate income taxes would make it possible to do that.

We recommend that the Government – and Ontarians – carefully consider the cost of the proposed personal and corporate income tax cuts for the public infrastructure and services that provide the foundation for a productive, prosperous and equitable society.

Conclusion

Aside from the benefit to individuals and families of our recommendations, we want to emphasize that investing in poverty reduction benefits everyone and needs to be an integral part of Ontario’s economic recovery. Every dollar provided through the Ontario Child Benefit and through new HST credits ends up with local retailers and grocery stores. These dollars will help prevent a longer and deeper recession and get Ontario into recovery mode faster. Investments in public programs and services help ensure that all Ontarians can be a part of that recovery.

For further information contact:

Michael Creek
Voices from the Street

Greg deGroot-Maggetti
Mennonite Central Committee Ontario