STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
PRE-BUDGET CONSULTATIONS ONTARIO FEDERATION OF LABOUR
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
BOARD OF TRADE OF METROPOLITAN TORONTO
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS
CONTENTS
Monday 31 January 1994
Pre-budget consultations
Ontario Federation of Labour
Chris Schenk, research director
Canadian Federation of Independent Business
Judith Andrew, director, provincial policy
John Bulloch, president
Catherine Swift, vice-president
Alan Ely, member
William Gazer, member
Board of Trade of Metropolitan Toronto
Steve Lowden, vice-president
Donald McIver, chair, economic policy committee
Maralynne Monteith, chair, taxation committee
Association of Municipalities of Ontario
Michael Power, vice-president
Doris Brick, board member and past president
Ontario Association of Non-Profit Homes and Services for Seniors
Dan Oettinger, president
Michael Klejman, executive director
Monica Townson
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/
Prince Edward-Lennox-Hastings-Sud ND)
*Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)
*Caplan, Elinor (Oriole L)
*Carr, Gary (Oakville South/-Sud PC)
*Cousens, W. Donald (Markham PC)
Haslam, Karen (Perth ND)
*Jamison, Norm (Norfolk ND)
Kwinter, Monte (Wilson Heights L)
*Lessard, Wayne (Windsor-Walkerville ND)
*Mathyssen, Irene (Middlesex ND)
*Phillips, Gerry (Scarborough-Agincourt L)
*Sutherland, Kimble (Oxford ND)
*In attendance / présents
Substitutions present/ Membres remplaçants présents:
Crozier, Bruce (Essex South/-Sud L) for Mr Kwinter
Haeck, Christel (St Catharines-Brock ND) for Mrs Haslam
Clerk / Greffière: Mellor, Lynn
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
MONDAY 31 JANUARY 1994
The committee met at 1402 in the St Clair/Thames/Erie Rooms, Macdonald Block, Toronto.
PRE-BUDGET CONSULTATIONS ONTARIO FEDERATION OF LABOUR
The Chair (Mr Paul R. Johnson): The committee will come to order. Our first presentation this afternoon is by the Ontario Federation of Labour. You may start.
Mr Chris Schenk: My name is Chris Schenk and I'm the research director for the Ontario Federation of Labour. Thank you for this opportunity to make our views known. I'm not going to try to speak on everything, nor am I going to try to read out everything I've written here. I have given a brief written submission, of which I'm sure I brought enough copies for you all.
While I haven't mapped out a blueprint for the Ontario economy and prosperity tomorrow, I have tried to limit myself to a few points which I think point in the directions we need to consider and indeed need to explore in a manner that I think can begin to help us in terms of our economic growth and employment situation.
I'd like to talk for a few minutes about a full employment strategy. I want to balance this with some discussion about the deficit issue, but I want to focus on a full employment strategy. I think this is a really important issue for all parties as well as the government, to map out or at least begin the process of mapping out a full employment strategy.
One of the big deficits we face today is not just monetary, but it's in our own lack of utilization of human capacity that exists already. With so many people unemployed, they are not able to contribute to our economy, so I think the focus of the budget needs to be on a full employment strategy. I think as well that it needs to set up some clear targets for job creation, as I try to point out in my written submission.
As well, it needs to have some clear targets in terms of reducing unemployment. A beginning would be to move it out of the double-digit figure in the upcoming year and to have clear targets for reduction in the years thereafter. This is all easier said than done, of course, but I think there are ways we can begin to do that. I think what we have a consensus on -- I hope, at least -- is that continuing double-digit unemployment is totally unacceptable to us as people in Ontario, and certainly to those of us in the labour movement who represent employees and try to help them maintain and improve their living standards and employment conditions.
What about the deficit and debt issue then? We always have this problem that we are at a provincial level and there are federal jurisdictions that are important to the economy. There are issues of deficit and debt at both levels of government, indeed all levels of government. I'm not going to try to sit here and argue that the deficit and debt aren't important issues. I think we all recognize they're important issues. The question is, how can we deal with that important issue and have an economy which is growing and people employed?
I would like to suggest that debts and deficits are the consequence, in large part, of high unemployment and a sluggish economy, which have ramifications for government revenue. It's not just that debts and deficits have to be controlled and therefore we're going to have a certain amount of unemployment; it's that unemployment itself creates a revenue problem for government and we have difficulties with debts and deficits. I guess the other way of putting it is that a full employment economy, a growing economy, has a positive impact on revenue and has a positive impact on debt and deficit, at least as a percentage of gross domestic product.
The government has taken a number of initiatives in the area of employment creation as well as deficit and debt control. I'd just like to talk about a couple of them.
There is the new federal-provincial infrastructure program wherein Ontario, I believe, will receive about $722 million in federal money, to be matched by provincial and municipal funds. This is a good example of government initiatives in terms of employment. There are a host of others, such as social housing in the public sector; there's the highway expansion, Highway 407; there's the convention centre expansion etc. There are many more, really. We've seen the sectoral partnership fund, the Jobs Ontario Community Action program etc, a range of good initiatives that the government has done in a period of fiscal restraint. We'd like to commend the government for those initiatives.
On the other hand, when I look at the Minister of Finance's statement before this committee, I see that those things are outlined, and then when we move to debt and deficit, we see that there's an expenditure control program and a social contract, but we don't see anything about the employment consequences of those programs.
We see initiatives on the one hand without much being said there in his statement about the cost effects on deficit and debt, and then we see other programs put in to control deficit and debt without the employment consequences laid out before us.
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I think that's a bit difficult, because on the face of it at least one could read the minister's statement and say, "Doesn't your activity on the expenditure control program and the social contract, which takes about $6 billion out of this economy per year, not to mention the fact that it opens up legally negotiated collective agreements, have employment consequences which cancel out your employment initiatives?" such as the ones I've outlined.
One could argue that one needs to take limited funds and channel them in certain directions. There's absolutely no doubt about that. One can't continue always with the same kinds of programs that one has had, but I think the public sector cuts have an effect on economic recovery and have employment consequences which need to be at least detailed.
I would like to present a few suggestions or perhaps limit myself to one suggestion which I take up in the written statement as to how to create more jobs.
In conditions of some fiscal limitations, one needs to look at a reduction in working time, and the Canadian Labour Congress has asked the federal government to establish a task force on this issue. I would hope that the standing committee might consider this as an issue of some priority, and if the federal government isn't prepared to move in this direction, perhaps the Ontario government could consider it.
By reduced working time, I'm talking about ways in which we could create more work, given the amount of work available. A relatively easy one to deal with, at least in a legislative sense it's easier, is to restrict overtime.
We have in this country a situation where we have workplaces of hundreds, indeed thousands of employees. In some cases, they've got hundreds and thousands on layoff and yet the people employed are working overtime. Many of my own constituency find this useful, to get some overtime in hard times, but the trade union movement didn't fight for time and a half for overtime or double time for overtime because it wanted its members to make more money. Initially, that was thought to be a penalty on the employers to make them hire someone else. For a range of reasons that isn't happening as much as it could, cost to the employer being one.
Why wouldn't I work you an extra two hours overtime, and three or four other people, rather than hire someone else, given my administrative costs, given my costs of just familiarizing them with the tasks etc? There are ways around this, which a number of countries have looked at, and I think in Ontario today it's very timely to consider how we reduce work time so that more people can get some employment.
At the same time, I recognize that the areas of growth in this economy are not only in workplaces of below 20 employees, primarily in the service sector, but it's also part-time work and contract work. I realize that while in some cases there are full-time people working overtime, there are also a lot of part-time people who want more full-time work. Nevertheless, I think there are ways to come to grips with this issue which can be beneficial to all concerned.
I don't know what my time is but I would like to mention the fair tax issue if I could. This is another area which I think we need to look at more thoroughly. The Fair Tax Commission has done a number of studies. It's done some exhaustive work in some areas, so exhaustive that I, for one, have not been able read everything it's produced, but I do see there a number of areas which I think the government could look at.
There is an issue of tax fairness in this country. There is a concern by a lot of people that they are taxed considerably and that other people are not taxed as much or have ways around that tax. Realizing the economy in which we compete, realizing there are other jurisdictions we have to compete with, there are still ways to make taxes fairer and probably to increase revenue for the government at the same time, without making working and middle-class people pay more and more.
I have appended to the back of our submission some remarks we made to the Fair Tax Commission for your information.
Let me conclude by making four recommendations.
(1) The upcoming budget should establish a full employment strategy with clear targets for job creation as well for unemployment reduction.
(2) The government needs to provide accurate data on the employment impact of the expenditure control program and the social contract, not just the estimated expenditure reductions, so that a proper evaluation of the employment impact can be conducted and of course compared and contrasted with the employment initiatives that the government has made in a very positive manner.
(3) The government should lobby its federal counterpart to establish a task force on the reduction of working time. In the absence of a favourable response, it should establish an Ontario task force on this issue.
(4) The government should begin to implement key recommendations of the Fair Tax Commission -- I didn't say implement all of them, but some of the key ones -- with the knowledge that tax fairness will not only restore the integrity of the system, but by equitably taxing those who can most afford to pay, potentially expand tax revenue.
I'll end my presentation there. If your practice is to have questions, I am more than willing to entertain them.
Mr Bruce Crozier (Essex South): Thank you very much for your positive and constructive recommendations, particularly with regard to the federal-provincial task force. At the present time, you may be aware that the Liberal caucus is conducting a jobs task force in Ontario, to which we invite labour, business and those from the community with a vested interest --
Mr Schenk: I would be surprised if you didn't remind me of that.
Mr Crozier: -- but there's one thing I wanted to clarify, and that is that you suggested the reduction in overtime be legislated.
Mr Schenk: I think there are some legislative things we can do on that issue.
Mr Crozier: With all due respect, I think we should be very careful before we enter that arena to legislate limiting overtime, because we are being told that the costs of doing business, and I mean government business or private business, are part of the reason we're in the economic and jobs situation we're in. We are being told by most who attend these that the less government does, the better. In other words, stay out of their face. I think we should be careful, particularly with legislating and limiting overtime, if that's what you meant.
Mr Schenk: Let me just make a couple of comments. In a number of countries in Europe, when I asked them about this issue, they told me that there were particular tax incentives, for example, for an employer to hire someone else. For example, there is a certain administrative cost to any employer trying to hire you to do two or three hours' work instead of having me stay overtime. There are certain tax incentives that are given employers when they hire someone else. There is some streamlining of programs so that a person can go from unemployment insurance into doing some work for a few days and back without having a massive problem for that employee.
Then there are some things in the Employment Standards Act one could look at. I think 44 hours is the work week. In many countries they've reduced that to 40. There are minor things that could be done legislatively, but I don't think it's primarily a legislative issue.
Mr Crozier: That still doesn't limit the overtime. Forty-four hours may be the standard work week, but then you're paid for overtime.
Mr Schenk: Some of that has to be done in collective bargaining, but I'm trying to get at how you deal with the unorganized workforce here which won't get time and a half or anything. How can one make some restrictions in those areas? I haven't thought them all through yet, but it seems to me that if there are ways to restrict the overtime in a manner that doesn't penalize an employer cost-wise and at the same time would further other employment, that's the kind of thing we need to look at.
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Mr W. Donald Cousens (Markham): I recently saw your survey of the job layoffs and the totals within the province. How many jobs do you think have been lost in the province among the whole public service, or do you have any sense of how many jobs have disappeared, since the social contract and the expenditure control plan? It's a playful question. I'll tell you why I'm asking it. I'm not trying to put you in a position otherwise.
Mr Schenk: No problem.
Mr Cousens: When we had the Minister of Finance in here a couple of weeks ago, I asked the same question. His public servants got to their books and they said, "Oh, it's 82," and I just find that a little bit hard to believe. Do you have a sense that it's been worse than that in the province, more than that or whatever?
Mr Schenk: As you probably know, if an employee for the government here gets --
Mr Cousens: I mean, the whole province, with hospitals and municipalities, is 900,000 people, and only 82.
Mr Schenk: I have difficulty having any confidence in that figure. If you make a direct government employee surplus, they still have six months. What you will find there is that a whole range of them are able to find other jobs, and then there is a range of them still on that surplus list who will be going out the door.
Mr Cousens: Do you have any idea of the numbers?
Mr Schenk: I don't have.
Mr Cousens: Could you get them? Is it something you'd be close to with your friends?
Mr Schenk: I certainly hope to get them.
Mr Cousens: I'd love to see them.
Mr Schenk: There are other issues. There are other people who are part-time people who are on these lists.
Mr Cousens: Oh, I know. There's part-time and then there's retirement --
Mr Schenk: There's contract.
Mr Cousens: -- and then there are buyouts.
Mr Schenk: Right. It becomes a little complicated. The reason I put it in there is I don't have them and I'd like to have them.
Mr Cousens: I'm looking for them. We're starting to get our own list.
When you talk about the deficit, that's one of the areas where you and I might have a different position, but the government's talking about a $10-billion deficit this year. It might even be higher. In fact, I'm pretty sure it is. What would be your magic number for a deficit for Ontario in these economic times?
Mr Schenk: That gets into a longer discussion on the role of a deficit and what the additional moneys the government needs are being used for.
Mr Cousens: I understand that.
Mr Schenk: Because part of that is for investment in various economic activities and various social programs etc, so there's a whole range of questions there.
Mr Cousens: But do you have a number?
Mr Schenk: I do not have a magic number. There have been deficits in this country much higher than this and I think to good effect. I am not particularly frightened by having a deficit. This has become a big issue as monetarist economic theory has taken some precedence over Keynesian economic theory. I don't have a big problem with a deficit of $10 billion or $12 billion or $14 billion depending (a) on what it's used for and (b) where it is being borrowed from.
A major problem I have with this deficit is not the amount, not the magic figure, but where are we getting the money? We're getting it from outside of this country, and that is a problem. It's very different when you owe it to financial institutions in New York as opposed to the Canadian public or the Ontario public.
In other words, if it was Ontario savings bonds or economic recovery bonds, or even a good part of it was that, that's very different because any government, whether it's led by you or the New Democratic Party, is able to finance that. You can pay it back, but you can also just float another bond. That's a very different animal than when you owe a certain amount of money to a financial institution which demands payment. It's very different if money is going out of the country than if it's staying in the country. Those issues, to me, are as important, if not more important than the actual amount.
Mr Cousens: I'm glad you say that, because there's no easy answer to it. The one thing is that there's only one taxpayer, and we're reaching a point where if you don't pay the taxes today, by having a deficit it's a deferred tax on future generations. It's another way of passing off responsibility in our time today to future generations and future taxpayers. Getting back to the size of the deficit, to me the $10-billion number is still too large and too difficult to deal with.
Somehow or other, when I listen to you, I agree with some of your fundamental principles. Somewhere along the way, we've got to find a way of establishing a dialogue where we can deal with the reality of it. I want to see more jobs. I want to see a better future. I want to see a lot of the things you're asking for. Somehow or other, we've got to find a way together to work out a method to get there. I appreciate the difficulty of it.
Mr Kimble Sutherland (Oxford): I certainly hope this committee, when it returns, will take up the issue of not only shorter workweeks, but the whole concept of workweeks in general, how much overtime is going on right now, how we get shorter workweeks, and examine some of the things that are going on in the private sector, what Bell has done for a short-term workweek. That would be an ideal topic for this committee to examine.
We've heard testimony from many people, certainly different forms of business groups, who indicate that payroll taxes, in many senses, are a disincentive for hiring more employees. If we're looking at how we can hire more people, they suggest specifically that you should go away from payroll taxes to, I guess for lack of a better term, more progressive corporate taxation rather than on hiring an employee and paying tax according to what they earn, not only those that are payroll taxes, but the other costs to business that are based on payroll, whether that be WCB or other things.
Have you or the OFL had any comment on that, as to how the government may be able to redirect or focus its taxation policy in that way that would help the employment situation, hire more people but still be able to maintain the tax levels we need for services?
Mr Schenk: We certainly have advocated a progressive taxation system and moves away from consumer-type taxes, which I find particularly regressive, like the GST, to more progressive forms of taxation. On the other hand, there is a tax mix and we find in our tax mix that it's often useful to use various kinds of taxes.
Payroll taxes have a role to play. I'm certainly not advocating that we have more of them or that we increase them, but if you look at some of them -- you mentioned workers' compensation. There's a certain sawoff in terms of what workers' compensation does versus particular legal suits in the American system. I happen to think our workers' compensation system, not touching on the current controversies around it but by and large, as an approach, is a valuable one.
That involves what employers would call a payroll tax. I think that's a legitimate tradeoff. Most countries have various kinds of payroll taxes, including some for training and other things that we don't have at this point. I would just leave it there without getting into it any more.
Mr Norm Jamison (Norfolk): You talked about how you felt about the social contract. I think it's understandable. We understand that's a measure that wasn't well received in certain quarters. I have to say that comparing that to Ralph Klein's moves, for example, in Alberta, at least, we believe there were up to 40,000 jobs maintained through that measure. Maintaining jobs is important.
The question I want really to get to beyond that is the reduced workweek, the reduced amount of payment for overtime. It's been my experience through negotiations that you really don't become effective in promoting the hiring of people until overtime is more expensive than the general wage and benefit package itself. You say that government can introduce measures to enhance that situation for an employer to hire people. I believe we are in some ways, through Jobs Ontario, through the $10,000 tax credit for hiring. What kind of measures, in your mind, would have to take place to promote the employing of people rather than as some -- not all, but some -- companies do by the overextension of overtime hours within a facility?
Mr Schenk: The methods I'm most familiar with now are those used in collective bargaining situations. If we look at the latest agreements at Chrysler and the rest of the auto industry, you will see that they put some considerable restrictions on overtime and won their bargaining teams and workforce to those ideas. I think at Chrysler it's 1,000 new jobs basically created by restricting overtime. Those kinds of mechanisms can be done, and that partly is our responsibility on the labour side.
I was thinking that what we need to do is strike a task force or some kind of vehicle to examine the various ways this is done in other jurisdictions. Even government initiatives can be taken to help us spread what work there is available around to more people. I don't have all the solutions, but certainly one of them would be looking at the kinds of costs there are for employers today in hiring a new person versus working someone overtime and the cost to an employee who's, say, on social assistance or unemployment insurance for taking two days' work and then going back on to some form of assistance. That's about as far as I've taken it at this point, but I think those are the kinds of things that need to be looked at.
You mentioned the Jobs Ontario $10,000. I think that has some positive aspects. There are some difficulties with that kind of program, and I haven't seen the latest stats at this point. I understand there are more people utilizing it, but I don't think it's taken up quite the way people had expected, nor have the day care spots been filled, which were fairly generous, in the program. I don't think they've been utilized for a number of reasons.
Partly it shows the difficulty of trying to create employment, and for many employers $10,000 isn't enough to make them hire in a period of recession. There are some things you just can't deal with from a government point of view very directly, but that certainly is one way of trying to further employment.
The social contract thing gets us into another issue. Was the projected deficit of $17 billion really a very realistic projection or was it a worst-case scenario? There is a whole range of issues there.
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And then there's the role of deficit. The highest deficits ever in this country were in the Second World War, a very different period, but they were the highest deficits, way higher than we have now. We have, I think, around $500 billion federally. It was about $1,200 billion federally in today's figures, the federal government deficit. Did that lead to economic disaster? Quite the contrary, it pumped so much money into the system. This is a system which is producing for a war and it's going to have to produce and produce. I wouldn't equate the situations but it was one major factor in leading to economic prosperity by putting money into a system, and giving our children what? Did it give them a tremendous debt to pay back or did it bring them a better education system, better training, better medicare etc?
I think it can be argued that deficit spending can be phenomenally useful in funding employment, in stimulating an economy where its GDP grows again and its deficit begins to shrink comparatively. One has to look at this situation we find ourselves in, which is not one that's equatable with that.
I'm not arguing that tomorrow we should go out and spend another $500 billion, but I think the focus on the deficit has been an incorrect one. I think the focus has to be on how we move this economy forward to GDP growth and to employment growth, and within the context of a full employment strategy, what is the role of the deficit? Is it just wasted money going down the tube that we can't afford to spend? It is being used for investments that will propel this economy forward? Where are we getting this money from and how are we going to pay it back? If we're borrowing it all from New York, we're going to be in big trouble, in my view, in terms of paying it back.
I know that's the easy place to borrow it from. They can do the job. We're talking about approximately $1 billion a month at this point in time for the provincial government, and you're not going to find $1 billion a month just sitting there on Bay Street waiting for you, but I think there are ways to raise a considerable percentage of that right here, which has real repercussions in terms of paying it back.
The Chair: Thank you, Mr Schenk. I thank the Ontario Federation of Labour for making its presentation.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair: The next presentation is by the Canadian Federation of Independent Business. The representatives are familiar to most of the members of this committee, but please identify yourselves for the purposes of Hansard and for the committee members.
Ms Judith Andrew: I'm Judith Andrew, the director of provincial policy for the Canadian Federation of Independent Business. We appreciate the opportunity to appear before your committee today, and I'd like to briefly introduce our delegation. CFIB's president is John Bulloch and Catherine Swift is vice-president. Mr William Gazer is from William Gazer Insurance Brokers Ltd, and Mr Alan Ely is from Ely Ltd, men's clothiers in Toronto. We are grateful to our members for joining our presentation. John will begin.
Mr John Bulloch: I'd like to make just a few comments that you might find useful. They're based on over 25 years of experience with tax reform exercises in this country, going back even as far as the Carter royal commission in 1966. I have personally been, and our organization has been, very much involved in about every permutation and combination of consultation, manipulation and public opposition on matters relating to tax.
There are a few important lessons that need to be learned by all of us, because we seem to go around this circle every three or four years. The first lesson to be learned is that there's absolutely nothing new in tax, and the Fair Tax Commission report was totally predictable, once you know who the players are.
The section on taxation of dividends, capital gains and wealth taxes came right out of the 1969 white paper on tax reform, the section on sales tax reform came right out of the 1987 federal paper on sales tax reform, and both were written by the same person. The stuff on personal income tax came out of a 1991 discussion paper.
Lesson 2: Don't mix tax reform and revenue raising. If particular tax measures are no longer necessary or effective, remove them and drop the rates. That was why the 1987 income tax reform exercise was so successful and massive changes were made in the Canadian tax system. If new revenues are needed, and we don't agree that they are, but if they're needed, you raise rates. Don't get involved in sneaky exercises that have turned the words "tax reform" into code words for revenue raising.
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What governments do with reports is that they cherry-pick them for their own purposes. That's what Edgar Benson did in 1970. He cherry-picked the Carter royal commission report. We believe that's the danger we face with the Fair Tax Commission report, that it will be cherry-picked for the government's own purposes.
At the present time, the federal government and the Ontario government are negotiating to replace the present personal income tax system, which is applied tax on tax, and have it applied directly on the personal income tax base. This is going on at the present time, but it's got nothing to do with reform of municipal taxation. What they're doing is trying to negotiate a way to fund the expected cuts in transfers by taxing the taxpayers more extensively.
What we're very afraid of, as an organization, and what Canadians should be worried about, is that this new federal-provincial fiscal kissy-face is really being done at the expense of the taxpayers rather than for the taxpayers. Tax base broadening, a new federal-provincial fiscal agreement on PIT, and sales tax reform are potentially some of the biggest provincial tax grabs in Canadian history.
Rule 3: Expenditure cutting is the key to tax reform. We have tax measures in the tax system to encourage savings and investment, because governments take 80% of all our savings. If you didn't have those measures, they'd take 100% of all savings, and they'd still have to borrow tens of billions of dollars a year offshore.
I agree the tax system is unfair, but you don't have the power to change it. It's unfair to the middle class because wealthy Canadians have all their money in foreign trusts and you can't get your hands on it. The major corporations have their own underground economy -- it's called the global economy -- and you can't get at them either.
What's happening in the western democracies is that the burden of tax is falling on labour in the form of payroll taxes, which corporations pay and individuals pay, and on consumption taxes. It's falling on the domestic economy, and that's why you've got this jobless recovery phenomenon in the western world.
Rule 4: Modify and strengthen or change the tax system in small chunks. Tax professionals play a game of "Gotcha" with federal bureaucrats. No sooner do they devise a measure than a small handful play the game of trying to beat it and flogging their changes for their own purposes. When you revise the tax system, a problem in one area has myriad interconnections with other sections, so it has to be done very carefully. If you politicize it, you'll have a mess. These are highly technical problems. We have worked cooperatively with nine out of 11 Finance ministers to clean up the tax system.
The fifth and final point, and I don't want to take too much time, is do not confuse general tax issues with the issue of small business financing and the tax system. It's a separate body of knowledge. There are five totally distinct strata within the small business community that have their own financial problems. You can't deal with their problems through programs. All the programs in Canada combined never touch more than 5% of all the small businesses in Canada.
Capital markets are biased against small business. The tax system is biased against small business. So is the regulatory system. You try to offset these biases through the tax system because there isn't a program approach. You cannot finance the equity needs of small business through institutions. It's a non-institutional equity market that serves small business. Your low corporate rate up front and back-end incentives are all designed to move money from individuals into small business.
Another thing that's very mischievous is when reports pick out one tax and compare it with big business or compare it with the Americans. We have done extensive research -- the studies are in our submission -- that show that the effective tax rate for small and medium-sized corporations in Canada are higher than the effective tax rates paid by big business and higher than the effective tax rates paid by their counterparts south of the border.
That's all I want to say and I'll be available for questions if you want to follow up on what I've said.
Ms Catherine Swift: First of all, we found that attempting to jam both the Fair Tax Commission report and the pre-budget for 1994 into about 15 minutes so that we allow some time for your questions is absolute craziness, and we sure hope there will be other opportunities to discuss many of these very substantive issues.
John's just given an overview of our approach to the Fair Tax commission situation. I'd like to move into related but really more budgetary matters.
We all know that Ontarians have seen over a decade now of very substantive tax increases, as Canadians have generally, and in the context of both the upcoming budget and any further deliberations on the Fair Tax Commission report, one bottom line is that there simply is no revenue solution to our current problems. As we've seen in a number of provinces, notably down east and on the Prairies, tax increases these days translate into even angrier taxpayers and growth in the underground economy. They do not translate into revenue increases for government. In fact, they translate into revenue decreases in some instances. As to the notion that there's tax room, even if one philosophically would like to believe it, you're not going to get more money out of it.
The only real solution for any kind of sustained answer to our difficulties has to be on the expenditure side, and when we look at what's going on around the country, certainly comparing the public to the private sector, the whole social contract situation, if the savings are realized -- which remains a big if, but we'll see that down the road -- even if those savings are realized, they can only be viewed as a bare beginning to the kind of efficiency-enhancing expenditure reduction in the province of Ontario.
We see a model happening in Alberta, interestingly enough, with fairly substantive cuts being made, cuts that nobody particularly likes to see, but we would predict at this time that it will forestall the need for more drastic cuts in the future. Also, interestingly enough, Ralph Klein is getting quite a lot of support for what he's doing, so perhaps it puts the lie to the notion that people will never go along with these kinds of cuts. What it does take, however, is some political intestinal fortitude, which we haven't seen in a lot of jurisdictions as yet.
We have a lot of specific suggestions, and given the shortness of time we've highlighted them in the document we handed out today, so I'm not going to go through them here, just talk in generalities for the moment.
What we also find worrisome in Ontario is the increasing attention paid to the so-called non-tax revenue items. We feel a number of principles have to be kept in mind when looking at these items.
First of all, if these measures are contemplated, and there may be places where they are appropriate, they should be considered as a replacement for taxes, not simply an incremental means of obtaining more revenue for government. They should also be guided by principles of user pay. Our members are very supportive of user pay. It's a sensible way to approach things. But you must keep in mind also that a service should be provided. We find a number of examples in Ontario: The $50 corporate filing fee is a good example which has just outraged small businesses because there is virtually no service provided for this so-called fee. There are users, however, of this database who could be charged, and that seems to be a more sensible way to go than to ding everyone.
Finally, I heard the earlier person from the OFL mentioning, or someone asking, how high a deficit is good, which is almost oxymoronic in any economist's language. In any event, I find the fact that we in Ontario have found achieving a $10-billion deficit a major accomplishment incredibly dubious. We should be ashamed and disgraced by the level of our deficit. We not only need to keep it within $10 billion -- three years ago, we would have thought people were dreaming in Technicolor if they put that number forward -- we really need to get it down an awful lot lower, and the only good deficit, of course, is a zero deficit.
Ms Andrew: At this point, I'd like to let you know that we have in our brief a thoroughgoing section on payroll taxes which outlines the research that shows that small businesses are more labour-intensive than large businesses, and due to this fact, that makes payroll taxes highly regressive on small firms.
Within Canada, the analysis by size of firm reveals that the total tax burden is heaviest on small businesses as opposed to their larger counterparts. When we've analysed this matter with relation to outside of Canada, we see that Ontario's tax burden is uncompetitively high and that large components of that tax burden are profit-insensitive and therefore are particularly damaging to the small business job creators in this province. Those portions that are profit-insensitive of course are the payroll taxes and local taxes that small businesses bear.
Our overall conclusion from this analysis is that Ontario must find ways to reduce the regressive payroll tax burden on the small business job creators in the province, and we have two concrete recommendations in this regard.
The first one is that the government must focus on reform of the Workers' Compensation Board, which levies very high payroll taxes on businesses and which interestingly was not considered part of the Fair Tax Commission's study. Our second recommendation is that Ontario should replace the graduated employer health tax rate structure with a small business allowance set at the level of $400,000 of payroll. That would indeed relieve the burden and be fair to businesses across the board.
I'd like to touch on another area, found near the back of the brief, and that is unfair competition. Our provincial survey results over the last couple of years have shown very high levels of concern with unfair competition. Up to 25% of our members complain about this.
The categories of unfair competition include grants, loans and government programs which subsidize commercial operations with taxpayers' dollars; commercial activity by tax-exempt, non-profit firms; commercial activity by government agencies; and finally, entry into the small business competitive markets by regulated utilities or regulated monopolies. We have listed numerous examples of actual complaints we have received from members about this on page 41 of our brief.
Our overall recommendation in this area is that government must take immediate steps to curtail the various types of destructive competition that are currently plaguing small business in the province. Specifically, we recommend eliminating administered subsidy programs to business, we recommend banning competition by government and its agencies, and we recommend ensuring that non-profits do not enjoy tax-free status on any commercial portion of their operations.
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Mr Alan Ely: I'm here to present a very brief tale of an independent merchant who at this stage in the game is a survivor. Some of the things I have to say will bear some relevance for you; some may cause questions.
My 92-year-old company at this stage in the game so far is a survivor through the current cycle of the economy because we've done two things: We've downsized or rightsized our company to make it work, and we've undertaken some creative negotiating with both our landlords and our staff to make sure the costs of running our business are appropriate to the amount of business we're capable of doing in today's environment. In that current situation, I can just pay the tax burden my company fields at this stage in the game, something in the order of 14% to 15% of my gross revenue.
If the business community continues to experience the modest uptake in business that seems to be occurring today, I'll continue to be able to survive, but I won't be able to pay any more taxes. There's no more there. There's nothing more in my business to be squeezed out of it. In fact, if I'm going to grow back to a larger company, which we have been in the past, and maybe larger still, I've got to develop some kind of bottom line for my company out of which to fund that growth. That doesn't happen if the more I make, the more it filters out through the back door.
I'd sit and I'd look at my business and your business and hope that in some measure they're the same, and the common law in my business says I can't spend more than I take in, not for long anyhow, and not without some very careful negotiations that will allow me to finance that load for a while. But if I do it for long, sooner or later my banker -- as he did; he came to me two and a half years ago -- will call my loan.
I guess I'm concerned that he'll call ours. I don't know how we contend with that. That's all I have.
Mr William Gazer: Thank you for the opportunity to be here today, ladies and gentlemen.
CPP, UIC, EHT: a volatile equation, a poisonous cocktail. We, as insurance brokers in the province, have been labouring under increased taxes on automobile and property insurance and a new automobile insurance bill. The police will tell you that so many people who are drivers and consumers of insurance in Ontario are dumping their insurance that a full 15% of the people they stop and check on their automobile computers are no longer driving with insurance. It's a non-affordable commodity.
With respect to what happens if EHT, UIC or CPP increase any longer, I cannot hesitate to pare down the job times of my employees, to seriously consider laying off permanently people who have been long-time, loyal, well-trained and experienced. I would not feel any compunction that the name of the game is survival today and that the decisions have to be made at the top. As a role model I have none other than Premier Rae's friend Maurice Strong, the Juan Peron of the north, who seems to be committed to survival of Ontario Hydro.
The next bit of evidence I'd like to present as testimony would be purely anecdotal. Some of it is known to me and it's interesting to note. In the US jurisdictions of Tennessee, North Carolina, South Carolina and Georgia, a salubrious and somewhat symbiotic relationship has taken place between two very important elements: business and labour. Some 14 to 16 months ago in these jurisdictions there was 7.5% to 8% unemployment. It has fallen now to approximately 4%, the implication being that in these jurisdictions job growth is being presented somewhat at the expense of Ontario. I know two businesses that have left Ontario, not to return, in the last 12 months, and one client of mine who anticipates leaving the province in the next six because of the tax burden.
Ms Andrew: That completes the formal part of our presentation. We would be pleased to answer your questions.
Mr Cousens: The first thing I want to do is go on record, Mr Bulloch, and say a very sincere thank you from my caucus, and my colleague Mr Carr in particular, for the ongoing support, excellent research and data that you were able to collect for all legislators on matters pertaining to government affairs. I thank Judith Andrew and Catherine Swift for the support they give in that direction. I see it as unbiased. I see it as clean. I see it as the kind of thing that I like to refer to and I'm glad to refer to. I put that on the record.
I want to clear up the record on one other thing, and that is deficits. When I was asking the question on deficits, I don't like a deficit either. I was trying to find out if the previous speakers had a number they liked, and I didn't find it. My number is zero, if we can ever get there, and to move so as much as possible.
Small business: I'm going to refer back to your report. Is there any other comment? Your last two speakers had good things to say about business in general, but small business? I'd like to see a section in our report on how this province could help small business.
Mr Bulloch: Let me try to give you a sense of what's going on out there. Margins are being squeezed right across the province. They're being squeezed on the revenue side by a very competitive environment, by a very cautious, squinty-eyed consumer, and they're being squeezed on the expenditure side by the growth of taxation, payroll and property tax, of course, which have their own regressive effects. To survive, businesses are restructuring dramatically. Dramatic subcontracting is taking place and a dramatic conversion of regular jobs into part-time jobs and into self-employed subcontractors, massive in their implication.
Your data on unemployment and even small business statistics are grossly misleading. You can have a rapidly growing firm of eight employees, and they're all growing in terms of additional subcontractors and it doesn't show up in the statistics. A lot of this subcontracting is being driven by technology, but it's also being driven by the insatiable cost of government, which shows up in the form of property and payroll taxes.
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We have something like a million self-employed today. Half of them are in homes. The movement from streets back into the home, to get away from the property tax burden, is taking place. The move to subcontracting part-time is being driven by the payroll tax.
These moves that governments make have fairly dramatic ramifications. There is a sense out there that you have to be a bit of an economic guerrilla to survive because you've got to fight banks and fight governments and you don't seem to have too many friends.
What we need out there is a sense that government is not the enemy. We have to have a change in mood in this country so that they'll start to feel positive about the future. Everything they're doing now is survival-oriented, and nobody's talking about the future because they're all so fearful about the next round of taxes and the threat it represents to the demand from their customers and their own operations.
Ms Swift: To continue briefly from that, the other thing to keep in mind is that carrots work a lot better than sticks. It was interesting to hear the labour gentleman speak before us because he said, "Businesses aren't hiring enough people so we've got to force them to have to charge more for overtime," or: "Let's hit them with a few more sticks here. This is the answer."
The reason they're hiring people on overtime, as we all well know, is that it costs a fortune to hire a new person. Then say demand isn't there six months from now; it costs you a fortune if you want to get rid of the person again. We have such inflexible regulations, benefits that have to be provided, the whole shebang.
If we had a few carrots dangling in front of people instead of continually hitting them with sticks, they'd hire some more people and might stay in the province.
Ms Andrew: Right now in this province the cost of government-mandated benefits and programs on a new hire is over 20%, and that's before a firm offers any type of benefit package to that individual. So right away, you've got to pay 120% of the salary in order to bring on a new person.
Mr Sutherland: You mentioned a couple of things. You asked why WCB wasn't in the Fair Tax Commission. I assume it's because while it's a cost of business, it's not a tax; it's a premium in exchange for workers not having the right to sue for difficulties.
I want to pick up on the question about deficits. We've heard a lot of different advice here. There seems to be, though, a growing consensus that deficits need to be dealt with, but in terms of how you deal with them, you should be careful that you don't take too dramatic a approach or you'll have a negative impact on the economic recovery.
I'm just wondering whether the CFIB has any opinion as to whether it supports, for lack of a better term, what the third party has been supporting, a Reform-style approach, doing it very dramatically, very quickly, or whether you would suggest that we do it in a more gradual approach so we don't harm economic recovery. What's your sense of that?
Mr Bulloch: Let me just state that we put out a major position paper on the deficit at the end of last year and have distributed it to 100,000 companies. It was our view, and it hasn't changed, that the portion of the deficit that won't go away if we get renewed economic growth is in the order of $8 billion to $12 billion at the provincial level, and about $8 billion to $12 billion at the federal level. We suggested that this be done appropriately through expenditure cutting rather than tax increases simply because the governments in this country have lost control of the revenue side of the deficit equation.
They can't forecast anything today because so much of the economy is underground and people are so defensive. So many taxes they thought were domestic are turning out to be quite mobile. Consumption is becoming very mobile as people find ways of beating the tax system.
The reason almost every government in Canada has problems with its deficit numbers is because it's lost the revenue side of the equation -- this is more than just philosophy; this is a very pragmatic issue -- that the solution is revenue raising. Whether you do it all in one crack, that's usually taken out of our hands. Governments will do their nasties in their first year in office, and it doesn't matter what party's in power, and so the timing of these things is usually a political issue. We expect the federal government to be quite vicious and nasty in its first year, less vicious the second year, and kissing and loving all of us in the third and fourth year. All governments seem to do it that way. But one way or the other, we're going to have to take $20 billion out of our spending stream in this country to prevent what might hit us in about two to three years.
The potential for a debt crisis is sitting out there and it's going to hit the provinces and municipalities because almost all the foreign debt is provincial; say, 80% of the foreign debt is provincial-municipal. The danger is that we could have a couple of provinces in this country that could disappear. The federal government has to deal with it at its level because it has first claim on the savings. When they take all the savings, Ontario's debt then goes offshore and a lot of big corporate debt goes offshore, and we are in the mess we're into now.
This is not a partisan issue any more. When you're at this level of crisis, it's not partisan. The nasty stuff that was done by the government of New Zealand was done by an NDP-style, social democratic government.
Ms Andrew: Just a word on the WCB not being a tax: In our members' view, it is very much a payroll tax. It is a mandatory system. It's been in place since the early 1900s. People are required to remit their premiums, and when it's government-mandated to the tune of $3 billion a year, we consider that a tax, as do our members.
Mr Sutherland: You would prefer then to go back to giving people the right to sue?
Ms Andrew: In this brief, we didn't get into our ideas on reform but I can certainly provide those separately. We have many ideas on WCB reform. But we would say that the Fair Tax Commission missed a big tax when it did not study the WCB.
Ms Swift: The whole problem, when you get back to the deficit issue, whether it's with the WCB or with governments generally, as long as the tax route available to the government -- whatever political stripe; it seems to be irrelevant over the years -- they will not reform spending. It's the easiest copout route. As long as you can increase WCB premiums, UI premiums, and taxes etc, then you will not do the structural change.
Companies didn't want to downsize. They had to. It was death or downsize. It's the same with governments. You will not downsize until you're forced to. Right now, we have a silent tax revolt going on with the underground economy and cross-border shopping. We saw a rather open tax revolt in Quebec last week regarding cigarettes and so on. There will be more of those. The options unfortunately may be right out of your hands in terms of gradual versus more abrupt dealing with the deficit.
Mrs Elinor Caplan (Oriole): We only have a couple of minutes and there are many questions I'd like to explore with you. I was struck by the theme of mood and confidence. The importance of the small business sector in the province I don't think can be overstated in any way. I know that's the place where we see most job creation, and therefore the confidence of the small business community is extremely important. Your presence here today is very helpful to the committee.
I have a question about a graph you have on page 26 that shows the differing commercial and industrial effective tax rates within the province. It was a surprise to me to see the huge variations. I wondered whether this was because of the way we fund education, or does this have to do with our assessment base or is it just the decisions that are made at local councils? Is there any way you can explain these wide variations of tax rates in municipalities across the province?
Ms Andrew: It's probably part of all three of those. Certainly, the local decisions are made and the mandated differential is 15%, but many areas exceed that. This is something that wasn't brought out very well in the Fair Tax Commission report, but obviously a highlight for us is in terms of the much larger burden of the local tax that is by business, as opposed to the residential taxpayer.
Mrs Caplan: I was looking, for example, not only in the Metro area, the differential between, say, Mississauga, North York and Toronto, but also the differential between Owen Sound and Timmins, huge differences in communities that are neighbours, next door. I just wondered whether you had done any analysis on how this resulted, on what the factors were that created this. I think this has a lot to say about what's happening in the province and the need for change and reform, and if you're going to support small business, how the province does that in a place which is so widely different in each municipality.
Ms Andrew: We do note here in the report that there doesn't seem to be any attempt by municipalities to compete with each other, at least on the business side of things. This particular chart is basically a restatement of something that was in the Fair Tax Commission report, so it's got to be accurate.
Essentially, municipalities don't seem to care too much about business taxpayers. When we witnessed what happened in terms of the discussion of tax reform on market value assessment in Metro, the brunt of those proposals was to load even more on business and save the residential taxpayer. This is a very regressive tax on business that no one seems to want to highlight, and we chose to highlight it.
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Mrs Caplan: I appreciate your doing that; your inclusion of that graph and the discussion around those kinds of taxes.
You also mention the cost of each employee. We know the overwhelming job creation opportunity is in the small business sector in Ontario, and I wondered, since it wasn't mentioned in your document here, what you have heard from your membership about the tax on benefits. In the last provincial budget, as you know, there was a new tax on benefits which is ultimately having two effects: One is either seeing the cancellation or reduction of benefits, or increasing the cost to employees. I wondered whether you have had any feedback from your members on the impact of that new tax.
Ms Andrew: We have had a fair bit of feedback from our members on that particular tax as well as the myriad other taxes introduced in that budget. When you tax benefits for a new firm that wishes to begin to introduce a package of benefits for employees, it makes it that much more difficult to do so, so we would certainly argue that the tax on benefits has discouraged smaller firms that didn't have benefits packages from actually introducing them.
You may want to explore this with the insurers, but my discussions with them tell me that the insurance companies are noting that many of their customers are either downgrading their packages or, essentially, companies are looking for ways to cut. This in effect is equivalent to a 1% payroll tax on benefits, if you calculate it on the average. For companies that determine they're going to keep their benefits packages as they stand, essentially it's another profit-insensitive tax that hits them.
The Chair: I thank the federation for its presentation.
BOARD OF TRADE OF METROPOLITAN TORONTO
Mr Steve Lowden: I'm Steve Lowden, vice-president of the Board of Trade of Metropolitan Toronto. I have with me Don McIver, who is chair of our economic policy committee and chief economist at Sun Life, and Maralynne Monteith, who is chair of our taxation committee and a partner at Morris Rose Ledgett.
Thank you for providing us with this opportunity. We've asked to appear at this late date in your hearing process because we've been examining the report of the Fair Tax Commission through a task force of the board. That task force consists of seven policy committees and we've needed this much time to get our preliminary thoughts together.
First, let me say that with so many other government initiatives, the Fair Tax Commission has cost us a lot of time and money and yet only a couple of weeks are allocated for public comment on the findings. I think this is inadequate and I'm sure you agree.
What you have before you today is not a formal policy submission. It's a minor variation of a presentation that we made to our council on January 20. It's comprised of a brief summary of the report followed by preliminary views on the concept of provincial assumption of responsibility for public education finance and some other key recommendations which we either support or do not support. All of it is accompanied by a package of charts which supports the positions we are taking. We hope to have all of this in the form of a formal submission by the time we meet the Minister of Finance on February 16 at his pre-budget consultation meeting concerning the Fair Tax Commission report. We are not going to rail at you today about the overriding need for control in government and the need to get taxes down. We'll leave that to the pre-budget submission. The last deputation you heard dealt with it at length. But it does strike us that there can be no concept of fair tax allocation if there isn't a fair tax burden to begin with, so someone has got to deal with the quantum of taxes. The Fair Tax Commission chose to define that out of its objective and just deal with the allocation of the existing burden, but that will not solve the problem. Let me get on, then, to what we have come to talk about.
Firstly, we strongly support the concept of provincial finance of public education, although with a number of important caveats. Don McIver is going to speak about those in a minute.
Secondly, we see a tremendous opportunity being presented to finally introduce a fair, equitable and up-to-date property assessment system in Ontario by the province's taking over public education finance, one that will create a more level playing field for business across the province.
Thirdly, we completely reject the idea of raising personal income taxes as a means of generating revenue for provincial finance of public education. We have a raft of reasons for believing that this is a terrible idea. Instead, we believe the consumption taxes should be the basis for the takeover.
To be sure, there are plenty of ambiguities in the report of the Fair Tax Commission and plenty of recommendations that we emphatically reject, but, as Don and Maralynne will shortly explain, there are a number of positive recommendations which we believe we can recommend to each of you in the hope that, whoever forms the next government, serious consideration will be given to implementing them.
I'm first going to call on Don to comment on the pros and cons of provincial finance of public education. Maralynne will then present the balance of the presentation, which touches on property tax reform and the concerns we have about raising income taxes.
If there's sufficient time at the end of their presentation, I'd like to go through those charts with you, either on the overhead or we can just leaf through them, the ones at the back of our report, so we can quickly summarize our presentation in a more graphic way using the charts appended.
If there isn't, I'd just like to leave you with two thoughts relating to those charts. Consider that businesses in Ontario pay more in property taxes than they do in provincial corporate income tax, employer health tax or workers' compensation premiums and that the businesses in Ontario carry a vastly higher share of the total property tax burden than do businesses in the US. In Ontario it's 47% of the tax burden versus 16% in the US. It's a huge burden and one which we believe plays a more important role in what's been happening to our industrial base in recent years than is generally recognized.
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Mr Donald McIver: I'd like to speak for a few minutes on the proposal to remove education funding from the property tax base. The board's position is that this is fundamentally desirable. I'll run over a few of the most obvious reasons for you.
Obviously, it recognizes the transportability of education benefits between municipalities and areas in the province, and it equalizes education opportunities.
From our perspective also it's important because it serves to equalize the education tax treatment for business. It also recognizes the trend in this direction that is evident abroad and is increasingly evident even within Canada across the provinces.
Also, it's important because it can lead to education vying for or competing with other legitimate spending responsibilities of government for what is becoming increasingly scarce funding. That, we feel, should help in the process of negotiation between the province and those employed in education.
While all of the above are very good and sound reasons for endorsing the proposal, I would add the additional comment that we believe the effect of this proposal can be carried through without undermining the accountability of local educators.
All of this, as I say, we view as extremely beneficial, but we do have a few notwithstandings.
The change should not take place until education costs have been thoroughly examined and reviewed. The change should not take place until a deterrent has been put in place to prevent municipalities from moving into the tax room vacated by education funding. I know the recommendations of the Fair Tax Commission itself recognized this problem, but I think it's important before any move to implement this to be sure that those constraints are binding and put in place for a protracted period of time.
Steve already mentioned the very high burden that Ontario businesses pay in terms of their municipal taxes in contrast to those in the United States: 47% in Ontario, 16% in the US on average. We believe this should not go forward until at least some thought has been given to actually excusing the business sector from this taxation rather than just reassigning it to the provincial field.
It should not go forward, we believe, with that 10% pop-up provision that allows local school boards to increase their local funding by 10%. We believe it should not do so because we are concerned first of all, in essence, that it's retrograde -- it obviates the purpose of the proposal in the first place -- but also that where this has been tried elsewhere, there's a tendency for it to creep up over time.
The final point: This proposal should not be implemented through an offsetting increase in the income taxes. Steve mentioned that already. We have already an income tax system which is sufficiently progressive and sufficiently anti-competitive that we cannot push the burden of additional funding on to this tax.
Ms Maralynne Monteith: We consistently come back to the same refrain: to be cautious about dealing with only the revenue-raising side without considering the expenditure side.
Tax reform is something that if it's going to be done, we feel very strongly should not be done in a vacuum, and certainly shouldn't be done in the context of the cafeteria style of picking and choosing among 150 recommendations. Any resulting system is going to have serious flaws in it because it will not take into consideration the total impact on the entire system.
I'll deal with some of the specific areas where we actually felt somewhat aligned with the Fair Tax Commission, again with the proviso that this is a vacuum speech I'm giving right now and one piece of the pie may be outweighed if something else doesn't balance it.
We are very concerned, as was pointed out in the previous presentation, with the imbalance between the burden that businesses are bearing versus the residential sector in the property tax area. It's well past due, in our view, that that whole area needs to be reformed.
It's probably best brought up to the provincial level where you get a degree of consistency throughout the province and that people who are living across the street from their neighbours -- we have certainly business situations where moving across the road has a substantial effect on the bottom-line costs or property taxes, and that's simply not a tenable system to have in place.
We strongly believe that whole system has to be looked at and has to be corrected. This is certainly a good opportunity to update our property tax system.
The harmonization of GST with the Ontario provincial sales tax has always been something we felt strongly should occur, not only on compliance costs reduction but taxpayers being able to deal with a simpler system, reducing of cross-border shopping. It's simply not tenable to have a two-tier system of sales tax, given the cost to the consumer and the business person of complying.
In the corporate income tax area, the Fair Tax Commission was fairly content to recognize, and we believe this is true, that competitiveness is critically important when formulating a corporate tax structure; that you have to remember what your neighbours are doing, because businesses are indeed mobile.
The corporate minimum tax: It is our hope that the Minister of Finance will go back to the table on that particular budget recommendation and perhaps turn it around, based on the Fair Tax Commission report. We believe this is a tax that is particularly hard on businesses when they are cash-poor, because it doesn't really care if you have cash to pay it, and it has been inordinately complex in other jurisdictions that have tried to use it. For all the reasons that the Fair Tax Commission said we probably don't need one and shouldn't have one, we support it in that position.
Finally, in user fees, we support that proposition, balanced, however, by the problem that you can get into with dumping, where the cost of user fees is outweighed and people stop using the proper environmentally responsible approach to waste disposal.
The one area where we feel very, very strongly that the basic assumptions upon which the Fair Tax Commission report are built need to be viewed through a bit more of a microscope is our concern with the position that our system needs to be made fairer, with emphasis on moving towards the progressive type of taxes, that is, income tax, and away from the regressive taxes such as property tax and consumption taxes.
Based on all the evidence we've been able to see from the OECD and indeed from the Fair Tax Commission itself, it's very hard to support the position that the Canadian tax system is not progressive. It is the most progressive tax system in that it relies the heaviest of all industrialized countries on income tax rather than on the consumption-property tax part of the equation. Consequently, we also have the most volatile system in terms of reliable tax revenues, because when people are unemployed, that tax base just evaporates.
It is our view that this basic assumption is simply not tenable and that a government has to be responsible in looking at its obligations to have a reliable source of revenues and that therefore this is one of the principal reasons why the income tax system is not the proper system to look to to fund education, because the reliability of that tax base is simply not borne out.
It's our view that the more appropriate position or tax base to look to is indeed the consumption tax base, the sales tax base. We believe it has the correct balance of reliable revenue source. Also, its regressivity can be ameliorated through tax credits and various other items, but not in such a way that you're going to have spikes and valleys on your tax revenue base. We think the education of the Ontario youth is very important and cannot be rested on something that just may not come up with the dollars next year if the economy has a swing.
The other positions we've taken in our paper really relate somewhat to the federal tax jurisdiction, such as RRSP deductions and dividend tax credits etc. We simply would support the position that has come out in the newspapers today by Mr Malcolm Hamilton of William Mercer, who had some very interesting statistics to tell us about the fact that the private sector is desperately, woefully underfunded on its retirement savings and that to cut it off any more simply does not make sense.
Finally, we'll just leave you with the plea that, whatever you're going to do, do it in context. Look at the expenditure side hand in hand with the revenue raising side. Hopefully, we'll move towards a system that is evenhanded, reliable and doesn't need to be any more progressive than it already is.
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Mr Lowden: Let me take you through the charts quickly. If you turn to the back of our report, after page 9, that first chart sets out what's been happening to the total tax burden in Canada versus G-7 countries and the United States. You can see our tax burden is rising at a much faster rate than it is elsewhere.
The second chart shows the total tax revenue that's derived from personal income tax in Canada versus other countries: Canada at 41% of total tax revenues, the United States at 35%, the G-7 countries at 26%.
Our third chart looks at the marginal income tax rates in Ontario versus the 13 largest OECD countries. In 1988 Ontario was 45%. The proposal is that the maximum rate now go to 60%. We're up at 53.5% or something today, in 1994, and it's proposed to go to 60%. The OECD countries were 74%; that's their former high. They've cut it back to 51.6%. We're going in the opposite direction from the rest of the world as far as top marginal tax rates are concerned.
The next chart deals with the actual personal income taxes collected versus the announced changes in Ontario since 1985. You can see that there was a period there where we announced modest changes and picked up huge increases, and now we're announcing huge increases and watching the revenue disappear. This we call the tax ceiling; it just doesn't raise revenue any more.
The next chart looks at marginal income tax rates in the various Canadian provinces. The Fair Tax Commission proposal is that the highest rate should be 60%. There is where our provincial competition lies, and you can see we'd be in difficulty in that structure.
The next chart looks at the total share of tax revenue that's derived from consumption taxes in Canada versus other countries: the European Community 32%, the OECD average 30%, Canada 27%. So we're behind in consumption taxes as compared to our competition.
Maralynne referred to the volatility of personal income tax and corporate income tax as compared to consumption taxes or retail sales taxes, and you can see the changes in the years 1988 versus 1991. It's true that when you get into a recession, income tax doesn't provide much of a revenue source for government.
The next chart just looks at the aggregate of our retail sales tax and GST across the country.
The next chart Don McIver referred to. Ontario's businesses pay a total of 47% of the property tax burden. In the United States in 1957, businesses paid 45% of the property tax burden. They are now paying 16%. That's a very difficult competitive environment for our businesses to deal with.
I referred to the fact that property tax, commercial, industrial and business taxes are now the largest tax paid by businesses in Ontario: $4.7 billion versus provincial corporate income tax of $3.2 billion, health tax of $2.6 billion and workers' compensation premiums of $2.5 billion. Property tax is the big item at the moment.
The next page just looks at some tax burdens factored on a per-square-foot basis in major centres in North America. You'll see Toronto there at $19.60 per square foot in our prime office space versus very substantially less numbers in the US, even in such high-cost places as New York City.
The final chart shows -- this is a difficult concept for me but let me try it this way. The Ontario Municipal Act, the Education Act and the Ontario Unconditional Grants Act require that the rate of tax on residential property be set at 85% of the tax rate on commercial and industrial property; or, if you look at it the other way, commercial and industrial properties should be 117.6% of residential property. That's what the legislation calls for.
Our understanding of the actual relationship, based on the assessments versus real market value, is more like 103%. This information, I believe, is contained in the property tax working group of the Fair Tax Commission. In other words, we have overburdened the business community badly. Residential property taxpayers have shifted the cost to the business community. It's not competitive with our environment and it's not in accordance with our legislation. We need a fair property tax that is applied consistently.
We'll take a few questions.
Mr Sutherland: I appreciate your presentation. I was a little surprised by some components. You're suggesting that sales tax is a better way of going than increasing income tax because you feel it's more stable. We're just finishing up our hearings on the underground economy, and I'm not so sure I would agree with the assessment that sales tax revenue base is any more stable than an income tax base.
Ms Monteith: That's just based on the material we have available from OECD sources, that indeed it is less susceptible to movement, less volatile.
Mr McIver: The suggestion also is, that you can have a broader base for the retail sales tax than you currently have now. Obviously, with harmonization with the GST, that would result in a much broader range of services being included in the tax, which of course is less susceptible, at least to cross-border purchasing.
Ms Monteith: Which is not to say we wouldn't make some amendments to GST to help that stability.
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Mr Gerry Phillips (Scarborough-Agincourt): I appreciate the thoughtful, as usual, comments from the board of trade. I'd just follow up on Mr Sutherland's comments so I understand. You're saying that your organization would be supportive of the province-wide pooling of commercial property tax. You aren't looking at any substantial reduction in what your members pay, but it's a fairer way of raising the money, and that for the $3.5 million that currently is raised from residential property tax, some form of higher sales tax and a broader sales tax is strongly preferable to the board than the increase in the income tax?
Mr Lowden: I think the reality is that Metropolitan Toronto businesses have been abused by residential taxpayers much more than the province at large. The result is that Toronto businesses would be better off in that larger pool on fair market value or rental value.
Mr Phillips: That's not inconsistent with what we heard from the city of Toronto when it made its presentation here last week. The board's assessment, I gather, on some analysis, is that your members would benefit from province-wide pooling. I gather, reading between the lines, you also believe there's some expenditure savings in moving in that direction as well.
Mr Lowden: Very much so. We think the expenditure levels in Metropolitan Toronto have been much higher than they are in the rest of the province.
Mr Gary Carr (Oakville South): I appreciate some of the comments you made. I want to go to what this government and the federal government are doing with their job creation program, the infrastructure program. I understand, as a matter of fact, that the Prime Minister is speaking tonight at one of the boards of trade.
Mr Lowden: That's correct.
Mr Carr: Your board of trade?
Ms Monteith: Yes.
Mr Carr: What do you say to the Prime Minister, and we talked about the deficit and the debt, knowing that we're now going to spend $6 billion? My municipality likes it because it's only kicking in one third, but there is only one taxpayer. Tonight, as you sit down over dinner with the Prime Minister, are you in favour of the capital structure program he's putting in place, or if you had your way, would you endeavour not to go into this major program? What are you going to tell him tonight?
Mr Lowden: I'd say, "You have to economically justify these expenditures." There's certainly room for government to make capital expenditures but only if they can be economically justified. They have to be good long-term value or we shouldn't do them.
Mr Carr: And the money should be taken out of existing programs?
Mr Lowden: You have to take the money out of existing programs. We don't have any capacity for increased spending, so we have to take it out of existing programs. It's that simple.
Mr Carr: Some of the things you talked about are similar to what Alberta does. I think Mr Sutherland's right. I like what they're doing. They're taking some tough measures, but I think at the end of the day they're going to be more successful. Would you agree that the province should have some of the tough measures that Alberta has, including its balanced budget provisions? Is that what you'd like to see a government of Ontario do at some point in time?
Ms Monteith: Very definitely. We'd like to see the fiscal responsibility come back into line, because we firmly believe that if we keep spiralling on the revenue raising side, that underground economy is just going to get bigger and bigger and bigger. You've flipped the pyramid on its head, if you will. Instead of spending your money building the capital base, you're just trying to shave it off the top. It's going to be a never-ending problem if we don't take some hard medicine now in terms of spending up to our credit limit and stopping.
The voters are telling you, "We don't want you to spend any more money because we're not prepared to pay for it." Maybe you should deal with that issue, that there is a wall that's been hit and people are saying, "I don't want to pay more taxes." The other side of that is that we have to deal with expenditures.
Mr McIver: One of the criticisms of the process of the Fair Tax Commission that I have had personally, and I've been involved in it to some extent, is that the premise is perhaps incorrect. Really what you need is a fair expenditure committee. What you really need to do is define what it is you should be spending your money on. You can determine after the fact how you should be generating the funds to meet the necessary spending.
The Chair: I thank the Board of Trade of Metropolitan Toronto for making its presentation.
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
Mr Michael Power: My name is Michael Power. I'm the mayor of the town of Geraldton, from the great northwest of this province, and a vice-president of AMO.
Ms Doris Brick: I'm Doris Brick. I'm the reeve of Ennismore township in Peterborough county. I'm a member of the board of directors of AMO, I am a past-president of the association and I did serve on one of the task forces for the Fair Tax Commission.
Mr Power: We propose to divide this between Doris and myself -- Doris is well experienced and knowledgeable about fair tax matters -- and then we have general comments we wish to make to the committee. We propose to leave sufficient time for questioning by members of your committee.
On a positive note, we'd like to acknowledge and to say how pleased we were that both levels of government, federal and provincial, were able to get together on the infrastructure program and how delighted we were that you involved a municipal representative in the final selection; namely, Bill Rice, chief commissioner from the city of Thunder Bay, will be involved as one of the people. We're very pleased about that.
One of the things we want to make very clear and very plain to the committee as we move forward this year is that we're not here saying, "Give us, give us, give us." We're here to make some concrete and very positive suggestions to you. One of the things that's happening, has been happening and will continue to happen both this year and next year, we believe, is that there will be major reform in programs, in the method of delivery of these programs, and that there will also be tax reform happening. In light of that, it's the position of AMO that it is absolutely critical to have consultation between the two levels and that we work together to achieve it.
As you're aware, 1993 was rather difficult for municipalities in Ontario because there were many changes to programs and to finances, euphemistically known as the expenditure control plan, which we all had to deal with, and the social contract, which brought experiences that municipalities have never really experienced before.
One thing we're really firm about is that the Association of Municipalities is convinced that governments at all levels must work together to find solutions to the problems we're facing. Some of them are new problems; some of them are old problems we never solved.
We have looked at, over the past year, a number of areas where the municipal sector is involved and where we play a part in the economic strategy of this province, so we'd like to make some suggestions in terms of the upcoming budget. As I said earlier, you will be delighted to know we're not saying, "Gimme, gimme, gimme." We're not asking you for an increase in unconditional grants. We haven't picked out various conditional areas where we are asking for 4% or 3% or 0%.
We do believe that the current practice that all governments have of downloading responsibilities can't be continued and can't be tolerated. The problems when you download still stay there; they don't even get removed off your plate. What we're saying is that we need a new way of governing. For example, we're saying to you that real consultation and not pseudo-consultation must take place.
As a good example, it was suggested to us that today was the opportunity for AMO to make its input on the Fair Tax Commission's report, and we put it to you that this isn't consultation. We look at it as a first opportunity to make you aware of some of our thoughts. We believe there has to be proper consultation and we encourage this committee to take that under advisement and to move forward to make it possible and to insist that further and meaningful consultation take place.
You must understand there are times when we feel that as a municipal government we're country cousins, and that is because sometimes members of provincial governments forget to treat municipalities as another level of government and tend to sort of pat us on the head and say, "Now, now, go along and do this or do that." We're suggesting to you that isn't good enough.
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For example, during the ECP and social contract discussions, municipalities were very heavily involved, but initially, and even in the final analysis, the province did fail to recognize the difference between provincial and municipal fiscal years, which put an inordinate burden on the municipalities, because most people don't realize that municipal fiscal year is January to December and provincial fiscal year is April to March. When you're coming in with a program that takes effect in April, it places an inordinate burden on municipalities which have already done their budgeting. What we're suggesting to you is that when you're announcing programs that have fiscal impact on municipalities, you should be recognizing the difference in fiscal years and prorating it or bringing it in at a time when it makes sense.
While we're not asking you for increases in unconditional grants, we're saying to you that there isn't room for further cutting of the unconditional grant structure. We think that would send out from this government the wrong message to municipalities about this government's commitment to economic recovery, and certainly this government has been very firm in saying it wishes to have economic recovery in promoting programs -- Jobs Ontario and other kinds of programs -- to try to stimulate this recovery.
Also, a program we're all in together, the infrastructure program, could be seriously hurt if we have further cuts to the unconditionals which leave municipalities with less room to manoeuvre with their budgets as well. As we all know, we're anticipating that through the infrastructure program in this province we will be able to create significant economic activity together and create many additional jobs. Certainly the Premier of this province has recognized that.
We know it is always very important to look at new programs. All of our constituents, be they at the municipal level or the federal level or the provincial level, are all the same constituents, but they all come to us and they always have nice ideas and good ideas about new programs that should be brought into effect.
What we're saying to you very firmly today is, when you're bringing new programs into effect or considering them, please also consider the ongoing costs and don't bring into effect a new program that's downloaded to municipalities where we have to pay the ongoing costs. We don't have any other place to get it than you do. An example that took place in the past, of course, was on court security. That made a very dramatic impact on municipalities.
There is a suggestion that in an attempt to meet a proposal that is coming forward to attract people who have defaulted on family payments, the marriage licence system will be used. We say to you again, if you're planning to use the municipalities for that, please consider the costs, look at them thoroughly and consult with us before this is done.
For example, in 1993 in the Ontario budget, we're not convinced that the province considered the impact on the municipal sector when the retail sales tax was extended to insurance premiums, parking revenues and building materials. We really aren't convinced that was considered and we think it was an oversight. What we're saying to you is that you must be more cognizant and you must think ahead when you're putting new revenue generation schemes in place to see how they will impact on the areas where the revenue generation is coming from. I'll give you an example.
When you talk about parking and a tax on parking revenues, most meters aren't designed to handle GST and the rest of it, so you have that kind of difficulty. We just think it probably wasn't thought about in advance. We ask you to do that.
We're very encouraged by the fact the province will be conducting a cumulative impact assessment of its policies and programs on municipalities, as was agreed to in the municipal sector agreement under the social contract. AMO is extremely pleased that the impact of policies and programs on municipalities will be assessed and we recommend that it should be an integral component of future budgetary processes.
One of the things that we are concerned about is the level-of-care funding. For example, in long-term care many municipal homes are looking at cuts to funding, and yet the service levels have to be maintained. We're a little bit concerned as to how we're going to do this. We're urging you that, in terms of the homes, you continue at the present moment to maintain the funding and to fund the shortfalls until such time as we're able together to look at other things.
Those are the major thrusts in terms of our thoughts on budgetary process and how the budget can be constructed. We turn to Doris for some thoughts on the Fair Tax Commission.
Ms Brick: In the time allotted to us we can't go into a lot of detail on the Fair Tax Commission report, so we will very briefly. We have left with you some information that has been approved by our board on a preliminary review of the document. Our main concerns deal around the funding of education, the assessment system, the intrusion into the municipal tax base and the shifting, more so than reduction, of taxation.
The Fair Tax Commission underscored the importance of the municipal sector and the need for local government finance reform when it dedicated over 60 of its 135 recommendations to issues relating to property tax reform. Therefore, the government is encouraged by us to consult with and involve local government representatives in its activities leading to the introduction of any of the commission's recommendations.
AMO supports in principle the commission's recommendation that education be fully financed by the province and therefore removed from the property tax base. We propose that the education portion of commercial and industrial property taxes should be replaced by greater revenues from corporate income tax and other general revenues. We agree in principle that municipalities should not rush in to replace the tax room vacated by the reduction of that portion of the residential property tax which had formerly gone to education, but we do not support the recommendation that municipal tax rates should be subject to provincial regulation during a transition period. We consider this to be an unwarranted intrusion into the municipal tax base, and as such would undermine local municipal autonomy.
Regarding the recommendations dealing with assessment, specifically how the province would finance education, AMO encourages the province to rely more heavily on revenue sources which are more progressive than the property tax.
Proposal 82 that deals with assessment in the Fair Tax Commission report we see as a proposal that certainly has some merit. We think it can work in an urban situation, but we do have some concerns about other parts of the province and its application, especially in rural Ontario. Due to the magnitude of the provincially negative outcome, AMO strongly recommends that any replacement of the current assessment system be fully tested before being implemented province-wide.
Certainly another matter of great importance to AMO that we're gravely concerned about is the commission's recommendations calling for the establishment of a provincial property tax on commercial and industrial property. These recommendations constitute an invasion by the province into the municipal tax base.
We have been on record as being strongly opposed to the pooling of commercial and industrial assessment for education finance purposes. Once again, the education portion of commercial and industrial property taxes should be replaced by greater revenues from corporate income tax and other general revenues.
In closing, we ask that the government consider that municipal administrations require some breathing space to allow them to plan for and adapt to the significant financial challenges we face. This association supports the commission in its interest in treating education finance reform as a package, recognizing that the interplay of all the recommendations made by the commissioners will have to be considered as any one recommendation or group of recommendations is implemented.
The magnitude of the recommended changes necessitates further consultation with key stakeholders. AMO believes that an impact analysis team consisting of representatives from the provincial government, municipalities and school boards should be established for consultation before any implementation of the commission's recommendations is undertaken.
Thank you for this opportunity to speak to you. We look forward to trying to respond to your questions.
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Mr Crozier: I've always considered AMO to be a conscientious representative of the municipalities in Ontario.
Having been very recently the mayor of a small urban municipality in this great province -- I'd like to discuss a number of the issues, but I'll take just one -- I agree that it may be an intrusion into the municipal arena for a limitation to be put on by the province if there were some changes in the education tax so that the municipalities couldn't jump into that big void it would leave. I would be interested to know, though, how we might be reasonably assured that this wouldn't happen, because I'm afraid there are some municipalities that would abuse that. You might help us as to whether there were any discussions about how that might be controlled, and then some night at AMO I'll sit down with a drink and ask, "How is disentanglement coming?"
Ms Brick: Most of us in municipal government recognize that your electors are our electors. We know the taxpayers will not tolerate tax increases today, and we like to think we're responsible too. If we impose taxation levels on our ratepayers as a result of that space, we're going to be turfed out of office. It goes back to the point that we have to respect you as a level of government, but the respect should go both ways.
We would like to think we would be financially and fiscally responsible in the manner in which we would deal with that space. Most of us just don't have room for growth in taxation unless we start to go into debt, and we don't believe, being fiscally responsible, that is a proper venue for us to approach at this time either.
Mr Power: One of the things to pick up on is the fact that municipalities over the last few years have shown themselves to be extremely responsive and responsible. If you look at the rate increases in the municipal portion of taxes over the last few years, you will find that the vast majority, 99% of the municipalities of this province, have held any tax increases to between 0% and 2%.
Also, as Doris as pointed out, municipalities aren't asking for the authority to infringe on the province, right? We have full confidence in you as electors and as members of the Legislature, and we suggest that you should also have full confidence in us as elected representatives at the municipal level.
Mr Crozier: There's your first mistake.
Mr Phillips: The recommendation from AMO on provincial funding for the upcoming budget, which we're wrestling with right now, is essentially for a freezing of the grants. Is that a fair way to characterize it, as maintaining the absolute levels from the previous year?
Mr Power: What we're saying to you is that the unconditional grants should not be arbitrarily reduced. You may want to enter into discussions with municipalities further down the road on other items dealing with disentanglement, as Mr Crozier has brought up, because there are other agenda items on the table that the government has placed forward that will require discussion. But we're saying to you that the unconditionals shouldn't be arbitrarily attacked as a method of saving dollars and downloading on to the municipalities.
Mr Phillips: In terms of where things are right now out there, because I very much believe you have your hand on the pulse, probably a lot better than we do just because you're much closer to the electorate, what's happening right now in terms of the economy? Are your tax payments up to date? Are they falling behind? Is that something we need to be concerned about? Are your municipalities beginning to see the turn in the economy that we think is here now?
Mr Power: Most of the municipalities aren't really seeing the turn in the economy. Maybe we're all getting used to things being not so good. In terms of taxation and dollars coming in, we've now started into 1994. The first interim tax payments will be coming in from most municipalities, so I can't give you a firm example as to what's happening in 1994. In 1993 we did notice a slight increase in the lateness, so that by end of December 1993, when provincially you might be trying to run around 12% in deficit payment on taxes, in some municipalities you were running over 20%.
One problem hitting the large urban areas in terms of all the Metro Toronto municipalities is the business tax area. That has always been a major problem for them and continues to be so. Our discussions with large urban municipalities haven't shown any tremendous increase in economic activity that has led to greater tax revenues or put them in any better position to handle things.
In the northwest of Ontario, for example, we're a little more remote and usually things happen to us about a year or two after they happen to you. I have to tell you that we are now, for the first time, really seeing the recession in the northwest. It's affecting us in some of our smaller communities. It's sort of novel for us, and we're having to learn how to deal with it.
In my own municipality of Geraldton, if I may be very parochial, we saw last year that our uncollected taxes had increased from 12% to 17%. That causes us grave concern, so we've been attempting to find innovative ways of getting them collected on a sliding scale and almost doing anything. You want to keep the businesses in place, so you'll do almost anything as long as they can try to make some payments.
Ms Brick: In our area it's a mixed bag. People are a little slower, but there is a lot of innovative collection going on. People really want to keep their taxes paid up to date, and there are a lot of arrangements being made that maybe 10 years ago wouldn't have been considered. But there is certainly in the business community a struggle. Even in the residential, where people are unemployed, there's a lot of difficulty.
The rates vary. In some places they aren't having difficulties; in others they are. Local conditions are pretty well determining what the amounts are. East of here, where I come from, you're likely looking more at 8% and 10% on collection, where Michael says it's 12% to 17%. The impact the recession has had on communities varies.
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Mr Cousens: When you say no cuts in unconditional grants, no new programs, I'm reminded in part of what the previous Treasurer, Mr Nixon, had to say. He felt that Ontario municipalities had tremendous reserves. The province, according to Mr Nixon, was going into debt while municipalities had surpluses, and municipalities had that freedom to establish more debt. I see you resisting that impulse, that the Liberals said and this government is now saying that there's tremendous elasticity left with the municipalities. Are you disagreeing with that?
Mr Power: I don't think we need to apologize for the fact that municipalities are well run and well managed. As a result of that, they have avoided excessive debt and have attempted always to put money aside in order to pay for the things they foresaw they would have to pay for in terms of equipment or new programs if we chose to create the new program.
Where we're saying we don't want new programs is when a program is mandated upon us by the province that we have no say in but must share the cost of. We're saying that's not right. There should be discussion before ever that happens.
In terms of debt, we can talk about that around and around, but it doesn't matter whether the debt's at the municipal level, the provincial level or the federal level; it's all there and it has to be dealt with. If the desire is for the province to download to the municipal level, remember that under the Municipal Act, because you created us and you really are a little bit afraid to give us the authority and leave us on our own, you also have to take the responsibility if a municipal government becomes irresponsible and increases its debt beyond its ability to pay. That normally doesn't happen. When it does happen on occasion, the province steps in and very quickly it's cleared up, not through grants but just through proper management. I don't think we want to apologize for that.
What we're saying is, for new programs that you mandate to us, you provide the funding. If we want to persuade you of a new program and try to persuade you to help us fund it, that's fine.
Ms Brick: To elaborate on the reserve funds that municipalities have, it's a good thing that municipalities did use some fiscal restraint a few years ago and saved some money. It's the only thing that's saved us today and it's the only way that most of us will be able to afford this infrastructure program, because we know we can't levy tax increases to take advantage of the program. If we didn't have funds in reserves, we wouldn't be able to take advantage of the situation.
The other thing is that when you talk about the reserves that municipalities hold, some of them are kept in funds for specific purposes and can only be used for those purposes. They can't just be taken and spent willy-nilly as we might like to choose on a given day. I think that had we not had the reserve funds, we'd be facing many of the problems that the province and federal governments are facing with debt, and we aren't supposed to deficit-finance.
The Chair: Thank you, Mr Cousens.
Mr Cousens: I didn't have as much time as the Liberals had.
The Chair: You had just as much time, but the people making the presentation didn't take quite as long to answer, to be quite honest and fair.
Mr Cousens: I got good answers, though.
The Chair: Yes, you did. Very succinct.
Mr Sutherland: My questions may be a little tougher. I represent the riding of Oxford. Oxford county is the only restructured county in the province. They did that 20 years ago, and I think it has worked out very effectively.
We hear a lot about boards of education, wanting to reduce the number of them. What about municipalities? There are some 837 municipalities. Much of their structure was set up at the time of Confederation when we didn't have telephones, we didn't have faxes; we still had a horse and buggy. What about municipalities all across the province, and particularly counties that haven't restructured, taking a serious look at doing something like Oxford did, which came up with its own model, but seriously reducing the number of municipalities to reduce the amount of administration costs out there?
Ms Brick: Michael says that's mine. I guess coming from a county, it is. Indeed, there are a number of restructuring studies going on. There is one in Peterborough county. It's a very difficult issue to deal with. Certainly there are many of us who recognize that Oxford is very fortunate. They went through this years ago and are up and running well, and that's where many of us should be.
However, it's a very difficult local thing. There's turf protecting, there are a number of things, but many of us in local government recognize that it's something whose time has come. For cost efficiencies, we are all going to have to look at it and bite the bullet, whether it's this year or next year, and there is some movement forward. Simcoe county is showing the rest of us a good example, Lambton has, and it's something whose time has come. It's a result of some downloading from the province, because as small local units of government which are very close to the people, we just can't afford to run many of the services that are coming our way. We don't have the administrative capability and the financial backing to be able to carry on.
Mr Sutherland: On the infrastructure program, do you have any sense from the early stages what percentage will be done from reserves versus what percentage may be done through some debenturing?
Ms Brick: Not at this point in time. It's too early to be able to anticipate that.
Mr Power: We are getting some feeling from a lot of our municipalities that they will to the extent possible utilize their reserves or maybe put off buying a truck or those kinds of things. Only in the large projects will you find too much debenturing, I think.
The Chair: I thank AMO for making its presentation.
ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS
Mr Dan Oettinger: We represent the Ontario Association of Non-Profit Homes and Services for Seniors. We are this year, as a matter of fact, celebrating our 75th anniversary. We are, to the best of our knowledge, the oldest non-profit seniors' care association in Canada and probably in North America and we take some pride in that service over this three quarters of a century.
My name is Dan Oettinger. I'm the president of the association for this year. My colleague is Michael Klejman, our executive director.
OANHSS membership encompasses over 220 non-profit agencies serving over 10% of Ontario's seniors. That includes some 25,000 facility beds and approximately 10,000 seniors living in non-profit seniors' housing independently.
With that bit of background, we have presented here to you today a full brief. We will highlight some of it, in the interest of time, and invite questions at the end.
For 75 years the association has represented non-profit long-term care providers in Ontario. During that time, our members have travelled the distance from running poorhouses for the aged and infirm to managing comprehensive, multiprogram services suited to the needs of today's seniors.
Our members have provided leadership in developing high-quality programs for seniors both in facilities and in their own homes in the communities. We've pioneered the idea of supportive housing through private home care, group homes and satellite homes and created adult programs, respite care and emergency response units in order to assist care givers in the community. Our members have initiated in-home community programs such as Meals on Wheels, and also introduced the idea of partnerships in cooperation with community-based agencies long before it became the fashionable thing to do.
However, current fiscal restraints, including the social contract, long-term care legislative and policy changes, the demands of labour legislation and wage settlements have presented our members with a greater challenge than we've ever faced before and quite frankly have brought some of them to the point of breaking under that fiscal load.
We're being only too realistic when we express the alarm of our members at the funding crisis in homes for the aged. In 1993 our member homes lost a total of nearly 30,000 hours of care to residents, affecting some 460 staff positions; 69 of our members reported that over 170 people had actually lost jobs, while many others had their hours significantly cut.
While costs were increasing because of provincially mandated program changes such as WCB, pay equity, arbitrated settlements and taxes, our revenues were also decreasing as a result of the social contract, as well as reductions in resident copayments. Preferred accommodation charges have dropped. Municipal contributions and donations from the voluntary sector have also dropped.
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You no doubt have heard and will hear from many organizations and individuals who believe Ontario's primary budget priorities should focus on expenditure control. We would like to suggest that the Legislature must consider three issues more crucial to the future wellbeing of Ontarians. Our presentation will focus on these three areas:
(1) The need to review spending priorities in programs and services. We believe a review of priorities will change some of the ways the Legislature does funding.
(2) The current problems with developing revenue sources for long-term care facilities.
(3) The impact of provincial policy decisions on the rising costs of operating long-term care facilities when there is no additional funding forthcoming.
First, a review of spending priorities: We recognize that there are many demands on the provincial tax base. Among those demands are residents in long-term care facilities; as a matter of fact, those who built this society that all of us enjoy. Since 1992, changes in the funding and levels-of-care requirement in those facilities have created a crisis that threatens the level of care for some 56,000 frail residents.
Until 1990 municipalities were funded on the basis of negotiations with the area offices of the Ministry of Community and Social Services, an arrangement which enabled municipalities to contribute from their own resources to secure a higher provincial grant and thereby better service for the senior.
Capping introduced in 1990 imposed limits on provincial contributions to the homes which exceeded the provincial municipal average per diem. Charitable homes were funded based on a legislatively defined ceiling that by 1992 had been equalled by funding to the profit nursing home sector.
In 1992-93, the total funds expended on facilities was approximately $1.033 billion. In 1993-94, funds allocated had dropped by $30.5 million despite the fact that Ontario's expenditure reduction plan showed no reductions for long-term care due to the implementation of long-term care redirection.
For the same fiscal year, homes for the aged developed their budgets based on an anticipated average daily rate of $90. In the fall of 1993, after all that planning, we discovered that available funds translated into an actual daily rate of less than $80. This is intended to cover nursing and personal care needs, accommodation and food, activation and recreation and social support for elderly residents with severe physical and cognitive disabilities, people who simply cannot remain in the community. The number of severely impaired residents will increase over the next few years as the percentage of our elderly in this society increases and as more people remain in the community with support services.
Currently some 63% of residents in municipal homes and some 14% of residents in charitable homes need care that exceeds $90 a day, and these numbers continue to escalate. Unfortunately, these homes are faced with levels-of-care per diems which average only $79.61 from the province.
Originally, as a part of long-term care redirection, the province agreed to red-circle contributions to the homes. Homes would then have to absorb all new costs, such as provincially arbitrated salary increases, utility charges, pay equity and so forth, but at least our revenue would have been held. Only recently, we've been informed that the province may not even abide by the commitment to red-circling and that the cost impact on these homes would be even worse than we'd anticipated originally.
By comparison, we've shown some of the per diem funding levels for other social programs in the province: Young Offenders Act, for secure custody under MCSS, $300 per diem; Young Offenders Act under Correctional Services, $275 per diem; jails and detention centres, $118; other correctional facilities, $131; developmentally disabled in schedule 1 facilities, $241 per diem.
Some of you may be aware of the rather extensive and rather negative coverage in the media of one of our member homes in the city of Brantford recently, where the public institutions inspection panel compared it rather negatively to the care provided for criminals. I would hasten to add that some of those comments were taken somewhat out of context and don't necessarily represent reality. None the less, when you consider the average of $79.61 per diem to serve our seniors, many of them extremely dependent, compared to some of these other social services, no wonder the panel said we treat our criminals better than we treat our elderly. If in fact red-circling goes, that particular home would probably lose something in the order of $20 per diem, which would be absolutely devastating.
Many facilities in these programs are funded 100% by the province, incidentally. Community-based residential programs may be supplemented by volunteer funding, but keep in mind that the average senior in the home for the aged pays about $33 of that $79.61 himself or herself as opposed to 100% funding by the province for these other programs. The difference in that funding level should make obvious to you the kinds of problems that we're suffering.
In addition to that, we've examined the daily costs of community care for several other programs. Community day care for special-needs kids in Metro Toronto, for example, costs $107 for the day programs in addition to the cost of professional and paraprofessional in-home services which would be funded.
I want to make it clear that our members do not, under any circumstances, question the value of these services. We give them here simply by way of comparison. We do question whether such vast differentials are justifiable, especially when the need to set priorities for public expenditure has never been higher.
Within the long-term care sector itself we have also compared the respective costs of facility-based care and care to people who are living in their own homes or apartments, so-called community care. The daily maximums for personal support and professional services -- that is, long-term care for people who live in houses and apartments -- have been set at fixed-dollar maximums of $115 -- that's $3,500 a month for the basic funding level -- and $216, or $6,500 a month, for the enhanced funding level or higher levels of service. These figures do not include the cost of services from other sources that may also be provided for the client.
Given the current average limit on the cost of 24-hour basic care for professional supervision in a home or facility -- and I include here registered nursing staff around the clock -- given that we have there $79.61 a day, the province can hardly say that the introduction of upper limits ranging from $115 to $216 per diem is really that cost-effective.
We fully support the philosophy of maintaining people in their own homes as long as possible and as long as they wish. We have always been reluctant to get into the we-they kind of argument regarding comparative costs. However, we are witnessing not only the erosion of our funding base but the inexorable tightening of a noose that is driving many of our members into unmanageable deficits to the point of breaking. We're not here talking just about financial deficits for a home; we're talking about care levels that are provided for our seniors.
For this reason we urge you to insist on budget priorities that balance several factors:
(1) The needs of the client;
(2) Overall service outcomes;
(3) The degree to which particular service packages meet the client needs; and
(4) Comparative affordability.
We've taken the position that a realistic threshold for delivery of community services ought to be established based on fiscal, quality-of-life and service management considerations. This threshold would then give us an idea as to when a person requires service in a facility or some other mode or context as opposed to simply saying they should stay at home.
We suggest that the absence of a clearly defined service delivery threshold will result in increased risk to consumers and reduced cost-effectiveness for the system and in fact increased cost as well. The setting of a threshold will permit measurement of program affordability against clearly defined outcomes. We believe that the province should consider taking a more integrated approach to community-based care and facility-based long-term care.
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Mr Michael Klejman: I will summarize the points we make in the remaining sections; that is, the review of revenue sources, provincial policy decisions and their impact on operating costs and the current financial projections and impacts on the long-term redirection process itself.
Looking at the revenue sources, I'd like to draw your attention to one of the key components in the whole design, which was to generate an additional $150 million in funds for the redirection process in facilities from changes to the revenue fee structure for residents which calls for the introduction of a new base of about $38 a day per resident and then a sliding scale down to about $26, depending on the income level. Our analysis of the data, and we reported this to the Ministry of Health on previous occasions, suggests that the revenue is not going to be realized.
About 50% of residents are actually in a position to pay that amount, and at best, that policy in itself will be a revenue-neutral development which will leave someone short of anywhere from $90 million to $60 million, in terms of the projected expenditures in this program.
The second issue we're looking at is the question of how user fees are applied within the long-term care sector, and we see quite a discrepancy in the current policies within the community service sector, where you can find the same services provided free of charge to some seniors, and the same services being subject to user fees in other situations.
Secondarily and of greater concern to us, obviously, is the significant discrepancies in the fee structure between services provided to residents in long-term care facilities and services provided to people living independently.
Finally and probably most important of our points in looking at revenue sources was the decision to exclude assets from consideration of residents' ability to pay for services. It has first of all created an unfair structure where individuals who have modest income are now expected to pay considerably above the base copayment level while other individuals who may have no significant or even modest income but have considerable assets of various types are paying less, paying the base copayment of around $26 a day.
Secondly, it creates a situation where public funds have to be injected into the long-term care sector to cover the funds which otherwise would have been coming from those who are able to pay now or at least would have funds available when the estate is being disposed of at some point in the future.
The second area is provincial policy decisions on operating costs. I'd like to just give a couple of examples to illustrate the impact of provincial policy decisions in the past two or three years on our members.
Looking at the impact of pay equity implementation, the average cost to a municipal home in 1993 was $2.1 million per home. Charitable homes experienced an impact of $48,000 per home.
Another example that is very difficult to deal with is the impact of arbitrary decisions for awards. As you know, in our sector, we are subject to the arbitration process, and our members have experienced, on the municipal side, an average $136,000 in additional costs as a result of arbitrated awards, and charitable homes $16,500 per home, keeping in mind too that some of these decisions in the years 1992 and 1993 allowed for 29% increases in wages.
Another aspect of policies which the government is currently looking at is the implementation or at least receiving the report of the Fair Tax Commission. I noted that our colleagues from AMO spoke about it as well. We want to draw your attention to one specific recommendation contained in the commission's report and that was recommendation 103, which suggests the local property tax exemptions should be eliminated from organizations which are of charitable nature and function for the relief of the poor. To date, homes for the aged have been exempt from property taxes, but our housing members have not been so fortunate and have often been forced to spend time and money on property tax assessment appeals and protracted legal actions.
The impact of recommendation 103 would significantly reduce the financial viability of our facilities, which are already under pressure. A most disturbing fact is that for our members this change will mean having to charge our residents or tenants more and, if they are not able to pay, reduce the services to them.
Finally, our members are concerned with the introduction of a costly inspection system designed to deal with some of the issues of standards of care in the for-profit sector and are, we believe, unnecessarily applied to the not-for-profit sector, despite the fact that we have developed an accountability system, have endorsed selfgovernance in our settings, have developed a multidisciplinary approach to provision of care and have a clear accountability and control process through the volunteer community boards.
Looking at the implementation of redirection of long-term care, the last of our points, there was a key principle that we want to state. Provincial policy initiatives of the last decade have questioned the role of facilities in the delivery of care to seniors. The focus of these initiatives has been the independent senior living in the community, with independence and relationship to the community generally defined in terms of individual seniors' living arrangements. Therefore, living in a single-family dwelling or an apartment equalled being independent; residing in any kind of a group or congregate setting or a facility equals living in a facility and not being independent.
Let us make it very clear that independence is not a function of a physical structure or the size of the living unit. Isolated seniors with significant functional and cognitive disabilities and limited mobility can be just as institutionalized in their own homes as they can be in any facility. Independence is a function of the availability of practical choices, ability to choose and ability to carry through with those choices. Facilities are just as much part of a community service network as any other services are.
The second issue in the implementation of redirection of long-term care relates to the funding commitments that were made at the time of implementation. One of the provisions of Bill 101 guaranteed funding from the province and residents' contribution to be maintained at the level it was at on July 1, 1993, until the so-called case mix system brings the funding to appropriate levels. The intent was quite clear: to avoid reduction in services to seniors, care to seniors and to minimize the potential impact on staffing levels and to minimize layoffs.
Within six months of introduction of the new funding system and those commitments, we are now facing a possibility that the red-circling provision will be eliminated this year. At the same time, the province extended a guarantee of a minimum of 2.2 hours of care funding to proprietary nursing homes. It is apparent that some of these decisions are now made on the basis of immediate expediencies and immediate pressures rather than based on long-term vision and plan.
I believe all three parties present around this table have taken credit for and endorsed the concept of preference for non-profit services in human services in this province. We have seen since 1987 a loss of 4,000 beds in the non-profit sector in Ontario. We have seen since 1990 a cap on municipal homes' and since 1992 a cap on charitable homes' special grants. Six charitable homes have closed doors and over half of our 80 charitable homes are in deficit.
We also know that the omission of the role played by municipalities and their contribution is causing serious concerns. I note that in 1992 municipalities contributed $90 million to the operation of homes for the aged and charitable organizations raised over $24 million. The potential erosion of this funding because of provincial negligence is inexcusable. The impact it will have on the most frail of our seniors is difficult to imagine and I hope we avoid having to deal with any media in the future.
Mr Oettinger: There are a number of other financial problems that our member homes face as a direct consequence of the redirection process.
First, there has been a gross underestimate of revenues from residents. Secondly, the decision to exclude assets in the payment calculation has resulted in a major shortfall of revenue. Capping the number of preferred accommodation beds at 60% of total beds in facilities regardless of the physical layout of the building and the residents' ability to pay is also restricting revenue. The expectation was that residents in our facility will be able and willing to pay $38 a day, when in reality resident copayments have been below that target and, just as significantly, revenues from preferred accommodation fees have been dropping as residents and some of their families have refused to pay.
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Probably the most telling result of the process used by the province during the reform is the fact that OANHSS members have refused to sign service agreements with the province. Our colleagues in the nursing home association sector have done likewise. This refusal to sign is based on the fact that the province has set unreasonable requirements while refusing to provide appropriate funding that enables us to meet those imposed expectations and, furthermore, some very negative and punitive consequences for not having met requirements imposed on us without commensurate funding.
I hasten to add we are in negotiations with the longterm care division of the province at the present time trying to work out language that is acceptable, but at the present time we simply cannot sign such a document.
OANHSS members have served seniors and their communities faithfully and well for 75 years. To the best of their ability they will continue to do, so but on behalf of our residents we urge this committee to examine the impact of current program and fiscal proposals on our members. In all the redirection documents, the province speaks of the importance of partnership. We represent that reality of partnership through our partnerships with providers, families, residents, residents' councils, volunteers and our staff, with municipalities and with charitable homes.
We hope that the strength of these community-based partnerships will not be further eroded by more legislative and policy demands on our members, inconsistent application of funding provisions in Bill 101 and revenue policies apparently calculated to force our members into deficit, or at best into reduced services to our residents.
We would like to leave you with four recommendations based on the above information.
We urge this committee to:
(1) Realign spending priorities to ensure that funding for facility-based care services for the elderly is commensurate with allocations to other facilities for people with severe disabilities.
(2) Recommend changes to current policy to permit charges on resident assets as opposed to income only.
(3) Recommend changes to current regulations to enable facilities to make full use of design advantages to generate income through charges for preferred accommodation based on the residents' ability to pay.
(4) Ensure that provincial policies are developed in a meaningful, consultative process such that new legislation, policy or program expectations are not introduced without commensurate resources being allocated in order to prevent lost jobs and services, a result which usually invalidates the intent of the changes so implemented.
Thank you very much. That concludes our presentation. We'd be happy to take questions if you wish.
The Chair: You had half an hour for your presentation and you've used that completely. Thank you.
MONICA TOWNSON
The Chair: Our next presentation this afternoon is not a presentation but indeed is Monica Townson, the chair of the Fair Tax Commission. She's here so that committee members may ask her questions about fair taxation and other things relevant to that. Welcome. I apologize for being a little bit behind in our schedule. It might be fair to start with 15 minutes per caucus.
Ms Monica Townson: I'm at a slight disadvantage. I wasn't quite sure what to expect because I hadn't had any contact with the clerk or with anyone. I did have a few opening comments that won't take very long.
I just wanted to say a few things about the process of the commission. I'm sure you're all aware of how it was set up and so on, but there are a couple of points that might be worth emphasizing.
As you know, this was a three-year process and our report was released in the middle of December. Our mandate, as you perhaps know, was to make recommendations to make the tax system fair. It was not to help the government find more money to reduce the deficit, which is what some people thought it was, nor was it to look at government spending. Although we certainly heard in our public hearings that people would have liked a commission to look at government spending, that was not part of our mandate. Nor was it to look at the overall level of taxes, which is another thing that some members of the public thought we should be looking at. Our mandate, as I said, was to look at really how the cost of paying for government services could be shared more equitably among all taxpayers. Part of the mandate was to include people who were traditionally not included in tax policy process in the past. That part was achieved in a number of ways.
One was through the commissioners who were appointed, who were 10 people from a variety of different backgrounds and from different political perspectives. This was not a commission of tax experts. I imagine that was a deliberate choice on the part of the government.
Secondly, as you know, we had working groups which involved about 200 volunteers who looked at specific tax issues identified by the minister, and those groups reported directly to the minister.
Thirdly, we had what I think many people would agree was a very innovative public consultation process where we went out into about 17 different communities across the province and talked with people there on an ongoing basis and where people there volunteered their time and formed themselves into task forces to get together and talk about taxation and the concerns of their particular communities.
All of that was fed into our process, along with what commissions traditionally do, and that is an extensive research program. That was directed by an academic who has a lot of credibility in this field. We came up with about 50 research studies, most of which were done by tax policy people, by academics, by tax professionals, by some of the big accounting firms. Those studies are all being published by the University of Toronto Press. So that was the third element of the input into our process: research, the public consultation and the working groups.
Our recommendations, as I said at the beginning, were not to try and find out how to raise more money or whatever, so they are, overall, revenue-neutral. What we were aiming for was a redistribution of the tax burden so that the end result would be more progressive: We would change the mix of taxes so that the overall system would be more closely related to people's ability to pay.
The recommendations we made, and I'm sure you're quite familiar with these, can be grouped into a number of key areas. One key area that most people are familiar with was the one on education finance. We suggested that should be reformed, that the burden of financing education should be removed from the property tax and that it should be funded from taxes more closely related to ability to pay, imposed at the provincial level.
We also suggested a number of changes in the personal income tax. In fact, they might be categorized as a kind of national tax agenda which would involve negotiations between the provincial government and the federal government to change certain provisions in the Income Tax Act -- those relating to capital gains, for example, and some of those like that -- along with a harmonization of national sales tax with a provincial multistage tax.
Another key section of recommendations relates to reform of the tax system to better protect low-income people. Our estimate was that as a result of our recommendations, if they were all implemented, about 50,000 Ontario families would be raised above the poverty level.
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Another key area was a whole package of recommendations on environmental taxes. We suggested that environmental policy could be achieved through the use of the tax system quite effectively, we thought.
Finally, in the area of business taxation, the key recommendations there were that there isn't really much room to increase corporate taxes, that Ontario's corporate taxes have to remain competitive with those in other jurisdictions, but that we did think Ontario should work with the federal government to minimize interprovincial tax competition and also tax competition in the corporate tax area at the international level.
We recommended some changes that would not give a preferential rate to manufacturing. That was based on a view which I think is part of a general consensus that the service sector is increasingly important in Ontario's economy. We saw no reason to penalize services in comparison with manufacturing. We thought the rate of corporate tax should be the same for all.
I won't go into any more details. Those were the key areas we dealt with, and I'd be happy to try and answer any questions you might have.
Mr Carr: Thank you very much for coming in and being prepared to listen to some of our questions and for helping out. I want to jump around a little, but I'll start with the whole issue of the property tax situation.
As you know, this government was elected on a promise of increasing the share of provincial funding. But one of the problems -- I sympathize with them and I want your comments on this -- is what we heard from some of the other presenters earlier today. I guess it was AMO. One of the concerns I have is that when you shift it to the provincial level, municipal politicians may jump in and fill that void and for a number of different, good reasons want to increase the property tax.
If the provincial government was to take over more of the share of funding for education, would you see it as necessary -- and I'll just let you know that AMO said it didn't want any regulations or restrictions -- for the provincial government to then come in with some type of cap on the municipal politicians so that we don't have that? I say this to be non-partisan, because governments of all political stripes have done it: When there's an opening, they jump in to fill the void with increases. I think Bruce mentioned that as well. If we do shift it, how do you see us protecting the property taxpayers who may get hit with big increases because municipalities, as an example, may now say: "Oh, boy, that's gone to the province. We can up our share of it now"? How would you see the province handling that?
Ms Townson: We considered that possibility, obviously, and in fact we make a specific recommendation that there should be regulation for a period of time.
Mr Carr: Would that be in the form of a cap?
Ms Townson: We didn't specify. I'm just trying to find that particular recommendation here but I can't put my hand on it. We made two points on removal of education from the property tax. Obviously, it could result in a major reduction in the property taxes, and clearly there would be a danger that municipalities might jump in to fill the gap, so we suggested that initially there should be regulation by the province to prevent that from happening. But secondly, we made the point that we didn't think that would be necessary on a permanent basis, because voters at the municipal level, we felt, would be cognizant of the fact that this was supposed to shift the burden of education funding from property taxes to some other tax, probably mostly income tax. They would be aware of that and they would monitor what their elected officials are doing at the local level.
Mr Carr: So you are in favour of regulation?
Ms Townson: Yes, and in fact we specifically said that. It's in the recommendation here somewhere.
Mr Carr: On the same point, the board of trade said it didn't want any income tax. They looked more at the provincial sales tax. In order to do that, my rough calculations are you'd have to double the provincial sales tax from the 8% to 16%, and then you get the GST. You seem to be saying to do it through the income tax. You're not calling for it to go on the provincial sales tax.
Ms Townson: No. There's a specific reason for that of course. Our objective was to make the system more progressive overall, and sales taxes are not progressive taxes. What that means, as you know, I'm sure, is that if you look at the sales tax as a percentage of your income, the lower your income, the higher the percentage of that income you pay in taxes.
In changing the system of education funding, one of our key objectives was to make the overall tax system more progressive. You would not achieve that objective if you shifted the burden of education funding to sales taxes. In fact, you would probably make it more regressive, because you would shift a heavy burden on to those at the lower end of the income scale.
Mr Carr: One of the reasons the Fair Tax Commission was set up, and forgive me for being a little cynical, is that in the last provincial election the government said we could have all the spending we wanted, but it would come in and somebody else would pay. The presumption in the middle class and lower middle class was that this somebody else would be the rich. when the government got in, it realized the Income that comes through the income tax from the so-called rich is very small. Unfortunately, the proportion paid by the middle class income tax and through the provincial sales tax is the bulk of it.
They weren't specific. We always thought there were these thousands of people out there who didn't pay, and if we just made them pay or increased them, we'd have all the money we need. The reality is that those people in that bracket can move their savings or their term deposits to other jurisdictions overnight. I believe when they got in and saw that, they said, "Now what do we do?" That's typical of all governments of all political stripes. When we can't implement what we said we'd do, we set up a commission to look at it.
If in fact it's so easy to tax the rich, to get the revenue we want to pay for all these programs -- the OSSTF said that's basically all you do, tax the rich -- how come a socialist government that was elected on that very fact didn't do it in its first two or three budgets? Why did they need a Fair Tax Commission? Did Bob Rae become a fiscal conservative all of a sudden? If it was so easy to tax the rich to get the revenue we need in this province, why didn't they already do it?
Ms Townson: I have no idea. I'm not a member of the government. I can't speak for Mr Rae or anybody else in government. I was appointed to chair the commission. We fulfilled our mandate and produced the report.
Mr Carr: Isn't it true though, in the words of the Premier and some of the socialists, that we can't get the amount of income we need if we tax the rich? I'll say this, the reason we had to have the massive surtax on anybody making $53,000 or more in the last budget is because that's where we get the bulk of our revenue. I always use the example of the Ford workers in my own riding of Oakville. When the last provincial election came and they thought somebody else would pay, they didn't think they were going to be part of the rich and famous. They got hit with a massive surtax in the last budget.
I firmly believe that's the reason. There's no other reason the government wouldn't. It had a mandate to tax the rich. Why wouldn't they have done it in the first three years? I recognize that you're not part of the government. I'm asking you, as somebody in charge of the commission, is the theory that somehow we can tax the rich in this province and get the revenue we need really not the case, that there is no more revenue? If you increase the tax levels on the so-called rich, all they're going to do is move their money to other jurisdictions.
Ms Townson: I can only repeat what I said at the beginning. Our mandate was to decide what changes could be made to the system to make it fairer. What we're suggesting is shifting the burden of how we pay for services that are provided through the public sector. We were not asked how we get more money, which is what I said at the beginning. The report does not advocate taxing the rich, whatever you mean by that. I don't know what your definition of rich would be.
Mr Carr: That's the problem. We don't know the definition.
Ms Townson: We do recommend changing the way taxes are raised, as I said earlier, by shifting away from regressive taxes like the property tax and shifting on to more progressive taxes like the income tax. We do recommend some changes in the structure of income tax, as you know, that the whole system be made more progressive, that there be more tax brackets, that there be more at the lower end and more at the higher end, so that it would go up more evenly.
Our recommendation for the wealth tax, for example, which I believe some people were advocating at the provincial level, as you know, we do not suggest that be imposed at the provincial level but at the national level. Incidentally, we also say in our report that if there is a national wealth tax, then income tax rates should be reduced accordingly.
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Mr Carr: Maybe you could be specific in terms of the cutoff. You've got to forgive the public: I know this isn't your fault, but they are very leery of politicians, again of all political stripes -- when people start talking about rearranging the tax structure. "Rearranging" to a lot of people means, unfortunately, "I get hit." I'm talking about the middle class now. Political parties of all stripes have somehow done that.
In your recommendations, could you be very specific in terms of the amount? Most people know what their take-home is in a year, whether it's $40,000 or $30,000. Who will pay more and who will pay less? I know it's very complicated, because there are different levels. At what yearly income will people start to pay more? Maybe you could start with that. At what level, on a yearly basis, would people start to pay more taxes in terms of making it, as you say, more progressive?
Ms Townson: I don't know if you have a copy of the Highlights document.
Mr Carr: Yes, I've read it.
Ms Townson: On page 109 you'll see a table that says exactly that. It's the estimated impact of our proposed changes on income of families in different income brackets. For a family in the income bracket of $70,000 to $90,000, for example, under our proposals, they would pay $70 more a year, which is not very significant, I wouldn't say.
Where it would be more significant would be families with income of $90,000 or more. They would see a change in their disposable income of approximately 1.6%. In other words, their take-home or disposable income would go down by about 1.6%. Now, that is $90,000 way on up to $200,000, or whatever.
So for the middle group, that is, those within the bracket of $30,000 to about $90,000 family income, there would be very little difference. For those of less than $30,000, there would be significant improvement. For those of $90,000 and on up, their tax burden would increase somewhat.
Mr Carr: What about the bulk of people, the middle class, the $30,000 to $90,000?
Ms Townson: The bulk of the people would be in that middle group.
Mr Carr: The $30,000 to $90,000 would stay the same, presumably.
Ms Townson: More or less the same. There would be slight increases, ranging between $20 and $130 a year.
Mr Carr: But that would include keeping the last budget's -- and I call it a "massive surtax" because it is. It's a surtax on anybody making $53,000. That would keep that in there then.
Ms Townson: No.
Mr Carr: That would be withdrawn?
Ms Townson: In recommending a new structure for the income tax, we eliminated all the surtaxes and put it all together so that in this system, if it were adopted, there wouldn't be any surtaxes. There would be simply a more progressive income tax with more brackets and different rates on each bracket.
Mr Carr: But to keep the amount of revenue neutral, I assume, even if you didn't call it a surtax, that last budget where people got hit with a surtax, that would still be in there for my average Ford worker. When you say he's not paying more, he wouldn't pay any more than he's paying now, but he would be paying more than he did before September 1990, if you follow my drift.
Ms Townson: Yes, I understand. As I said earlier, this whole budget is revenue-neutral. Some people will find themselves paying less in property taxes and more in income taxes, but overall, the burden is not going to change that much for those in the middle group.
Mr Carr: But as you know, there was a major problem in the last budget because it was made retroactive. People are very upset about that surtax. Just so I'm very clear, the way you've structured it with your report, those people would not pay any more, but they certainly wouldn't go back to where they were prior to the last budget in May of last year.
Ms Townson: You're talking about the 1990 budget that implemented changes for 1993?
Mr Carr: Yes.
Ms Townson: I can't remember offhand, and I would have to look through here, whether we took that into account or whether we were basing it on pre-budget. But what we're doing is we're not talking about any surtaxes here; we're talking about a new system for income taxes.
Mr Carr: But you know what the average person is saying? Whether you call it a surtax or whether my rate's higher, that's what they're concerned about.
Ms Townson: Yes, exactly, which is why we're saying we don't want surtaxes. We just want a simplified income tax structure. Incidentally, by the way, that is not going to be possible unless there is negotiation between the provincial government and the federal government that would allow Ontario to structure its tax rate in that way, and that would have to happen first.
Mr Carr: I won't belabour the point, but I'm thinking again of the average Oakville worker saying, "We're going to be revenue-neutral, but you've already hit me, you've already increased me massively." I don't expect you to comment on that because some of it's political.
You admit you've got to have the federal government involved in it. As you know, this government's mandate is winding down. The Premier's already said it will be spring of next year. Do you see, by the time this government leaves, any of those things you talked about being implemented in conjunction with the federal government, or won't we see it in the life of this government?
Ms Townson: No, I do see them being implemented, and there are a number of reasons for that. First of all, this is not something that's just up to Ontario. As you may know, the federal government did issue a discussion paper in 1991, I think it was, where it suggested renegotiating the tax collection agreements to allow the provinces more flexibility to set their own parameters in their income tax systems. That paper was put out there specifically because provinces requested it. Provinces felt they didn't have any say in the basic parameters of the income tax system. So that was already put on the table by the federal government.
What we're suggesting is that Ontario pursue that option which was offered by the federal government; that instead of imposing a tax which is a percentage of the tax imposed by the federal government, it might impose tax directly on income, which is what the federal government suggested in that paper.
So this is not something to do with this particular government in Ontario; it's something that was put out there by the previous federal government, incidentally, at the request of provinces that had lobbied that government. I would expect that those negotiations would be ongoing, because I think a lot of provinces, not just Ontario, would like to see changes made in those agreements.
The Chair: Mr Carr, your 15 minutes are up.
Mr Carr: Gee, time flies when you're having fun.
Mr Sutherland: Ms Townson, I want to thank you for doing a very comprehensive and a very good job with the report. I by no means consider myself a tax expert, but even some of the assumptions I had about taxation issues -- you supported some of them and you destroyed some of my assumptions too, and I think the value of your report will last because it does exactly that. A lot of the discussion about taxation issues by politicians and a lot of people, has been done in a bit of a vacuum, and I don't think we're doing this with the Fair Tax Commission now. I think people can have a more intelligent conversation about what the impacts are of different types of tax alternatives. So I compliment you and the commission for a job well done on that aspect. From the standpoint of the public overall and all of us who have to make decisions being more educated, I think the commission succeeds on that front.
We've heard here before the committee, and we ask people to comment, the commission made a recommendation about carbon taxes. We've certainly heard from economists, from other groups, that if carbon taxes are going to be implemented, at the minimum they should be implemented at a national level. I'm wondering what your comments would be regarding that aspect.
Ms Townson: I can certainly see the argument for doing that, but we did consider that and we think that there is room for Ontario to act to supplement its own requirements in the area of environmental policies with a carbon tax. We recommended that it be set at a relatively modest level -- I think we said $25 a tonne, as I recall -- and we also suggested that if this were implemented, then a comparable reduction in other business taxes should be made so that it wouldn't penalize business. Nevertheless, we felt it was something that Ontario could do, where it could take action to supplement its own environmental policies in this way.
Mr Sutherland: This issue isn't directly related to the province, but you made some comments about RRSP limits and what they should be. There's been a lot of debate going on with the federal government and its public pre-budget consultations regarding this issue. I'm just wondering. Did the commission do any research to indicate what amount of people using RRSPs are using the actual maximum allowable amount?
Ms Townson: We didn't; we looked at who is using RRSPs. Incidentally, it's important to make the point that we weren't just referring to limits on RRSPs. We were talking about registered pension plans as well, because some of the media coverage of this has been misleading. We did not just recommend restricting contributions to RRSPs; we looked at the whole area of tax assistance to private retirement savings.
What we did look at was the number of people who are contributing to RRSPs -- and there's some information about that in our report -- and who belong to registered pension plans. Less than half the work force belongs to registered pension plans, and the most recent information I've been looking at for a research project I'm working on myself indicates that the coverage has gone even lower than that, and it's about 20% or 25%, perhaps even less than that, as I recall, who contribute to RRSPs.
There has been some research from Statistics Canada recently that indicates not everybody is using it to the maximum at this point. I would suspect that's probably because of the state of the economy, that people can't afford to make their maximum contributions at this time.
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Mr Sutherland: We've also had a lot of discussion -- obviously one of the things all members of this committee are concerned about is unemployment rates -- through the presentations about payroll taxes. I know your mandate wasn't necessarily to look at their impact on employment, but we've certainly heard from many presenters that payroll taxes are too high. They're not, for lack of a better term, a progressive tax, because they're not based on the amount of income they actually earn. Yet we know that corporations are also able to transfer funds much easier out of Ontario or out of the country.
I'm wondering if you had any comments in terms of whether there's a better mix of corporate taxation that could be done than what's there now. Is there too much in payroll? Is that hurting employment? If we went to other forms based more on income, would that be revenue-neutral or would we end up losing more? Did the commission look at what impact this might have on employment and companies hiring more?
Ms Townson: First of all, it's important to make the point that our research indicates, and most economists would agree with this, that it's not corporations that bear the burden of payroll taxes; it's workers. We have a discussion of this in the report, actually, that shows that while it may be difficult for a company to adjust to payroll taxes in the initial stages, over the long run it may adjust to that by reducing wages or by not hiring as many people. In fact, we recognize in the report, and make comments about this, that we do not want to recommend increases in payroll taxes because of the impact on employment and on workers.
In fact, there were some people who were suggesting that if we took away some of the business taxes at the local level, for example business occupancy tax or commercial-industrial property tax, that could be put on to payroll taxes. We rejected that suggestion because of the very point that you're making, because payroll taxes affect employment, and we didn't think that was appropriate at this point in time.
Mr Jim Wiseman (Durham West): This is a question about how to tax in terms of business and how to use taxing in order to encourage businesses. I haven't had a chance to get through the entire document, so forgive me if it's in there. The question about taxing -- and we've heard a lot about it. For example, at the municipal level there are taxes where they pay by the square foot but there are also taxes that are non-taxes; for example, site plan approvals and the control that municipalities have over those kinds of costs.
Have you given any thought to how the tax system could be restructured to encourage business development by rejigging, removing and realigning the way money is extracted from the business community now?
Ms Townson: We did look at some of that but perhaps in a limited sense. The examples you gave were not ones that we looked at specifically, but we did consider, for example, whether business should be encouraged to do training through some kind of mechanism in the tax system, let's say a training credit or whatever. We decided against that for what we thought were very valid reasons, because the way you could structure that kind of credit would only really help those businesses which paid for outside training. Since many businesses do training in-house, we didn't see how a tax credit could encourage them to do that kind of training, which is deductible in any case.
We also looked at things like incentives. As you know, the tax system has incentives for business to write off investments in plant and equipment. Given that the direction of the economy and the analysis of the future of the economy is much more focused on human resource development, that was one of the reasons we were looking at whether you could do something in the tax system to encourage business in that kind of investment, which in the future some people suggest may be even more important than investing in factories or equipment or whatever. That's why we're looking at this idea of perhaps some incentive for training. But as I said, we decided against that.
We have some guidelines in there on tax expenditures for corporations -- that is, incentives you give through the tax system for corporations -- and we've set out some principles for that which say among other things that you should look at what your objective is to give this kind of incentive to corporations, and that there also should be some kind of ongoing monitoring to see whether your objective was met if you decided to do this through the tax system.
The majority of commissioners was not in favour of a minimum corporate tax, as you probably know, and the problem of some profitable corporations not paying any tax we felt should be addressed by reducing the number of tax expenditures for corporations rather than imposing a minimum corporate tax.
Overall, the direction was not in favour of increasing incentives for corporations in the tax system but suggesting that where you do give those kinds of incentives they should have clear objectives and they should be monitored to see that the objectives were met.
Mr Wiseman: As a taxpayer there are two things I have as a major bone of contention. First is urban sprawl and the fact that the infrastructure that is necessary to maintain the new greenfield developments comes back as tax increases to the rest of the community to pay for that. The second is, particularly in my constituency they're building a water treatment plant, but that water treatment plant is for industrial, commercial and residential expansion and yet everybody is going to pay for it. It's causing taxes to go up.
There are really two questions there. In the first scenario, did you happen to have a chance to look at what the sustainable size of the lots is in terms of the new subdivisions paying for themselves in terms of delivery of service, without having to raise everybody's taxes to subsidize?
Ms Townson: That's the kind of technical question that I don't think I'm in a position to answer. That may have been something that the property tax working group looked at. I personally can't give you the answer to that. They gave a very comprehensive report.
I can say that what we looked at in terms of local taxes was that if you removed education funding from the property taxes, then property taxes would become much more closely related to a tax for the services you get in your municipality, which is why we are suggesting also that the education portion of the commercial-industrial property tax be imposed at the provincial level rather than at the local level. So what you're left with at the local level, if these reforms were implemented, would be a much lower rate of taxes that would be much more closely related to the services that corporations and others get from the municipality. We also suggested that where it's possible to measure those services, like water, sewage, garbage pickup and so on, they might be funded through user fees rather than through municipal taxes.
Mr Sutherland: I get the sense from your overall recommendations on changes to the property tax, taking the education portion on, your comments about how to redo assessment and whatever, how that plays out for some people, that if I'm a small business person, depending on where I am, initially I may get some increase, I may get some decrease, but over the long run I'll have more stability in terms of what my property taxes are going to be. I won't get the wide variation from a reassessment or that type of thing. Is that a fair comment to make?
Ms Townson: It probably is, yes, because what would achieve that result would be the change in the assessment system, which is a totally chaotic system. It isn't even a system, as we say in the report there. Certainly, our experience in hearing from people at the hearings, both individuals and businesses, was: "There is absolutely no way we understand this system. It doesn't make any sense whatsoever."
The commission felt strongly that this is a major area that has to be addressed, and soon. I think if that were changed there would be more stability both for businesses and for residential taxpayers because it would be much clearer what the system was. There would be a system, first of all. It would be more understandable, it would be clear, it would be logical, and that, I think, would have the result you're talking about.
Mr Sutherland: So then really all you'd be left with is whatever the municipality or whatever decided to do with that tax rate. That is what you'd need to worry about rather than all these reassessments that may come about.
Ms Townson: Yes.
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Mr Phillips: One big thing we're interested in on the committee is the underground economy. I wonder what conclusions you reached from your work on that.
Ms Townson: We debated, actually, at the commission as to whether we could get into extensive studies of the underground economy. There were some commissioners, frankly, who would like to have done that. What we felt was that a lot of that resulted probably from the GST, and we did not have access to the information at the federal level to do the kinds of studies that would have given us information.
Also, of course, by definition, since it's an underground economy it's very difficult to get at who's avoiding taxes by channelling work through the underground economy, whether that's GST on services or products or whether it's income taxes from not declaring income.
We eventually decided not to go into that area in any depth. We might have done so, but we didn't.
Mr Phillips: That's the problem, probably. What we seem to see happening here is that it's a large, growing issue that seems to be extremely important. If the commission said, "Listen, that's something we're going to have to ignore," then we may not be dealing with an environment that's central to taxation.
Ms Townson: I'm not suggesting we said we'll ignore it altogether. I'm suggesting that we decided not to do any detailed specific research on it. We do have a section in the report, as you know, on administration and compliance and audits and stuff like that, and how you get people to comply with taxes, so we have looked at that.
My understanding is that one of the problems with the underground economy, among other things, is the question of adequate enforcement mechanisms and compliance and so on, so we do have comments in the report on that.
Mr Phillips: We see a move to permitting more incorporation of individuals as small businesses: doctors, for example. What's the Fair Tax Commission's view on that, where individuals will be allowed to incorporate and I presume use the small business tax rate?
Ms Townson: I don't think we expressed any particular comments on that specific issue, as I recall.
Mr Phillips: Did you ever look at the incorporation of individuals as small businesses?
Ms Townson: We looked at it from the point of view of self-employment, of things like the imposition of the employer health tax on the self-employed individuals and those kinds of things. But from the specific point of view you're asking about, the trend to incorporation and so on, as I recall, we didn't make any comment on that.
Mr Phillips: I think lawyers and doctors, among others, are going to incorporate and they're relatively substantial numbers. What would be the tax impact if one incorporates? What is the tax saving available?
Ms Townson: I can't answer that question.
Mr Phillips: I gather the commission's all wound up. You at one time had a computer-based infrastructure and what not, and that's all now just wound up?
Ms Townson: A computer-based infrastructure; what do you mean?
Mr Phillips: Didn't you have kind of a network of people around the province who were working on --
Ms Townson: Oh, that was part of the public consultation process which actually wound up before the commission did. As I mentioned at the beginning, we had animators working in a number of communities across the province with established groups in those communities. Those groups met and talked about taxes and formed tax forces, so those people are kept in touch with each other through a computer network. That may be what you're referring to.
Mr Phillips: Yes.
Ms Townson: That was just while that process was going on. I can't remember exactly when that ended but it was prior to the public hearings.
The commission itself is over, as you know. We ceased to exist as of December 31, so it no longer has an office or a staff or anything. All the records and the follow-up is being done by the ministry.
Mr Phillips: The corporate minimum tax you've talked about. I think your focus would be more on if the tax expenditures aren't right, to get rid of them, as opposed to the introduction of a minimum corporate tax.
Ms Townson: Right.
Mr Phillips: The proposal on a different way of assessment, I would assume you've done some modelling on that, taken some jurisdictions and said, "Here's how it does work." I gather there are other jurisdictions around the world that use similar models. It would be helpful for us to know what other jurisdictions use that. I think your recommendation is, "Let's get away from market value assessment and move to this system." Where is this system working now? In what communities did you do a little bit of modelling to make sure this is a model that works?
Ms Townson: There again I'm not sure I can answer your question specifically. We have a number of research projects in that area and we did look at other areas where they had the unit value system that we're talking about. Some of the more detailed research, some of which was done by John Bossons, Enid Slack and those other people, is going to be published as research studies by U of T Press, so there will be some more information there.
Mr Phillips: Where are they using that unit value? What jurisdictions do they use it in?
Ms Townson: I can't tell you that offhand. I would have to look through here and try to find it, but there are some, as I recall. I'm sorry. Some of these technical questions are a little difficult for me to answer.
Mr Phillips: I thought a cornerstone of the recommendations was that property tax reform was the big thing, getting rid of market value assessment and moving to your new unit value. I would have assumed that the commission had some level of assurance that this is a system that works.
Ms Townson: Yes, we did, but I can't recall off the top of my head where the other places are that have it. We have a discussion of it in here and there'll be more detailed discussion of it in the research studies which were the input to that section in the report.
Mr Phillips: It would be helpful if you could let me know, if you have the time.
Ms Townson: I can get somebody to give you that information. I'll make that commitment, to do that.
Mr Sutherland: I think it would be helpful if all the committee had it, so if it's made to the committee, that will be fine.
Mr Phillips: Yes, because that's the cornerstone.
Ms Townson: I'm sure one of the people there who was an expert in this area can probably give you more of that information. I'll make a note of that.
The Chair: If you could forward that information to the clerk of the committee, the clerk will ensure that we all get copies of that.
Mr Phillips: I know my experience is that everybody thinks whatever they're paying is unfair until they see the next proposal.
Your recommendation on essentially replacing the residential portion with income tax: One of the things we seem to be seeing is that there is some resistance maybe because of the informal/underground economy among other things, to looking for a lot more revenue from income tax. But I gather the Fair Tax Commission concluded you could take a 20% or 25% increase in provincial income tax and actually deliver that.
Ms Townson: I think it's important to emphasize that this is not just an isolated increase in income taxes; it's also a reduction in property taxes. It seems to me some people have lost sight of the connection between the two things. For an individual who is paying heavy property taxes, when education funding is switched from property taxes to income taxes, that individual may not be paying any more than now, but he'll be paying it through income taxes instead of through property taxes. That's the key point that has to be borne in mind. My impression from some of the coverage that our report received was that people focused on the increases in income taxes and forgot that there were compensating reductions in property taxes. It's important to keep that in mind.
Mr Phillips: I actually found the reverse, that they focused on the reduction in property taxes, internalizing that in the end somebody's going to pick it up.
Ms Townson: Somebody's got to pay for it, yes.
Mr Phillips: Did you do any kind of modelling of where there may be some substantive changes geographically in taxes paid? I know the city of Toronto felt your recommendations would help the business sector here.
Ms Townson: Again, that's a question I can't answer off the top of my head, but I believe there is some modelling such as that in the background studies we commissioned for this. Maybe what I could do, along with giving you the stuff on unit value, is indicate to you what background studies would be relevant to address your question and when they might be available. In fact, they may even be available already.
Mr Phillips: Good. I was pleased to see you came in under budget for the thing, I think.
Ms Townson: And on time.
Mr Phillips: Yes. It was roughly a $9-million exercise, I gather.
Ms Townson: We were cut back, as you know, in the middle of our activities, which was hard to adjust to; nevertheless everybody had the same problem. I think it was going to be $8.6 million and then it was reduced by another $400,000 or something. I forget. The total amount was less than $9 million anyway.
Mr Phillips: As I say, I was pleased to see it.
Mr Crozier: Just so nobody shoots me, please answer this one quickly. It's one of logistics, just for my own information. Let's say for all intents and purposes that 50% of our property tax is education. I'm a tenant. I pay $1,000 a month; $500 of that is going to be taken off. Did you give any thought to how that would be handled in light of rent control and that sort of thing?
Ms Townson: We talked about tenants and how the government should make sure that the savings were passed on to them. We didn't specifically say that it be done through the Rent Control Act or through some other act, but we did include in our recommendation that there should be some mechanism for ensuring that those savings were passed on to tenants.
Also, we heard from a number of tenants' groups who felt that tenants often were not aware that they were paying property taxes through their rent and who wanted some formalized way of notifying them what part of their rent went to property taxes, so we made some recommendations on that as well.
The Chair: Thank you, Ms Townson, for making yourself available to the committee this afternoon to answer questions with regard to the Fair Tax Commission.
We stand adjourned until 10 am tomorrow.
The committee adjourned at 1732.