Changing tax and benefit laws can improve women’s incomes, Queen’s researcher finds

Wednesday February 01, 2006, Women in Canada continue to have lower incomes than men, a new Queen’s University study shows.

During most of their working lives, women’s average incomes are only 60 per cent to 70 per cent of men’s average incomes, says a study by Queen’s Law professor Kathy Lahey. At the same time, women bear disproportionately larger shares of unpaid or poorly paid, part-time and irregular work.

The study, commissioned by Status of Women Canada, also analyzes how Canada’s current fiscal policy reinforces the poverty of women and the social, economic, and legal barriers to equal opportunity in the full-time labour force.

Women And Employment: Removing Fiscal Barriers to Women’s Labour Force Participation concludes that the current system ignores the impact of income and sales taxes on women’s low incomes and does not consider the realities of their childcare and other economic responsibilities.

The result is a tax and benefit system that leaves low-income women vulnerable to having to claim social assistance, while placing pressure on women whose spouses or partners can afford to support them to turn toward unpaid work in the home, says Professor Lahey.

Lahey concludes that six basic changes to income tax laws would help encourage more women to support themselves through paid income:

* Reduce the income tax rates imposed on low incomes;
* Permit secondary earners to deduct all work-related expenses;
* Make sure that women employees either receive fringe benefits they can actually use or, if they are covered by their spouse/partner’s benefits, give them their monetary equivalent;
* Improve low-income access to employment insurance, Canada Pension Plan, registered pension plan, and registered retirement savings plans benefits;
* Replace the more than 100 tax provisions that tie tax bills to marital status with provisions that treat all women as individuals in their own right; and
* Provide an earned income credit to the “working poor.”

“It is most crucial that all joint provisions in income tax and social assistance law become individual measures,” says Lahey.

She notes that income tax provisions that adjust tax liability and benefits in light of marital status are particularly insidious. The child tax credit, for example, currently gives parents with incomes of less than $21,480 an annual allowance of nearly $2,500 for one child. With most male salaries are so much higher, this cut-off is irrelevant to single fathers. But if a single mother begins to live with another adult, she is likely to lose much or all of her child tax credit if her cohabitant’s income is added to hers in determining eligibility.

Because quite a few tax and benefit provisions work in the same way, Lahey demonstrates how low-income women are forced to choose between relationships or tax benefits, and between making it economically under their own steam or becoming economically dependent on another adult.

“The effects of joint taxation on women as a class make it clear that, as adult relationships become more diverse, the adult couple should not be used as the tax or the benefit unit,” says Lahey.

If it cannot implement all of her recommendations, Lahey says the government should offer an earned income credit that can be claimed by all secondary earners. This should include women with partners, single parents, those on or leaving welfare, and those with incomes below the average market basket measure, she adds.

Only such a credit system could counterbalance the unrelenting pressure on women to substitute unpaid work for paid work, Lahey argues.

“This measure,” she concludes, “is urgent in light of the fact that women and men inhabit two different economies, and if the new Conservative tax changes come into effect, things will get even worse for women than they already are.”

To order this publication on line go to Status of Women Canada.

For more information please contact Lorinda Peterson, 613 533-3234, lorinda.Peterson@queensu.ca.

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Therese Greenwood

Queen’s University

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