Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 16 - Evidence
OTTAWA, Thursday, February 1, 2007
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 10:47 a.m. in conjunction with the inquiry on the issue of funding for the treatment of autism.
Senator Art Eggleton (Chairman) presiding.
[Translation]
The Chairman: Good day everyone and welcome to this meeting of the Standing Committee on Social Affairs, Science and Technology.
This morning, the committee is continuing to look into the issue of funding for the treatment of autism and will hear from witnesses on the tax treatment of autism-related expenses under the Income Tax Act.
[English]
This morning we will hear from Mr. Pope and Mr. McVicar. In the second hour, we will have representatives from the Department of Finance Canada, the Canada Revenue Agency and finally, we will finish with Mr. Love, the Chair of the committee that published the report called A New Beginning.
Let me welcome Mr. Pope who is a lawyer here in Ottawa and offers special support to individuals with disabilities and their families. Through his experience and working with special needs families he has become an expert in writing wills with Henson Trust. These trusts ensure the parents of children with disabilities can protect inheritances while preserving provincial disability benefits. Mr. Pope is currently serving on the board of directors of Line 1000, an employment readiness and workforce re-entry program that assists people with disabilities.
Kenneth Pope, Tax Expert, as an individual: I appreciate the invitation. I am pleased to be here to provide what small assistance I may.
My practice is a wills, trusts and estates practice, working specifically with families that have children with disabilities. The children are of all ages and they have disabilities of all types.
To give you some small perspective, in Ontario, there are at least 250,000 families with children with disabilities. These are the actual reported Ontario Disability Support Program benefit figures. These numbers include people between the ages of 18 and 65. It excludes the one third with disabilities under age 18 and over age 65, so it is a true but conservative number. When you work out the numbers and the households in the various populations, you will find that one family in 10, conservatively, is either the parent household or a sibling household of a child with disabilities. This is, again, very conservative because many families have more than one or two disabled children. I am one of five, but then I am 54. I would also like to point out that this is, in a larger sense, a demographic issue because there are many children with autism spectrum disorder who are baby boomers and the parents of the baby boomers are 75 and 85 years old.
I recall, to show the core concern that these issues have for these families, a mother who said to me, "All I want is to live 60 seconds longer than my daughter." That is the essence of it.
What I do is to do wills, trusts and some tax assistance to help these families do what they, within their own means, can do to provide for their children. These families are not asking for sympathy; they are not looking for charity. All they want to do is get on with their lives and do the best that they can for their children of all ages and all needs. That is all any parent wants to do. Mine is a very gratifying practice. I would like to say that.
Simplistically, if a parent spends one dollar to provide for a child with disabilities, under the normal non-refundable tax credit arrangements, what they get to keep as a token of assistance is 16 cents of their own tax dollars. As you know, medical tax credits are also income tested to a certain extent. You have to spend a certain amount before you get to use the credits to any advantage. If you happen to be a single income household where perhaps a mother may stay at home all her life to care for that child — and keeping in context that if that child was being cared for by some agency, it could easily cost $55,000 a year from the public purse to provide for that child — what is a mother worth? She is worth a lot, just as a father is. If you then wind up with the father working two jobs, he is in a higher tax bracket. Of course, the higher your tax bracket, the less effect a medical tax credit. Therefore, I suggest that you consider some form of income splitting. This is not novel. We have already seen this implemented at a different age bracket. As well, with respect to autism spectrum disorders, it is an accepted fact that the ABA, applied behaviour analysis and IBI, intensive behavioural intervention therapy does work. For it to work, it must be introduced at a young age and we know that the earlier the diagnosis and implementation, the more successful the treatment.
We are finally starting to see some research statistics that show that it does work substantially and can bring children back. That means that unless there is public funding for this therapy, which we know there is not fully, a parent of a first or second child must deal with this alone. It is much harder with the first child, of course, because with your first child you never know what kids are like. How would you know?
Then you get a diagnosis and a year goes by and you are trying to get some kind of assessment because you think that is the process to go through. Then you realize that you should just pay for that assessment and get it done. After that, you hope to get some therapy assistance. Then you realize that time is passing and you put a mortgage on your house, or maybe you get a loan or a mortgage from a grandparent, your parent, against your potential inheritance. I think, with all due respect, that if this is to be the case, ABA therapy should be specifically earmarked as a tax deductible expense.
The various tax credits that you have referred to and wish to discuss are excellent credits. It is an excellent arrangement — it is all within the framework of the Income Tax Act. You should put on your list one other credit. When a child turns 18, they still have autism and at that point the caregiver tax credit comes into effect. The caregiver credit is a factor that was not on the list of tax credits. It is not much; it is about $600 a year, but it is still something.
I believe that the proposals for disability savings programs are excellent. I have a couple of small suggestions from Mr. Love that I will discuss with him separately.
Speaking as a practitioner for families, the first priority for the parents is not to be able to save money, it is to spend money. I still think there is an important niche for disability savings plans. However, if you are trying to come up with $10,000, $20,000 or $30,000, obviously you will not be putting $100 a month into a disability savings plan.
One issue was not put on the table. You are looking at the effect of tax credits on autism expenses, but you should also look at end of life. I speak in favour of a rollover of RRSPs and RRIFs to the child, which is now possible. The problem is that my practice is very much involved with the impact of these kinds of tax and financial estate planning aspects upon the Ontario disability support benefits. A rollover of an RRSP or RRIF to a child could disqualify them from all these other benefits that have been slowly, over the years, pulled together for the child.
That rollover can now take place. It should or would be better if the rollover could take effect in a Henson trust in the parent's will created to provide for the child. There are a number of issues around this.
My understanding is that the income tax amendments proposed to allow this rollover to a trust, although not specifically to a Henson trust — which a different discussion — were put forward as early as the February 2003 budget. For various reasons that I think we all understand, they have not yet been implemented. I would speak in favour of any influence or suasion that you might use to have the amendments to the Income Tax Act brought forward to allow the rollover of RRSPs to a Henson trust for a child with disabilities.
That is enough for now.
The Chairman: Thank you very much, Mr. Pope. Let me now call on our second speaker in this segment, Mr. John McVicar. After his presentation we will engage in dialogue and questions and answers with both our presenters.
Mr. McVicar is from Kitchener, Ontario. He is a graduate of Dalhousie Law School and spent 20 years in estate and tax planning for two insurance companies. He has two sons and three grandchildren. What is particularly significant in this regard is that the middle grandchild, who will be six in March, has been diagnosed with autism.
John McVicar, Retired Expert in the Field of Estate and Tax Planning, as an individual: Thank you, Mr. Chairman, for the opportunity to address the committee this morning. I want to be sure to get in a couple of key points so I have provided the committee with my script.
About 35 years ago a young child's parents faced a challenging decision. They were encouraged by medical practitioners to institutionalize their autistic son. His IQ tested at less than 30. In spite of the experts, the parent refused to give up and created a unique home-based, child-centred program in an effort to reach their son. No school that they wanted would take him. The mute, withdrawn boy, who once rocked endlessly, spun plates and banged his head against the walls, went on to earn a degree from an Ivy League university and today he has a near-genius IQ.
What does 35 years ago have to do with now? Unfortunately, too much. Institutionalizing is not so common but compartmentalizing is. Autistic children who have impaired development — not delayed development — are being warehoused in our school system; warehoused in special education classes that babysit rather than educate; warehoused in classrooms for children with behaviour problems so that they can be controlled rather than nurtured. There is no standard. Our grandson started senior kindergarten last September. He was there for half an hour before the teacher and the education assistant, EA, put him into a physical restraint. He had never been in a physical restraint in his life.
The educational opportunities that a child will be offered are only as good as the principal of a school decides that they will be. Who wants school principals in the role of Solomon? What an awesome task for someone who likely does not know much more about autism than its various and inadequate definitions. What a disservice to our children and to taxpayers.
Can you possibly imagine what goes on in an autistic child's brain? Even parents living with autism just shake their heads. So here is the John McVicar method of attempting to understand how our grandson, Ian McVicar, faces the world each day with his autism, and I hope it helps you.
There is a popular television commercial about drinking and driving. A car races along a downtown street at night. An empty drinking glass appears on the dashboard in front of the driver's vision. That empty glass changes the driver's view of the traffic, and you know it did not have water in it. Then a second glass is placed in front of the first. How many glasses are placed in front of the driver before you start feeling uncomfortable about being behind the wheel of that car? Some kids have two or three glasses impairing their senses, not just their vision. Other children have six, eight or even ten glasses. Our health system and our education system — and I should have added our tax system — must try to remove those glasses.
How can the federal tax system be amended to benefit families with autistic children? My first idea involves assessment fees, which stems from something that Ms. Caroline Weber said to the committee last November; and she was so accurate in her comments. She said, "Autism in that extreme I suspect is costly." Man, what an understatement. She continued, "These tax credits probably do not go as far as the costs incurred." Ms. Weber was referring to the existing payments and credits under the Income Tax Act. She mentioned three and added that she would supply this committee with all eight. She said:
. . . there is a wide range of autistic spectrum disorders. I think we need a fair bit of analysis to figure out. . . what costs are incurred in terms of dealing with this disorder. The other thing to remember, of course, is that these benefits usually accrue to someone with an income. People in low income situations or on social assistance face a different reality.
I will try to help you see one of those major expenses.
In 2001, our precious Ian was born. I was still under the impression that we had an awesome health system in this country and an equally awesome educational system. By 16 months, Ian had some signs that my wife recognized. After the initial family denials, we tried getting a diagnosis from the family doctor. She would not accept even the possibility that it could be autism and refused to refer Ian to a specialist. After six months of putting up with that, we decided to get a private diagnosis. About $2,000 and six months later, we had an assessment. Ian was well on the spectrum. The family doctor still did not accept that he had autism. "He's just slow," became her mantra.
Autism treatment methods vary. However, virtually everyone agrees that the sooner you begin the better. My own GP has never been afraid to admit to me when he does not know a lot of detail about a particular health matter. However, when Ian's doctor stubbornly refused to make a referral, she stole valuable time from him that could have been used to initiate therapy. This is not an isolated case. The families of many other children would appreciate a total refund of assessment fees, especially when the assessment establishes that the child is autistic. I know that this is a provincial matter but this committee is currently examining the entire issue of the treatment of autism and the possible development of a national strategy, which might dictate certain issues to the provinces regarding assessment and treatment. My proposal would certainly be easier than parents suing uncooperative doctors. Believe me, that has crossed the mind of our family.
I have other specific examples of expenses that parents face, and there is just one of them. I have that information because Senator Cochrane raised the issue of "medical necessity" last November and said that keeping to the strict interpretation of that phrase would preclude most parents from having relief from a wide variety of expenses relating to their child's comfort. I can give details about those expenses in the question session.
As for my thoughts on the recommendations of the Expert Panel on Disability Savings Plans, I will merely say in my formal comments that the proposed lifetime contribution limit of $200,000 is too low. Would you like to be dependent in your retirement on an RRSP of only $200,000 and not much else? Autistic children need lifetime care and might lose their parental support when they are only 30 or 40 years of age. They potentially have decades of life ahead of them without mom or dad because people do not die of autism. I believe that more capital should be permitted to be available to them.
Thank you again for the opportunity. I look forward to your questions.
The Chairman: Thank you, Mr. McVicar and Mr. Pope as well. Both of you have been very helpful to the committee in providing us with good information to help in our study of this issue.
Senator Callbeck: Thank you very much for your presentations. Mr. Pope, you mentioned several ways in which changes could be made to help families. You said that the recommendation of the panel for a disability savings program was a good one. Mr. McVicar has just said that he believes the amount is too low. I would like to hear your comments on that as well as on the other two recommendations of the panel. I would like to hear Mr. McVicar's comments as well.
Mr. Pope: I cannot speak against a higher ceiling for the disability savings plan. If the plan is intended to be used for supports for the child during the child's lifetime, it is very difficult to say how much money we need. That is a common question. My client families ask how much they should leave for their child. Their question really is whether they should leave their disabled child everything they have in the world and nothing for the other children. I do not know how much is enough. I do not see any real reason to have a ceiling, although having a ceiling is a nice touch.
In the sense of providing for the children, a disability savings plan has to be built with money that parents, brothers and sisters, who all love the child, can do without now. Therefore, I do not see disability savings plans kicking in until the children are a little older; ABA, to the extent that it can work, has been put in place; and the future lifetime needs of the child may be better known.
After the parents are gone, the amount of the disability savings plan may be a factor in what will be left to provide for the child. I will give you a simple example. If the real issue is how much will be left for the child, saving in a disability savings plan is an excellent idea. However, there are other aspects, and one of them is to have a will with a Henson trust, because a Henson trust in a will is an asset that is exempt and out of the purview of the provincial disability benefit program. A large part of my estate practice involves ensuring that whatever the parents leave does not cut the children off from other benefits, which is not a useful thing to do. Parents who are insurable — and there are those who are not — may want to put more money into another disability savings program.
If a 55-year-old father and a 50-year-old mother of a disabled child of an appropriate age get "joint and last" insurance, it insures both of their lives. Upon the first death, the premiums cease and a payment is made into a Henson trust. Premiums cease upon the first death, because upon the first death there is less household income. Seventy-five per cent of the pension is left for the spouse. The premium ceases on the first death and a premium of approximately $100 a month, stopping on the first death, would pay $200,000 on the second death, which coincidentally is the amount in the disability savings plan.
The point is that if you wanted to save $200,000, you would have to make 2,000 $100 monthly deposits. Two thousand months is 166 years. If you want to save $200,000 for when you are dead, you should more seriously consider a joint and last policy under which you pay a fixed premium of $100 a month which never increases. If you can pay it now, you will hopefully be able to pay it later.
For estate planning, you should certainly look to the disability savings plan for savings and use while alive. It is a very good tool, just like an RESP. However, upon death you will get more value with a joint and last policy, if that is the plan.
Senator Callbeck: Did you make a presentation to the panel?
Mr. Pope: No, I did not. I followed it, of course.
Senator Callbeck: Did you, Mr. McVicar?
Mr. McVicar: Not in this fashion. I did in writing, although not on those issues.
The Chairman: Do you have any comments on the other recommendations in the report, Mr. McVicar?
Mr. McVicar: The other two are fine. They are small but, as the report states, it is a beginning.
I do have a bias in that I come from a long line of entrepreneurs, and I tend to think that individuals should do things for themselves and, where possible, the government should let them do it. The smallest insurance policy that I have is $250,000. That is over the limit that is allowed as a contribution in this plan.
In the Kitchener Record last week there was a half-page article about saving for retirement, saying how baby boomers, on average, are having trouble saving enough money for their retirement. I am the leading edge of the boomers, so I can speak for that crowd. The article talks about needing three quarters of a million to a million dollars to have a satisfactory lifestyle.
On page 25 of A New Beginning look at the column entitled "Annual Contribution, $7,500" and you will see a $200,000 figure. Quite rightly, the panel dealt with the possibility of a one-time contribution of $200,000 into the disability savings plan.
I am 60 years old. Our son and his wife are both 33 years of age and Ian will be six next month. If I follow the long life expectancy that many of my family members have had, I could live to 90 years of age. By then, Ian's parents will be in their early 60s and Ian will be 36 years. If I die then what will this $250,000 be worth? What will it buy?
In the Kitchener-Waterloo and Cambridge area we have a well-known family in the construction business that has built a chain of wonderful retirement homes. My mother looked at one of those homes as a possible retirement spot for herself. She chose another one just like it but I became very well acquainted with that retirement home. I also saw some of accommodations that are $1,400 or $1500 a month — quite a bit less. You get what you pay for. I do not want my grandson, if I can help it, to be in what today is a $1,400- or $1,500-a-month home. I want him to be in the best that the family can provide. With all of the expenses that this family faces, and I say the extended family right now, with providing things for Ian that the health system does not, that the school system does not, we also want to put aside money for our own retirement. My wife and I want to put money away for our retirement and so do the other grandparents. We are all trying to help with just keeping this little family going as it is right now, because they are doing their own therapy.
The Chairman: Thank you. Mr. Pope, do you want to add a few comments?
Mr. Pope: I want to echo Mr. McVicar's remarks. All my client families want to do is the best they can for their children with their resources. To the extent that they get to retain their resources to use specifically for their children's needs, I see that as a positive thing.
With respect to recommendations 3 and 4, I think they are both positive recommendations. I have a comment on recommendation 4 found on page 68 where there is a practical problem you are not aware of, I am sure.
The Chairman: Members, on page 68 of A New Beginning, you will find the summary of the recommendations and we are looking at the bottom of the page at recommendation 4.
Mr. Pope: In a broader sense, I do not see why it should be only available for families who have kids with such marked restrictions that they qualify for the Disability Tax Credit. I think that it should be allowed for families who have kids with disabilities. I appreciate that, for clarity, the Disability Tax Credit is a nice way to put a line in the sand but I speak in favour of a much broader definition of a child with disabilities. Essentially, if you want a further test, it should include anyone who qualifies for provincial disability benefits. That means that you will not have to go through the testing, assessment and adjudication process. Parents do not want their kids to receive provincial disability benefits; they receive them if they must.
For example, in all the provinces there is a process where you must meet the financial qualification, meaning that in Ontario the child cannot have assets of his own of greater than $5,000; the child must be living in poverty. The child cannot receive money from a parent or a grandparent greater than $5,000 over a 12-month period or for every additional one dollar you lose one dollar. Is that not neat?
Now, it is true that if the child receives money for disability related expenses, those monies are exempt. However, there are many disabilities where the child does not really have those excessive needs; the child simply needs support. He or she needs to live at home with mom and dad until mom is 84 years of age. The son oar daughter may have a constant seizure disorder and every corner in the house has to be padded. At 84 years of age, the mother may run out of funds and have to sell the home, where will they go now? I am trying to give you the scenario. You might let the provinces determine who qualifies because you already have a disability assessment process in place. It is important to contribute before the child reaches the age of 18. For simplicity, if you let the provinces perform the assessments, then the families have the medical and activities of daily living assessments completed. It is not rocket science; you just must do it the right way. It is submitted to the medical adjudication unit in Toronto and a few months later you get approval. I do not see why you could not work hand in glove with the province at an earlier age because they will do it at age 18 anyway. They are already providing assistance for children with severe disabilities under 18 years and they would not do that unless they have done an assessment. I think this could be accomplished without that much work and it would save the federal government from having to approve 100,000 Disability Tax Credit applications. Maybe there is some virtue in that.
The bigger problem you will have, if you just leave this line in the sand, is that there is a great lack of knowledge about the Disability Tax Credit. For example, I give seminars across the province and we normally speak to between 25 and 75 people. Out of a seminar with 75 people, 50 families are represented. Some of the parents come together; others cannot because one must be at home with the child.
I looked at the statistics for seminars that I did in Scarborough and St. Catharines in October. Most of the families had adult kids with disabilities of a cognitive or developmental type, PDD-NOS, autism, Down's syndrome, et cetera. On the back of my family detail sheet that I collect to see with whom I am speaking — when asked, "Do you use the Disability Tax Credit," 45 per cent said "no" or "unsure." You can tell by the brief description of the disability that each one of those families would qualify. Forty-five percent of the people do not know they qualify. Is that not interesting? It is very interesting.
After asking a few more questions, I find out that they do indeed qualify and tell them that they have to be approved for the tax credit. The parents must see a doctor and complete a T-2201 form; I usually have 30 of the forms with me. The parents check the box entitled "mental functions necessary for everyday life." They fill out the child's same, SIN number and their name. The parents have to be paying tax for this to be of any use to them. "does the child live with you, yes or no?" Well, the answer is "yes." You then take the form to a doctor. The doctor ticks the box that says "markedly restricted in the activities of daily living, PDD-NOS or autism," signs and stamps it. It is sent in to the Canada Revenue Agency. About three months later you get it back. That means you can now use the Disability Tax Credit.
Two or three things then happen. The child turns 18 years or 21 years perhaps. He or she is in school until 21 years. Upon leaving school perhaps the child goes into a supported living situation. If you read the Disability Tax Credit form, it says, "does the child live you? " The letter you get when you are approved says, "if the child ever does not live with you, you have to tell us." Clearly, that leads the client to think that if the child does not reside with them they cannot use the credit anymore. It then goes on to say "if the child does not live with you, do you provide the child with the necessities of life: food, shelter and clothing?" The child is now on ODSP, and receiving $979 a month. He gets to keep $116 a month now, up from $112. The rest of the money goes to the agency that provides the supported living. He or she is in supported living, yet comes home every second weekend. The parents buy the clothes for the child and when they go on holidays, they take the child with them. They would say that they do not provide the necessities of life. They would say that the child does not live with them, nor do they make his food on a daily basis. This would lead you to believe that once the child is out of the home, the child no longer qualifies for the credit. That means the parents of all the kids who go into supported living at the age of 18 or 21 say they cannot contribute to the disability savings plan anymore because the child does not qualify for the Disability Tax Credit. The whole thing is a bunch of bunk. The real test is not "do they live with you" or "do you provide the necessities of life." Under section 118.3(2) you are a supporting person even though the child is not with you 24/7.
There are many situations, like physical disabilities, where it is clearly more appropriate for the child to live in separate housing. There are many situations where the child could live alone and still need a wheelchair. There is an internal inconsistency as CRA tells the parents they cannot do it any more. We assist the families to get these credits in place, and then the most common scenario is the child is at home with the parents and they never use the credit. It is abundantly clear that it applies. Then you have a maximum back filing under the fairness package for 10 years, and you recapture about $11,500 that the parent has overpaid in taxes for those last 10 years. Now they start to save about $1,600 a year because that is what they get back. It is not so much per month, but it is something.
The next common scenario is the child left home to go into supported living when 21, now they are 48 and the parent ceased using it because they were told or thought or understood that the child had to reside with them, and being honest, which my clients are to a fault, and taxpayers, they ceased using it. The second most common situation is a 10-year back filing for that family.
In those scenarios the caregiver credit, which at present is only applicable if the child resides with you, came in during 1998 for kids over 18 years and income less than about $13,500, which ODSP is, so we then do a filing back to 1998 and recapture another $4,000. If they are not using the disability credit, you can be sure they are not using the caregiver credit. On that point, on the caregiver credit, I do not think that the child should have to reside with the family member.
The Chairman: I thank you very much for your very helpful details. It is a complicated matter and you explained it well.
Senator Nancy Ruth: Do you have an income profile of parents with autistic children? How many would earn less than $25,000, how many more $50,000, how many more than $100,000?
Mr. Pope: For a period of years, when the children are young, you will find especially with children who have autism that it is a single income and therefore lower family income, but as a rule, the children are born into the full spectrum of family incomes. Disability is no respecter of income.
Senator Nancy Ruth: What is the median family income?
Mr. Pope: That is whatever the median is for a two-income household.
Senator Nancy Ruth: Behind my question is how many parents are dealing with disabled children of one sort or another who are not paying tax, or minimum tax, including using the advantages of this program; is it a large percentage?
Mr. Pope: I would say that it is a lot of families with a mother at home and getting by on whatever the income the husband can earn working one or two jobs, but no, I would not say it is primarily a single mother at home on welfare providing for the kids. I would not say that is the most common. We do come across it.
Senator Nancy Ruth: What is the most common family income?
Mr. Pope: That is an average two-income household.
Senator Nancy Ruth: I do not know what "average" is.
Mr. Pope: It is a household income of say $60,000 or $70,000.
Senator Nancy Ruth: Is that with one parent working?
Mr. Pope: Well, with two. With one you probably would have about the same because you are working one and a half jobs.
Mr. McVicar: Without having the statistics that other federal agencies may have and so on, my best guess is that because autism has become so widespread and it seems to be in virtually every country of the world, it does not matter which economic social level you look at, autism will be there. I do not think there is, in trying to pinpoint it in an average situation, if I understand your question.
Senator Nancy Ruth: Tax breaks are a benefit to those who can use them, and then there is everyone else in society who cannot. I am trying to figure out where is the balance. I love tax breaks; do not get me wrong.
Mr. McVicar: Autism will be spread amongst those probably just as equally as you have people taking advantage of tax breaks as there are those who do not.
Mr. Pope: I suggest that tactically it would be useful to allow these credits to be transferred more liberally to other family members who do pay tax, and that if that were available the number of families who really do not pay tax at all would be very small. It has been my experience.
For example, suppose you have a single mother with a couple of kids and one of them has autism and she has to stay at home now so she has no income. Well, I think that any tax credits that would have accrued to her could and should appropriately be transferable to another family member, just like the Disability Tax Credit.
Senator Keon: This is such a tremendously complex situation. Mr. McVicar, you referred to one component of the headache for the parents of an autistic child is that it is not listed as an essential medical service so it is not covered by the medical plans of the province and so forth. Of course, much of the education costs are not either.
What emphasis should we place in our report, an emphasis to get more of these services paid for through the educational and medical system, or an emphasis to open the tax system, the investment system and the inheritance system and others to accommodate these children? What emphasis should we place on the report? It will have to be a balance, but there could be an emphasis.
Mr. McVicar: You are referring to an entire range of expenses that a family could face.
Senator Keon: Right.
Mr. McVicar: I had one friend who told me that I would probably get that question, so this is what he said to me: Submit all treatment costs, and in that he meant even this kind of thing, which is called a picture exchange communication system, PECS. You can create your own or buy them. That is just one of many, but I lump that in and will call everything treatment costs. Submit treatment costs as part of the medical expense component of tax filing. Make this a100 per cent pre-tax deduction, or you can go a step further and make it a tax credit. Taxable income might be reduced to zero or a negative amount, which could be returned to the taxpayer by way of a grant, just like child care.
You have to submit medical receipts to take advantage of the medical tax credit. Submitting a whole bunch of receipts for this kind of thing will involve a lot more work on checking and verifying, but I will do some of it free of charge. The overall expenses that families face are awesome. There are expenses that you cannot even imagine until you face the situation or are closely related to it.
Senator Trenholme Counsell: Mr. McVicar, I must respond to your comments about the school system, because I hope that New Brunswick is still the ideal place when it comes to school integration and that no school principal could make types of decisions to which you refer. We just had the MacKay report in New Brunswick in which we affirmed our whole philosophy of integration begun by Premier Hatfield and continued by Premier McKenna. That is a plug for our system. I do not know whether you wish to comment.
Mr. McVicar: Not at this time.
Senator Trenholme Counsell: It has been suggested to us that parliamentarians need to think about a balance between tax treatment and direct spending. The disability measures and the tax measures are important, and many of them are new or are being treated much more favourably now than they were one, two, or several decades ago.
I feel that we have to increase the funding available to provinces for these kinds of activities. I am speaking of speech language pathologists, social workers and all the interventionists that a province with a forward-looking philosophy on all these services is offering but not nearly to the extent necessary. I think about speech language pathology, in particular.
Regarding the issue of waiting times and waiting to see a pediatrician for assessment, it all comes down to manpower across the spectrum. That is a huge issue.
I would ask you to comment on how a modern government with the knowledge that is available about these disorders should approach these issues if they are thinking of the balance.
Mr. McVicar: I believe that we simply need to make better use of available money. There are wonderful school boards throughout the province of Ontario that are already working with kids much more effectively than what we have experienced in our community with our grandson. This is a very personal comment. I have written to various levels of government for 30 years on waste, and I sometimes wonder about the actual use of dollars that comes from the Ontario provincial government to professional service providers and then filters down to therapists and parents. I believe that if some of the systems that we have in place can be examined, we will find tremendous savings.
Senator Trenholme Counsell: I believe you are speaking in terms of balance. As a society, we owe it to all parents and all children to have more services in place, but we also need to have benefits and plans whereby individual families can look after their own children.
Mr. McVicar: Philosophically, I have mentioned that I come from the background where I believe that individuals should help themselves first of all. The added feature of that is if government will take a dollar from me, it had darned well better make good use of it.
Mr. Pope: The preamble to the Ontario Disability Support Program Act, which was brought in on June 1, 1998, provides that the intent of the legislation is to provide supports for people with disabilities by the province, the community, the family and the person. The families are doing their best. If we can allow them to do their best with what they earn, the money will be better spent. The parents, in my experience, become experts on their children, and I have seen many times that it comes down to their knowing more about their children than the other professionals know. They become mini-experts, and the problem is many experts think they know what is best for someone else's child, and they might be right. However, they all have policies and procedures with respect to making their jobs simpler, to slot things, to clear a bed or to stop providing physiotherapy or something, but the parents really know best. If we just let them use their own resources to the extent they have them, then a further discussion about what further supports should come from the province and the federal government will flow naturally from that because we will have allowed the families to do the best they can with what they have. From there, we can continue the discussion about what other supports there should be that may require administration, management, bureaucracy, financial testing, and those kinds of things. The first priority would be to let the families retain their resources, get on with what they see immediately and then have further discussion about further financial supports from other taxpayers at whatever level. There should be some sharing of that support for these children, for all children and for seniors. That is what a community is about, but first, the core should be the family and that is all they really want. They are not asking for a lot of big handouts now; they just want to use their own resources to do the best they can. Right now, they are now doing it in a tax inefficient way.
Senator Mercer: Mr. McVicar, Ian is very lucky to have a large family that seems to be supportive of him and Mr. Pope, your clients are people who seem to understand that there are advantages to the system and you are educating them on those advantages. Some of those people think that they might able to provide some money for the future of the child or children affected by disabilities.
My question is for those people who do not have that network. My question is about that single mother or father who is out there with that child on their own, and, God, I have no idea how they do it by themselves. It is very difficult with the network that families provide. They are probably receiving some type social assistance because they cannot be in the workforce at the rate they were previously. What about them? These recommendations are fairly good. We keep talking about credits, and so on, but we are talking about people who are making money. We are talking about people who have an income and who have a support network but, as we have said, autism and other disabilities cross each economic spectrum. I am very concerned that the governments do not address the issue of those people at the very bottom of the spectrum. Do you have any comments?
Mr. McVicar: The panel's report did refer — and, I may have the term wrong — to a disability bond. Just as there are features in the education world of grants and sums of money available to students, I think the panel was trying to model this proposed disability savings plan on those aspects of the education plan. I think it is excellent. It is certainly better than nothing. For kids who come from homes that are dependent on welfare, if they are to have something like the disability bond, that is an excellent beginning.
Mr. Pope: In practice, families that not have means try to muddle through the best they can. Sometimes they try to live with their parents or their grandparents, but often these extended families are not around. In the worst unfortunate instances, the parent becomes overwhelmed. Perhaps the parent has more than one disabled child — this is not uncommon. At that point, unfortunately, the parent often knocks on the Children's Aid Society's door and turns the child over because the CAS can get the resources the parent cannot get. That is very unfortunate. That is the practical answer to this question.
The Chairman: Thank you both again for appearing here this morning.
In this portion of our meeting we will hear from officials from the Department of Finance and from the Canada Revenue Agency. In addition, we have Mr. James Barton Love, who was the Chair of the Minister of Finance's expert panel that produced the report we have before us, called A New Beginning.
Annik Bordeleau will speak on behalf of the Department of Finance as well as the Canada Revenue Agency, I understand. Also in attendance from the Department of Finance is Katharine Rechico. From the Canada Revenue Agency, we have Daphne Fraser.
We have Mr. James Barton Love, who was chair, as I said, of the expert panel. The expert panel was appointed last July by the Minister of Finance to examine ways to help parents save for the long-term financial security of a child with severe disability. The report was released in December and that is what we have before us today. Mr. Love is a partner in the Toronto law firm of Love & Whalen. He is also chairman and CEO of Legacy Private Trust.
[Translation]
Ms. Annik Bordeleau, Tax Policy Officer, Personal Income Tax Division, Department of Finance Canada: Mr. Chairman, my colleague Katharine Rechico and I are pleased to have the opportunity to appear before the Senate Standing Committee on Social Affairs, Science and Technology on behalf of the Personal Income Tax Division of the Department of Finance.
We understand that the committee is currently studying the issue of funding for the treatment of autism spectrum disorder, or ASD. We will provide some information on the role of the personal income tax system generally, and an overview of tax measures that may be available to families with children with ASD.
We will be pleased to answer any questions from the committee at the end of our presentation.
In the personal income tax system, income is used as the measure of ability to pay tax. To ensure fairness, the personal income tax is applied to a broad income base, with recognition of certain expenses incurred in order to earn income and other non-discretionary costs.
Generally, the purpose of tax measures is not to pay for a portion of these expenses, but rather to recognize that taxpayers who have to incur non-discretionary or involuntary expenses have a reduced ability to pay tax as a result of incurring these expenses.
It is worth mentioning that in 2003, the Technical Advisory Committee on Tax Measures for Persons with Disabilities was established to provide advice on how to address tax issues affecting persons with disabilities. The committee's final report was submitted in December 2004 and contained 25 policy and administrative recommendations. Budget 2006 took additional steps to complete the implementation of the policy recommendations of the Technical Advisory Committee.
[English]
We would like to turn to an overview of the specific tax measures. There are no tax measures targeted specifically to families with children who have autism spectrum disorders, or ASDs. The federal government does provide a number of tax measures to families with children with disabilities, for which children with ASD may be eligible.
First, the Disability Tax Credit, or DTC, recognizes the impact of non-itemizable, or general, disability-related costs on an individual's ability to pay tax. It provides a flat amount of tax recognition to all eligible individuals, which is meant to recognize additional out-of-pocket expenses that individuals with disabilities incur for everyday items, such as transportation, utilities, et cetera. The credit can be transferred to a supporting relative, such as a parent or grandparent.
Of note, no specific impairment or condition automatically grants eligibility for the DTC. Rather, eligibility for the DTC is determined on a case-by-case basis, based on the effects of the impairment. That approach ensures that tax relief is provided to those most in need.
Eligibility for the DTC gives rise to entitlement to other tax measures and benefits. First, the DTC supplement for children provides additional tax relief to families caring for children eligible for the DTC. This tax credit provides an additional flat amount of tax relief to these families. The federal government also offers some benefits delivered through the tax system. Of note is the Child Disability Benefit, which is a supplement of the Canada Child Tax Benefit and is payable in respect of children who are eligible for the DTC. Further, eligibility for the DTC results in enhancements under a number of other tax measures, for example, the Children's Fitness Tax Credit, the Child Care Expenses Deduction, Registered Education Savings Plans, the education amount, et cetera. We can provide more details on these later if committee members are interested.
In addition to all these measures, some expenses incurred because of ASD may be eligible under the Medical Expense Tax Credit, or METC. The METC recognizes the effect of above-average itemizable medical or disability- related expenses on an individual's ability to pay tax. The tax relief provided depends on the amount of expenses incurred and claimed. Taxpayers may claim medical expenses incurred on behalf of themselves, their spouse or common-law partner, and their minor children, and the list of eligible expenses is specified.
Finally, the proceeds of a deceased individual's RRSPs or RRIFs may be transferred on a tax-deferred basis to the RRSP of a financially dependent infirm child or grandchild.
I would like to conclude this overview of tax measures by mentioning that it is the Canada Revenue Agency that is responsible for administering the Income Tax Act. The determination of whether an individual qualifies for a tax credit or whether specific expenses are eligible for a tax credit are questions of fact. As such, the determination is made on a case-by-case basis by the Canada Revenue Agency.
Finally, the Expert Panel on Financial Security for Children with Severe Disabilities provided its report to the Minister of Finance in December, and the chair of the expert panel is appearing today. After receiving the panel's report, the minister stated that the government must better enable parents to set aside funds today to financially support a child with a severe disability when they are no longer able to provide support. He also stated that he looks forward to reviewing the expert panel's advice on how this objective can be achieved, and that review is ongoing.
James Barton Love, Past Chair, Expert Panel on Financial Security for Children with Severe Disabilities: Thank you. I was tempted to speak at length about what is in this report, but I can tell from the discussions that most of the members of the committee have certainly looked into it relatively deeply, if not read the entire report, so I do not think I need to do that.
The Minister of Finance asked us to study ways to provide for financial security for the future of children with disabilities. We were not asked to deal with the more complicated question that I know is very much on the minds of members of the committee, which is how to deal with income support on a current basis. We were looking at what provisions could be made for the future of children with disabilities generally.
After reviewing those issues, we concluded that there were three parts of a program that made sense to the panel. The first was a disability savings plan, modeled after the Registered Educational Savings Plan. This plan would allow anyone to contribute to a plan for a person with a disability and not to take a deduction for the amounts put into the plan but, rather, to let those funds grow without taxation on the income earned by them.
The second aspect of our plan was to provide for grants on what we thought was a generous basis, going as high as three dollars for every one dollar contributed by an individual to a plan, with those grants being limited to certain dollar amounts and being targeted mostly to people with lower incomes.
The third aspect of the plan was what we call the Canada disability bond, which is a contribution by the Government of Canada directly to a savings plan for people in the very lowest of income levels, to permit them to get some benefit even though they do not have the ability to put away money on their own.
In determining the amounts that should go into these plans, we wanted to balance the costs and the benefits and to target it towards those with the lowest incomes. That was where we were headed, and much of our recommendations in terms of the limits and amounts were directed towards taking whatever amounts of money would be available for this plan and targeting it down to those with the lowest incomes.
A senator asked a question not directly on this point, but close to this point: Where are the people who have these disabilities?
If you look at page 61 of the report, we will see that the largest group of people claiming the Disability Tax Credit, self-claims, were those people who earn between $10,000 and $20,000 of annual income. They represented 39.5 per cent of all people claiming the Disability Tax Credit. The next largest number earn between $20,000 and $30,000, and the next largest number after that were those with incomes under $10,000. Keeping those figures in mind, the panel took what it thought was a reasonable sum for the government to contribute to this type of plan of approximately $125 million per annum and target it toward the bottom end of that income level.
There are many other details about our proposed plan. We are delighted that the Minister of Finance has said that he intends to put this plan into effect and to seek the support of the House of Commons and the Senate to bring this plan to all Canadians.
The Chairman: Thank you very much, Mr. Love. Before I go to the members of the committee, do any other members of the panel want to add anything? If not, we will get into the questions answers and dialogue, starting with Senator Callbeck.
Senator Callbeck: I thank you all for coming here this morning. Mr. Pope, one of the previous witnesses talked about the Disability Tax Credit and being able to transfer that to another family member. Has there been any discussion on that?
Ms. Bordeleau: The Disability Tax Credit is transferable if the person eligible for the credit cannot make use of it because his or her federal tax liability is zero. Once that has happened, they can transfer it to a supporting relative, for example, a parent, grandparent, child, grandchild, niece, nephew or uncle.
Senator Callbeck: And a brother and sister?
Ms. Bordeleau: A brother and sister, yes.
Senator Callbeck: That is transferable. In your brief, you talk about the committee report that was submitted in December 2004 with 25 recommendations. You say that Budget 2006 completed the implementation of all these recommendations.
Ms. Bordeleau: The policy recommendations.
Senator Callbeck: All of those recommendations have been carried out?
Ms. Bordeleau: Yes, the policy recommendations have been completed.
Senator Callbeck: That is wonderful.
Senator Cook: You say they are completed. Are they being implemented?
Ms. Bordeleau: The policy recommendations, yes.
Senator Trenholme Counsell: Ms. Bordeleau, as a physician, I have been involved in the list of specified eligible expenses. What is the process for the development of that list? How often is it reviewed?
One of the questions of the previous presenters would fit into this concern, particularly with autism. Can you elaborate on the development of that list? How frequently is it revised, et cetera?
Ms. Bordeleau: The list is regularly reviewed, expanded and updated. If you look at the recent federal budgets, additions to the lists of expenses are eligible for the Medical Expenses Tax Credit, METC, are made frequently. Taxpayers can write in and say this new expense should be eligible. The value or the merit of those expenses is evaluated and, if it is deemed that it should be added, then that expense is added to the list.
Senator Trenholme Counsell: With autism, would you consult with physicians, interventionists and educators in deciding whether something should be on the list? How do you consult? Who is involved in that decision making? One of our presenters this morning showed us an item. I am not aware of the use of the item, but this gentleman showed that as an example of something that is of value in the treatment of autism. Upon whom do you call to make that decision? There is a great multitude of new things available all the time.
Katharine Rechico, Chief, Charities, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: It very much depends on the item in question. Sometimes we are made aware of things that are not covered by the METC, and we do some very superficial research on the Internet to find out exactly what it is, and it is quite clear that it is in. In other cases, it may require more detailed consultation with the people recommending the inclusion. We may call the taxpayer and look for information. We may call back the society or a lobby group that has suggested it to us. We continue down a path until we come to a clear understanding of the item and whether it fits the general nature of what should be offered under the METC.
Senator Trenholme Counsell: Is there an appeal process if you decide not to include it?
Ms. Rechico: I am not aware of a formal appeal process that we have in place, no. Certainly people are able to take their case higher up the line. Often, we may refuse the first time and say we do not think that is something that should be offered under the METC and people write back with more information, or we are made aware of more information along the way and we include things at a later date. No, there is no specific appeal process.
Senator Trenholme Counsell: On page 1, you refer to the overview of tax measures that may be available to families with children with ASD. Is this a form that deals with such basic things as ability to feed oneself, to dress one self, to ambulate, to communicate? I am familiar with these forms. Would this be the same kind of form for families with children with ASD and therefore it must be signed by a physician, or are there other people who can sign that form?
Ms. Bordeleau: You are referring to the Disability Tax Credit and the eligibility criteria for it.
Senator Trenholme Counsell: Yes.
Ms. Bordeleau: Yes, there is a specific list of basic eligibility criteria. Individuals, to be considered eligible for the disability tax credit, must be certified by a medical practitioner. There is a list of medical practitioners, and physicians are one of them, but in the case of different impairments, different medical practitioners can certify the impairment, as well as that person being eligible for the DTC.
Senator Trenholme Counsell: In the case of ASD, are there other people who can sign that form? We heard this morning about problems with family physicians, shall I say. I hope that those problems are rare.
Ms. Bordeleau: There is a list and, in order to be eligible for the DTC, you must have one or more severe and prolonged impairments and be markedly restricted in the basic activities of daily living, which are specified. Depending under which activity of daily living a child with ASD would be markedly restricted, the medical practitioner would depend. For example, where mental function is necessary for everyday life, either a physician or a psychologist could certify the form. If it were, say, for example, the activity of speaking, it would be a physician or a speech language therapist.
[Translation]
Senator Pépin: I must admit I was pleasantly surprised that the advisory committee's report, which contained 25 recommendations, was approved. That is a very positive development.
Since we are talking about persons with disabilities, I would like to digress for a moment. Our particular focus is autism, but we cannot overlook other mental disorders such as Asperger Syndrome or hyperactivity. Some parents maintain that they spend up to $200 a week on consultations not covered by health insurance. Do the costs or expenses in question here apply to similar disorders?
Ms. Bordeleau: Are you referring to ongoing medical expenses?
Senator Pépin: I am talking about deductible expenses, those not covered by health insurance.
Mr. Bordeleau: The legislation lists those medical expenses that are eligible for the medical expense tax credit. The list is fairly general. For example, expenses incurred for treatment would be eligible under certain circumstances. The person must first be eligible for the disability tax credit. However, the legislation does not specify the condition for which treatment expenses must be incurred. In the case of persons requiring treatment, regardless of the reason or medical condition, expenses would be eligible if they satisfy the criteria set out in the act.
Senator Pépin: Most of the time, the persons in question are children. We will arrange to obtain a copy of the report.
[English]
Senator Keon: Mr. Love, with regard to the report A New Beginning, I would like to hear your remarks on these new recommendations to estate planning and inheritance. Individuals with severe disabilities have many doors closed to them in this business of estate planning and inheritance. In other words, they cannot be part of the family business and many other things that people without disabilities can do. Consequently, it is my impression that a family that finds themselves in this predicament will be severely penalized when the time comes to get into estate planning and inheritance.
Is there something — and I must read this report more carefully — in here that compensates for that or will that have to stay the way it is?
Mr. Love: As Mr. Pope pointed out in his earlier remarks, there are ways that families with disabilities can do their estate planning to pass on their estates to a disabled child and protect it through a Henson Trust or another form of trust. Those avenues are available. I understand that situation the sole asset of an estate might be in the family business and it might be difficult find some liquidity to deal with that.
This plan, if it were enacted, would not absolutely deal with that consideration. It would provide an opportunity, for example, for grandparents who are trying to do their planning and want to do something for their disabled grandchild. It would help the grandparents to put some money in, by way of a lump sum or as a savings vehicle, on an ongoing basis. This would help down the road when the child has to get on by him or herself without the assistance of the extended family. There would be something for the child, a small amount admittedly, but still something more than he or she would otherwise have had under the provincial income support program.
Senator Cochrane: I am pleased the Minister of Finance has taken some action. We have heard about the tax forms being rather complicated in that they are not specific enough for the family to either tick off that yes or no we have a child with a disability. It is rather complicated.
Could we have this form simplified? We have heard that 45 per cent of the people eligible for this fund are not getting it because of the complications with the tax returns. Can I get some assurance from you here today that this will be simplified? That is a large number.
Michel F. Cloutier, Director, Special Programs and Partnerships, Canada Revenue Agency: Thank you for that question. The tax form tries to cover the most number of cases so that more people can take advantage of it. It must be generic enough to allow for Canadians to see themselves and therein use the tax measures offered to them by the government. It may be seen as complex although we have made a great deal of effort to try to simplify it as much as possible. We continue to do that every time the Department of Finance introduces new measures where we have to translate additional forms or change forms currently in use. We try as much as possible, given the time, to focus test these forms to verify that our assumptions are correct and that when we put them out to Canadians, they can be taken advantage of and used readily.
We do that in different fashions. We will focus test, as I said. We will also submit forms to a readability test whereby we ensure that the language is clear, fairly well used by the majority of the population and, therefore, can be used and recognized as such.
We try to improve every year. We review our forms to ensure that they are readable and accessible; not only in terms of reading the material and being taken advantage of, but also in terms of that they are accessible everywhere in Canada.
Senator Cochrane: You know as well as I do, Mr. Cloutier, that in various parts of this country we do not have tax experts to inform people of these benefits. I think the simpler, the better.
Mr. Cloutier: I cannot agree with you more, senator. Additionally, CRA has lines open if Canadians have questions about various tax measures. They can call and verify them. We also rely on the private sector. There are experts available to Canadians to seek consul and guidance.
Senator Cochrane: You say every year you are trying to simplify it more and more.
Mr. Cloutier: Absolutely. Every year we verify our guides to see if we can make enhancements to the forms.
Senator Cochrane: I am happy to hear you say that.
Mr. Cloutier: We have a group devoted to doing exactly that.
[Translation]
Senator Champagne: It worries me a great deal to hear that 45 per cent of the people who should normally be entitled to these benefits in fact are not receiving them. In some cases, do people not realize that there are ways of asking the government for help? Would it not be a good idea to launch a public information campaign? Who reaches out to these individuals? Who lets them know that help is available and what can be done to ensure that persons eligible for these services in fact have access to them?
Mr. Cloutier: Year after year, we run public information campaigns in an effort to reach the majority of Canadians during tax season.
In addition, when changes are made to the act, we carry out more targeted public information campaigns. Recently, recipients of child tax credits were informed that they could view their files on line.
Senator Champagne: Yes, but not everyone has access to the Internet. Perhaps it is a case of parents who cannot afford a computer or Internet services, or of senior citizens who are not Internet savvy.
It is all well and good to make this service available to Internet users, but I think there needs to be a way to target individuals with children with disabilities who could benefit from these new programs.
After your visit with us today, I would hope that you would join forces to find some way of reaching people and of letting them know that help is available to them. It is all well and good for the government to proceed with some of the recommended changes, but if no one knows about the changes, then the problem is not addressed.
Mr. Cloutier: Absolutely. Maybe I did not make myself clear. I only mentioned one of the methods used to reach people. Nearly half of all taxpayers communicate with us using electronic means, but the remaining half represents 12 million people. I simply wanted to point out that this new tool is in place. There are many different ways of communicating with the Canada Revenue Agency. People can always telephone us or drop by our offices. Our information booklets are available at a number of locations.
Clearly, we can always do better. We do what we can with the budgets we have, but every year we try to improve upon our efforts.
Senator Champagne: And we are counting on you to continue.
[English]
Senator Cochrane: Within this new beginning, Mr. Love, you have said that we are going to have the savings plan looked into. This will be implemented and the bonds and so on, but that is for the long term. Is there any immediate help for some of these people?
I am referring to autism in particular, but I know there are many other disabilities whereby families have had to sell their homes, where they just cannot cope and there are divorces, et cetera. Many problems have arisen because there is no immediate solution. The expenses start when the children are young.
Is there anything that you will look at in the future?
Mr. Love: Senator, we heard from many Canadians for whom that was the primary concern, just as you have expressed it. Unfortunately, the terms of reference that we had did not permit us to make recommendations in connection with the income needs that people have today. Those are issues, and it was one of the reasons why I wanted to call this report A New Beginning, because I think it is just a very small start. There is so much more to be done in all kinds of other areas that I did not want to celebrate it as anything more than a beginning.
Senator Mercer: Mr. Love, I want to congratulate the panel for the good work you have done. I recognize that this is a volunteer effort on the part of the panel and we need to recognize the contribution of you and the other members for a well-written report.
In your deliberations, did you consider the possibility of the tax credit or the disability savings plan being available to a non-family member? For example, I am the godfather of a disabled child. She is very lucky; she will not need a contribution from me because her parents are taking care of that. However, other people are godparents or friends of families who have disabled children who may not have the means to provide for their future. In that case, others may be interested in providing for them. Did you consider making that reference?
Mr. Barton Love: We made a specific recommendation on that point, senator. We said that a contributor to one of these plans could be any member of the community. We were thinking about situations such as you have described, but also other circumstances. For example, we have seen where there has been a drive-by shooting and someone was severely disabled. Members of the community get together and create a fund, and we thought those funds should be available to be placed into a plan such as this. We have said that contributors can be absolutely anyone to one of these funds. In terms of establishing a plan, however, because there will be some specific aspects to a plan that will not be governed by the legislation, in choosing what can be part of that plan, it needs to be the beneficiary of the plan or the primary caregiver who chooses the characteristics of the plan. Once the plan is established, absolutely anyone could make a contribution, according to our recommendation.
Senator Mercer: This question is to Revenue Canada. The minister has had advisory groups in the past, particularly in the charity field. He has had both policy and technical advice from charities. Mr. Cloutier referred to the fact that there is a similar committee dealing with disabilities. Is that the case?
My question is motivated by the fact that I understand that the activities of the advisory committees on the charity side have been cancelled or postponed since the new government came in. I hope that is not the case with this committee.
Mr. Cloutier: The same happened to the disability advisory committee. This committee also has been wound up recently, I think in the fall.
Senator Mercer: I would be concerned that the minister is not receiving advice on this from the community groups.
Mr. Cloutier: I should add that we have kept in touch with the members of the committee. We are involved in on- going discussions concerning Canadians with disabilities.
Senator Mercer: I appreciate that. It is a concern we should all have because these committees were put in place to give good advice to the minister.
Senator Fairbairn: This is a particularly challenging report but it offers a sense of hope. When you listen to the people who we have been listening, it is a very important piece of work.
As I was breezing through it, there was a paragraph toward the end that caused a light bulb to go off in my head. As Mr. Love will know, I have been on Parliament Hill forever and remember other times when these kinds of issues were very difficult and vigorous. In your future directions, you remind us of that. You talk about the difficulty with provinces not providing adequate support for such things as income support for seniors. The then federal government, as I recall, also showed leadership and out came the Old Age Security and Guaranteed Income Supplement programs, which have been an enormous help.
You have said, and I think quite well, that this is not an area where the provinces have been moving forward in a vigorous way to be a partner. You are urging the government to take a leadership role in working with the provinces and territories to ensure there is a stable future for Canadians with disabilities.
Mr. Love, you stated that a savings plan is a bold new beginning and that other levels of government have to pitch in and do their part. With this quite legitimate challenge, has there been any kind of positive response from the provinces? Might they be agreeable and wishing to join and help in this large and disturbing issue and one that challenges the lives of not only the people who suffer from autism but also their families and society? Have you had any response to that challenge?
Mr. Love: Senator, there are two parts to your question. The first part deals with income support. In our report on pages 27 and 28 we show the levels of support from the provinces. We can all agree that it is quite inadequate in today's economic environment to support someone with or without a disability, but certainly someone that has the additional cost of a disability. There has not been, to my knowledge, any indication that the provinces are looking to increase their support for people with disabilities.
Second, as you can find in our report, one of our concerns is that if someone had a plan established, the provinces would claw back on the income support that they do give. I believe that Mr. Pope testified that in Ontario, for example, any more that $5,000 in assets and the province begins to claw back the benefits.
On that score, I know that when the Minister of Finance met with the provincial ministers of finance he asked them whether they would be prepared to change their regulations under their income support programs to the extent that the clawback would not happen if the source of the income came from a disability savings plan. I understand from the press reports, because I have not heard it directly, that the provincial ministers of finance were interested in the idea. The Minister of Finance for the Province of British Columbia said that the government would amend its legislation once they got a chance to look at it. Other ministers said that they had only received the report and were not ready to respond. We had released the report only a few days before that meeting.
We have had no direct response from anyone; however, I understand that the provinces are at least lukewarm on the topic. I am hopeful that they will respond positively because the only result of our program, as we say in the report, would be a transfer of federal dollars to the provinces and absolutely no improvement in the lives of people with disabilities. It is very simple: if the provinces do not come on side and stop the clawback, then the program is totally useless to the people that it is intended to support.
Senator Fairbairn: It was very bold of you to take this on and it is a very important piece of this report. I hope that this part would continue to be looked at seriously by all of those who have spent such time and effort to keep as much pressure as possible on government. This is an all-Canadian issue.
Mr. Love: It does strike me, senator, that it is an opportunity for the provinces to do something that will not cost them money and will not interfere substantially with the policies behind their income support programs. It might even take a little bit of the heat off the provinces in terms of what they need to do to bring the income support levels for people with disabilities up to a reasonable standard.
Senator Callbeck: Mr. Love, I have a question on one of the recommendations. The disability savings plan has a cap of $200,000. You probably heard the two witnesses earlier this morning. One said that $200,000 was too low and the other said that he did not see the reason for any cap. I would like your comments.
Mr. Love: There are three aspects of the costs of this plan, and one cost relates to each of the three aspects of it. One, which is not unsubstantial, is the cost of not taxing the income earned. The larger the plan is the higher that cost becomes. The people who are most likely to be able to contribute at a significant level are likely those people who need it least. I want to be careful when I say that because one thing we learned clearly when we were doing this report was that even for people whose incomes seem to be very high, the consequence of looking after a child with a disability can be such that that is not their case at all. We had before us a gentleman who is both a lawyer and chartered accountant and his wife is a medical doctor. When he showed me their budget, he showed me a top line that was significant enough that I do not think any of us would want to say we feel very sorry for someone in that combined income level. By the time we looked at the cost of having two children with autism, I was not surprised to hear the address where they said they lived in the city of Toronto. It was not a very good address, certainly not for someone with that kind of top-line income. We have to be cautious when talking about people with high incomes that have a disabled child.
One of the costs of this plan is the revenue loss that comes from not taxing the income accumulating in the plan. The second costs are the direct grants and the third cost is the bonds. When we looked at those to determine where we wanted to skew the cost and, therefore, the benefit of this plan, we decided that the bond was where we wanted to put the cost. The tax system is a blunt tool and, as one of the senators said earlier, there are so many people who have a need and are not even a part of the tax system that we wanted to be able to put a bond in place that would be a direct payment to those who cannot save — those who have no taxable income. Next, we wanted to go to the people at the next levels of income and that is where the grants would apply. The $200,000 limit effectively tries to balance the benefits to people in different income ranges.
Certainly, we would all be happy if there were no limits and there was plenty of money to do absolutely everything we wanted to do. However, it seemed to us, given the limited resources available for the plan, that we were better off skewing it down to those with the greatest needs. I do not want to suggest that not everyone with a child with a disability has needs because they most certainly all have needs.
The Chairman: I have one final question relevant to the presentations made this morning.
Mr. Pope talked about recommendation number 4 on the eligibility factor in suggesting that, perhaps, we should look at those who are eligible under the provincial disability benefits programs because this might be a savings in terms of time and processing. Perhaps it would carry a broader group of people into eligibility. Can you comment on his suggestion?
Mr. Love: The reason for choosing a particular plan for the people already qualified was simply to make it possible for someone to go to their financial institution or plan sponsor, whoever that might be, having a piece of paper which makes it clear that they are eligible to be part of the plan. I heard Mr. Pope's suggestion, and it intrigued me. My concern would be that if the provincial plans are not all the same, we might be having eligibility in one province where someone with an absolutely identical circumstance in another province would not qualify under the provincial plan. It strikes me that unless the plans are all the same, and I have not looked at them all but I doubt they are, we need to look at something where all Canadians are treated equally. It seems to me that that is important in a federal plan.
Senator Cook: I thought it went to the national formulary, of which there is none for medicare. Would you advocate putting it on a national formulary? Is that idealistic?
Mr. Love: I would advocate anything that broadens this category but that also makes it possible for someone to take a piece of paper that would say that he or she qualifies for the plan.
Senator Cook: When this committee did the study on primary health, one of our overriding concerns was that there was no national formulary for drugs under medicare. It seems that if we are to move in that direction, we should look for a national standard.
Mr. Love: National standards are always good, yes. This is about finding a way to make it possible. The numbers we are talking about for a disability savings plan are such that creating a whole new bureaucracy for it would take large sums of money that I think we as a panel thought would be better used in the hands of those people with disabilities.
Senator Cook: Thank you.
The Chairman: Thank you, all of you who have helped us a great deal. That brings to a close this session. I still want to spend a few moments in camera to talk with our researchers in terms of any instruction we may give them vis-à-vis this part of the issue. They are preparing their report. We have talked about it before, but we did not have this particular input to talk about.
The committee continued in camera.