Canadians with disabilities face alarmingly high tax rates, new report reveals

Torontosun.com
May 11, 2017
By Anthony Furey

A new report reveals that low-income working Canadians with disabilities are facing tax rates of over 100% and advocates say that has to change.

The alarming report from the Library of Parliament shows that federal and provincial taxes combined with various benefit clawbacks make many working disabled taxpayers worse off for working longer hours, getting raises or in some cases even working in the first place.

It’s an issue that disability advocates have long known about, but this marks the first time it’s been formally tabulated by the government.

“I think this starts to quantify why people with disabilities are staying on the sidelines,” notes Rich Donovan, CEO of The Return on Disability Group. “I think there are some real structural issues in economics that cause this dislocation.”

These problems result in troubling trends such as high school guidance counsellors recommending students with disabilities go on social assistance as opposed to seeking employment. Donovan, a former portfolio manager with Merrill Lynch who has cerebral palsy, had just such an experience as a teen.

Just how regressive the tax system is for disabled workers is widely inconsistent and varies by province, the report shows. The Alberta system sees those working 40 hours a week making minimum wage hit with a 115% marginal effective tax rate while part-timers face only 4.8%. In Ontario, the full and part-time rates are 74.4% and 51.4% respectively.

“They are poorer because they work harder,” says Conservative MP Pierre Poilievre, who requested the study in the first place. “I think it’s morally wrong to punish people for working.”

Poilievre, who is studying the issue in concert with his work on a House of Commons committee looking at poverty reduction, is now calling for solutions.

He wants to see the Parliamentary Budget Officer report annually on the marginal effective tax rates for low-income disabled Canadians, recommends federal and provincial finance ministers cap those rates at 50% and calls for the feds to increase the Working Income Tax Disability Supplement.

A big part of the problem is just how suddenly governments claw back benefits for disabled workers. “If the claw back rate were reduced so that the benefit was withdrawn gradually then you could guarantee that the person is always better off by working more and working harder,” notes Poilievre. “The income benefits should be withdrawn more gradually and the taxes lowered to make sure that work always pays.”

For business operator Mark Wafer, these problems are nothing new. Wafer, who is deaf and owns multiple Tim Hortons franchises, has been making economic arguments about the importance of persons with disabilities in the workplace for years.

“My message is that business cannot afford to ignore the world’s largest minority group, people with disabilities. A massive untapped labour force,” Wafer writes in an email interview. “My message is also one of pure economics, better business and greater returns by being inclusive.”

A fifth of Wafer’s over 250 employees have some form of disability and he finds their hiring a win-win situation, but agrees government tax policy needs to change.

A 2013 federal government report titled “Rethinking Disability in the Private Sector” pegged the number of Canadians with disabilities who could be in the workforce but aren’t at 795,000.

“These are the kinds of systems we set up decades ago because we didn’t expect them to work,” says Donovan of the punitive tax rates. “We didn’t expect these people to be productive members of society. Now we’re realizing the vast majority of these people can be productive taxpayers.”