(PS37)
January 15, 2008
Which Best Helps the Poor?
Executive Summary
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Implementing the common social goal of better living standards for the disadvantaged requires that we expand incomes for the working poor.
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Three available methods for doing that are legislating higher minimum wages, expanding tax credits and increasing basic personal exemptions to remove people at the bottom from the tax rolls.
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Higher minimum wages create distortions in the labour market that have their own harmful effects. The worst of these is forbidding the least skilled from sharing in the dignity of work.
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A typical example of a tax credit is the proposed federal Working Income Tax Benefit. But restrictions in eligibility for the credit limit its impact, and it returns few dollars even to those who do qualify.
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Raising provincial income-tax exemptions to the level used in Alberta, however, does more than the other two alternatives discussed to help the working poor. In Manitoba and Saskatchewan, its benefits represent an equivalent minimum wage of $9.20 an hour.
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All low-income levels in Manitoba and Saskatchewan would benefit from this change in taxation.
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Alberta’s booming economy and its existing high exemptions obviate the value of such a reform in that province. But if federal exemptions were raised to the same level, that would increase the incomes of the working poor by 15%.
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Governments should stop meddling in labour markets with increased minimum wages and increasing the complexity of the tax code with tax credits of limited value.
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Removing more people at the bottom of the income ladder entirely from the tax code is a superior means of fighting poverty.
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David S. Pankratz, CGA is the Director of the Institute for Community Peacebuilding at Winnipeg’s Canadian Mennonite University. He was born and raised on a farm near Brandon, Manitoba. He recently completed his MBA from Laurentian University, having completed the CGA accounting professional designation in 1990, and a BA in Religious Studies at University of Winnipeg in 1980. Prior to coming to CMU, David was self-employed, taking on a variety of contracts, including delivering humanitarian aid in Iraq after the invasion of 2003. David is trained as an accountant and worked in that capacity both for Providence College and Mennonite Central Committee, with whom he has traveled to more than 30 countries on four continents, including three years in Zambia. Since 1996 he has been actively expanding his skill-set to include work more directly related to relieving human suffering and promoting a more peaceful world. In his spare time, David likes to read, enjoy his newly-renovated century-old home, and cook, as well as remain actively involved in a number of volunteer roles promoting peace and understanding.
Feedback:
- RE:
Which Best Helps the Poor?
— February 19, 2008
Great work. Enjoyed David Pankratz's brief on the issue of minimum wage as well as your op-ed. It is great seeing that level of information provided and hopefully serves to educate the general public in the government's misdirected attempts to address poverty. E-mail from Winnipeg
- RE:
What Best Helps the Poor?
— January 17, 2008
Bravo on your health care work and also on David Pankratz's research on tax policy and poverty! -E-mail from Winnipeg
