Canadian income tax system

The first paper should address the general issue of the treatment of children in an income tax system, and, specifically, how the Canadian system does and should treat children. Prior to 1993, the Canadian tax system treated families with the same incomes differently depending on the number of dependent children in the family (in some periods there were credits; in other periods there were exemptions; there were also Family Allowances providing additional income directly to the mothers of children). In 1993, these special treatments were eliminated, and some or all of the savings were used to finance system of child tax benefits aimed primarily at low income families with dependent children. The net effect of all these changes was that higher income families were treated the same way for tax purposes independent of the number of dependent children in the family. The Harper government reintroduced some modest tax breaks for higher income families with children, including tax credits for dependent children and children’s fitness and arts credits. The Harper Government also introduced the Universal Child Care Benefit which pays $1200 per child as taxable income to parents. Incidentally, the American tax system still provides differential tax treatment for families depending on the number of dependent children in the family.

Your assignment is to look at the issue of how children should be treated in the tax system. Using the Haig-Simons definition of income, explain the arguments for and against allowing for dependent children in defining an income tax system. Is special treatment important in establishing horizontal equity? In establishing vertical equity? Provide some detail on the history in Canada of the treatment of children in the tax system. Provide several arguments made by politicians and other policy makers surrounding the 1993 reform and/or the recent Harper government changes. Were these arguments related to the kinds of issues raised in an economics course on taxation? Are there efficiency considerations relevant to these various changes (that is, are the changes likely to be efficient, inefficient, or unconnected to efficiency, and why)?

Requirements:

Your papers must be no longer than 1500 words (about 5-6 typed double-spaced pages, using normal margins and normal print). Longer papers will be penalized. The penalty will increase with the amount that you exceed the limit (naturally, there will be no penalty for slightly exceeding 1500 words, but the point at which the penalty will be assessed is not specified, as is true for many legal penalties!). At the bottom of your paper you must state the number of words in your paper (Microsoft Word provides this information under Tools, subheading Wordcount; other wordprocessing packages also provide this information; you may omit the references from your wordcount if you like; be honest, because we have been known to count words!). You must double-space your papers and leave margins of at least 1 inch (2.5 cm) at the top, bottom, and both sides of the paper. Again, there will be penalties for untyped papers or papers not conforming to spacing or margin requirements. They will be accepted, but will be penalized up to 8 marks (depending on the nature of the violation).

In general you may want to do some additional research for each paper (beyond the reading list). Since both papers deal with issues that are real and recent, you can probably find lots of discussion of the taxation issues by using the normal search engines on the Internet. If you are having trouble finding out what you need, ask a librarian for help. You should of course provide complete references and footnotes, even to works from the reading list. Do not plagiarize. Cheating will be dealt with severely. Keep in mind that this is a paper in Public Finance, not in Tax Law or Tax Accounting – a good grade will depend on your ability to tie your analysis into the concepts learned in this course. In the past, students with access to accountant (eg. relatives) have occasionally turned in papers that present an analysis of the issues that is not particularly useful in this course.

A separate note on use of the internet: Many students use the internet to do research, in this and other courses. This is fine, but you should carefully footnote references, just as if you had gotten a book out of the library. Copying material off an internet site and representing it as your own is plagiarism, and the University takes that very seriously. You should also be aware of the obvious point that the internet does not have anyone controlling it. Often very useful sources will appear on your search engine side-by-side with sites that are complete garbage. It is your task, if you use the internet, to differentiate between the two! Librarians can help you do that.