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Liberals mulling tax break for poor

Liberals hope to implement scheme by 2008

Globe and Mail Update

Ottawa — The Liberal government is floating the idea of an income-tax benefit for people who take low-paying jobs so that their families are not penalized when the first pay cheques are cashed.

Up to two-million poor people might be encouraged to take jobs if they didn't have to worry about lost social assistance benefits, Finance Department officials said Monday, sketching out a scheme the Liberals hope to be in a position to implement by 2008.

At the moment there are strong economic disincentives to keep poor people from going to work.

Someone going from no annual income to $10,000 a year could lose $7,800 of that in taxes and reduced social assistance benefits, such as subsidized housing.

In these circumstances, "it simply doesn't pay to seek work," Finance Minister Ralph Goodale said. "This so-called welfare wall needs to come down before true economic opportunity can open up."

The primary goal is to help the poor get a foot up on the first rung of a ladder leading to better paying jobs.

But officials also see it as part of the strategy to deal with Canada's voracious need for workers later this century — a strategy that may require a quadrupling of the number of immigrants by 2050.

The "working income tax benefit" was one of the few political surprises in Mr. Goodale's economic and fiscal update statement Monday.

But Finance Department officials were careful not to describe it as a full-scale plan or even a proposal at this time because of the many hurdles that would have to be cleared before implementation.

Ottawa would have to negotiate agreements with the provinces and territories to make sure those jurisdictions don't clawback any of the federal benefit.

Negotiations will also be needed to harmonize the program benefit, a task complicated by the fact that there is wide variety in the social assistance programs in the different jurisdictions.

The Liberal scheme would cost the federal treasury about $500-million a year in 2008 and in 2009, going to $1-billion a year by 2010, Mr. Goodale estimated.

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