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Welcoming the
Contributions of Citizens with Disabilities
“If I were to summarize
what you (PLAN) are working on, it is to enable individuals to exercise
their citizenship.”
- His Excellency, John Ralston Saul
Honorary Patron, PLAN
Submitted to: Technical
Advisory Committee on Tax Measures for Persons with Disabilities
Sherri Torjman, Robert Brown, Co-chairs
Date: August 29, 2003
Submitted by: Planned Lifetime Advocacy Network
Ted Kuntz, President
Suite 260-3665 Kingsway,
Vancouver, BC V5R 5W2
Telephone: (604) 439-9566
Facsimile: (604) 439-7001
Website: www.plan.ca
Contacts: Al Etmanski,
Executive Director
Jack Styan, Director of External Relations
Summary of Recommendations
Immediate
• Permit expenses that result in companionships, friendships
or other supportive and caring relationships to be claimed under
the Medical Expense Tax Credit.
• Allow the tax deferred rollover of RRSP’s/RRIF’s
to discretionary trusts, the beneficiary of which is a person with
a disability, without the purchase of an annuity.
• Create an exemption for disability related distributions
from trusts for persons with disabilities receiving Guaranteed Income
Supplement.
• Re-evaluate eligibility for the DTC to ensure that persons
with life-long developmental disabilities qualify.
Medium Term
• Develop a Registered Disability Savings Plan
• Improve the RRSP/RRIF rollover provisions
• Create a Disability Expense Tax Deduction
• Improve the Disability Tax Credit
• Synchronize Old Age Security with provincial disability
pensions
• Support the Creation of a Provincial Disability Tax Deduction
Introduction
“In a sense what has happened is that we've developed our
sense of community. We've become much more aware of who we are,
and what it is like to be a citizen in a community. What is wonderful
about PLAN, this organization, is that it is focussed on community
and on the long term. Community is, after all, about the long term.
It's about today, it's about yesterday, but it's about the long
term, otherwise it's not community.” – John Ralston
Saul
Canadian families are resilient, self sufficient and capable. We
have never relied on or expected government to provide exclusive
support for our family members with disabilities. Beyond the basic
necessities of life, such as providing direct care and support with
the tasks of daily living, we love, support, inspire and nourish
our family members in body and soul. This is what caring parents
do. There are, however, additional pressures and costs associated
with our sons’ and daughters’ disabilities.
Like all parents, we too have dreams. We envision our family members
living a good life, being safe, contributing to their community,
having deep and enduring friendships, and enjoying committed loving
relationships. We want what our sons and daughters dream and desire
– that they have the opportunity to share and be recognized
for their gifts. In other words, that they be full citizens of Canada.
Like other parents, we will do anything to enable our children to
realize their dreams. Our limits are often financial. Most of us
are not wealthy enough to provide the best for our children for
their lifetime.
‘Citizen’ is one of the most important roles each of
us plays in society. The ‘caring citizen’ is the glue
that holds our society together. Citizenship involves three components:
rights, responsibilities and access.
• Rights of belonging, of access to justice, to due process,
of mutual recognition and approval of our distinctiveness, uniqueness
and differences both as individuals and groups.
• Responsibilities to respect and care for each other; to
commit to the well being of the community, to contribute to the
health and vitality of our communities, to engage in creating a
vital society.
• Access to the forums, institutions, associations and public
spaces where citizens meet, discuss, share, work, contribute, play
and socialize.
Thus our common vision is clear: to secure a good life for persons
with disabilities; to secure a caring society. A good life is universal.
It includes: caring relationships with family and friends; having
a place to call home; being able to make choices and pursue our
passions; having adequate resources to live with dignity; and becoming
contributing citizens.
Progress has been made in recent years, and many persons with disabilities
are living a good life. However, there are many challenges and much
more can be done. Persons with disabilities still live, disproportionately,
in poverty and isolation.
Achieving our vision is a responsibility shared by all citizens
and sectors of our society: persons with disabilities, family members
and other citizens, business and government. We invite you to consider
the following recommendations to enhance the capacity of Canadian
families who have always taken responsibility for caring for their
family members with disabilities. Indeed, approximately 75 percent
of persons with developmental disabilities are cared for by their
families without government support.
The Challenges
An Outdated Paradigm
The way in which disability is understood in our society leads to
the conditions in which persons with disabilities live.
“Disability is not measles. It is not a medical condition
that needs to be eliminated from the population.” The paradigm
that situated the disability inside the person and therefore resulted
in the need to “fix” the person has formed the basis
for statutes, policies and programs for persons with disabilities.
The result is a system that propagates this way of thinking.
Aspirations for a good life and citizenship require the adoption
of a new way of thinking and subsequently, the transformation of
the existing system. The emerging paradigm is one in which all citizens
are expected to contribute their gifts. Contribution is the cornerstone
for a good life and citizenship. The state can guarantee the rights
of citizenship but full citizenship is only realized through our
contributions. The reason for this is simple. We gain full citizenship
by contributing to the common good.
The gifts of persons with disabilities have too long gone unrecognized.
They have neither been encouraged nor expected to contribute. This
is a terrible waste.
Isolation and loneliness stand as major barriers to becoming full
contributing citizens and the realization of a good life. They are
also barriers to the development of a new paradigm of disability
in our society.
An Emerging Challenge
“It's about stability in the lives of people who have disabilities
and need that stability, just the way everybody else needs stability.”
– John Ralston Saul
When we think about securing a good life for our family members
with a disability, we must also think beyond our lifetime to the
lifetime of our family member. In fact, one of our constant worries
is “What will happen to my son or daughter with a disability
after I die?”
For the first time in history, our sons and daughters can be expected
to outlive us. Thanks to medical advances, higher social expectations
and community living, persons with disabilities will live long lives.
In fact, some of our sons and daughters are about to become senior
citizens.
This demographic fact highlights a new challenge for all of us –
families, caregivers and our federal and provincial governments.
We will need to look at new tools and instruments to permit families
to secure a good life; to acknowledge family contributions; and
to harmonize disability and seniors’ policy.
Use of the Tax System
The tax system can be an efficient mechanism for accomplishing social
policy goals. It is used to compensate families for the costs of
child care. It is used to alleviate the impact of poverty on children.
The federal disability tax credit recognizes some of the extraordinary
costs of supporting a family member with a disability.
Progressive tax policy does not require the administration of a
separate delivery system. It enables persons to find personalized
solutions, to be innovative and to best utilize their, their families,
and their communities’ problem solving capacities. It also
enhances their capacity to make decisions in the best interest of
their family member with a disability and to contribute in their
communities rather than remain passive recipients of charity.
Our Goals
Hence, we seek a policy framework which:
1. Is consistent with the new paradigm of citizenship and contribution;
2. Creates tools and instruments to help families plan for the time
when they can not take care and provide financial assistance;
3. Acknowledges the existing contributions of persons with disabilities
and their families; and
4. Provides incentives for persons with disabilities, families and
various levels of government to contribute and share the responsibility
for securing a good life.
Short Term Recommendations
No One be Left Alone
“I know that your dream – I think it shouldn't be your
dream, I think it should be your motto – is that no one be
left alone. And that sounds like a very grand dream in a society
where a lot of people are alone.” – John Ralston Saul
Issue
Isolation and loneliness are major handicaps and are often the most
significant barriers to achieving a good life. Relationships are
a key component to securing a good life. They are necessary to meet
our needs for belonging and meaning. They are critical for participation
and for achieving full citizenship. And, relationships are the single
most important element in assuring the safety and security of vulnerable
persons.
We need a framework of statutes, policies and programs that are
designed to facilitate and nurture belonging – relationships
and community connections.
Solution
Permit expenses that result in companionships, friendships or other
supportive and caring relationships to be claimed under the Medical
Expense Tax Credit.
Rollover of RRSPs and RRIFs to trusts
Issue
Discretionary trusts are key tools for families who are trying to
secure a good life for a family member with a disability. There
are two main reasons for their importance.
First, discretionary trusts enable us to leave a share of our estate
to our family member without jeopardizing their provincial disability
benefits. Provincial disability income systems serve persons within
the “welfare” framework. The result is that persons
with disabilities qualify for a disability pension and the associated
benefits only in when they have no financial assets and only when
they have little or no income. While families want to help their
disabled sons and daughters, few are in a position to replace provincial
disability income on an ongoing basis. The discretionary trust is
the most important tool for planning the long term safety and well
being of our family members with disabilities. And second, trusts
can provide a mechanism to manage or co-manage an asset in the best
interests of the person and thus protect funds and assets against
exploitation and misuse.
The recent requirement to purchase an annuity to pass funds from
an RRSP or RRIF to a trust on a tax deferred basis, while a positive
step, requires the purchase of an annuity. When interest rates are
low, an annuity might not be the best investment tool with which
to maximize income. Furthermore, it reduces flexibility in the use
of the asset because payments are restricted to monthly amounts.
For example, it would preclude the asset being used as a down payment
on the purchase of a house for the son or daughter with a disability.
Solution
Allow the tax deferred rollover of RRSP’s/RRIF’s to
discretionary trusts, the beneficiary of which is a person with
a disability, without the purchase of an annuity.
Create an Guaranteed Income Supplement Exemption for Disability
Related Expenditures from Trusts
Issue
In some provinces, such as British Columbia, distributions from
trusts that are used to purchase certain disability related goods
and services are not considered income by the disability benefits
system. Thus expenditures on “disability related costs”
can be made without diminishing the income of our family member
with a disability. This permits a significant contribution towards
securing a good life and protecting the person’s safety and
thus acts as an incentive for parents to assist their sons and daughters
with disabilities.
A similar exemption, however, does not exist when a person turns
65 and then moves to Old Age Security and the Guaranteed Income
Supplement. When receiving Guaranteed Income Supplement, distributions
from a trust are treated as income and effectively taxed at 50%.
Thus when our family members with disabilities turn 65, they lose
a mechanism with which to secure a good life.
Solution
Create an exemption for disability related distributions from trusts
for persons with disabilities receiving Guaranteed Income Supplement.
Re-evaluate eligibility
for the Disability Tax Credit (DTC)
Issue
Many of our family members with life-long developmental disabilities
have been denied the disability tax credit. While they may not have
physical impairment to meet the current criteria for the DTC, their
intellectual limitations mean that they require ongoing care and
support. Their families remain involved throughout their lives by
providing financial assistance and watching out for their safety
and well-being.
Solution
Receipt of the DTC would assist this group of persons in achieving
a good life and, if transferred, would compensate families for some
of the extraordinary disability-related expenditures and would recognize
families’ life-long commitment to their sons and daughters
with disabilities.
Re-evaluate eligibility for the DTC to ensure that persons with
life-long developmental disabilities qualify.
Medium Term
Registered Disability Savings Plan
Issue
Parents, grandparents and siblings have always demonstrated their
willingness to contribute financially to their relative with a disability.
These contributions are largely unacknowledged in the tax system
– in fact there are disincentives. Often the funds or assets
passed on to the individual are clawed back by provincial policy.
The lack of a flexible, tax-deferred savings vehicle that is available
to families who want to help their relative with a disability is
a major impediment. There is no incentive for families to plan for
the future. Neither is there any ability to assist their family
members with disabilities to purchase housing and other social,
educational, work or rehabilitation supports.
Thus any goal of reducing dependence on publicly funded programs
by encouraging self-reliance and promoting the maintenance of quality
of life is effectively discouraged for many Canadian’s with
disabilities.
Solution
Establish a new tax-deferred savings vehicle called a Registered
Disability Savings Plan. This would be a commitment to the full
participation of citizens with disabilities in Canadian life. It
would also encourage the contributions of family members and encourage
self-reliance and future planning for citizens with disabilities.
These contributions will not only increase the likelihood that many
Canadians with disabilities will achieve a good life; they will
also reduce dependence on government-funded social services.
A Registered Disability Savings Plan would have the following characteristics:
• Deferred tax on contributions during the lifetime of the
individual with a disability;
• Permits ownership of the Plan by a discretionary trust to
recognize varying levels of capacity and the family’s desire
to protect its assets;
• Expenditures to enhance participation and citizenship would
not be considered income and would be exempt from taxation (for
example: a home or modifications to a home, devices or medical aids,
caregiver or other services related to the persons disability, education
or training);
• Contributions could be made by the individual with a disability,
a parent or a member of the extended family; and
• Contributions could be in the form of money or other financial
assets.
Transfer of Funds in RRSP and RRIF Accounts to Relatives
with Disabilities
Issue
The Federal Government recently increased the ability of parents
and grandparents to provide for the future well being of their relative
with a disability by extending the tax deferred, rollover provisions
of RRSPs and RRIFs to adult sons, daughters and grandchildren. The
increase in the income threshold and the ability to utilize trusts
means that families have an additional planning tool.
There remain, however, several obstacles to the use of this provision
as an effective planning tool for families:
• The ability to use a trust as a planning vehicle is limited
by the requirement to purchase an annuity before RRSP or RRIF funds
can move into it on a tax deferred basis. Thus the flexibility and
utility of this option is reduced by the requirement to purchase
an annuity.
• Utilization of provincial disability benefits further restricts
families from using the RRSP rollover provision to help their relative
with a disability. In most provinces, the direct transfer of assets
to an adult with a disability makes the person ineligible for disability
benefits. Thus an attempt to assist a relative with a disability
is nullified by the province.
• The definition of dependent creates a low-income ceiling.
The person with a disability must have an annual income of less
than $13,814. This restriction renders the policy of allowing the
transfer of such funds meaningless to those Canadians with disabilities
who have a very moderate income.
• This mechanism is only available to parents or grandparents.
Thus any interest that siblings, aunts and uncles or cousins might
have to assist a relative with a disability is thwarted.
• And finally, this mechanism is only available on the death
of a parent or grandparent. Thus it cannot be used to assist a relative
with a disability during the parents’ lifetime.
Solution
Further increase the utility of the RRSP/RRIF rollover provision
by removing restrictions on its use. Greater flexibility will encourage
contributions, benefit Canadian’s with disabilities and reduce
dependency on social services.
The following changes will increase the flexibility of this mechanism:
• Permit families to transfer funds held in RRSPs and RRIFs
on a tax deferred basis directly to discretionary trusts established
for the benefit of their family members with disabilities;
• Link the cut-off for determination of financially dependent
to the Low Income Cut-off and make dependence solely based on income;
• Broaden eligibility to permit extended family and siblings
to assist a family member with a disability; and
• Permit family members to utilize this mechanism prior to
their death.
Disability Expense Tax Deduction
Issue
Families bear a wide range of direct costs of caring for dependents
that have a disability. Numerous income tax provisions recognize
and provide some relief for these costs. There are, however, significant
issues. Most significantly, the tax relief is much less than the
actual costs incurred by families.
The Medical Expenses Tax Credit, which provides recognition for
some expenditures, has four major problems:
• It is a credit against tax and as a result only a fraction
of costs are reimbursed;
• It has a high deductible that is unfair when applied to
expenses that recur year after year;
• Some legitimate disability related expenses, such as expenses
to facilitate and enhance social networks, are not recognized; and
• Families who have relatives with disabilities often overlook
the opportunity to claim benefits because of the name.
Solution:
Re-create a Disability Expense Tax Deduction to recognize the real
costs incurred by Canadians with disabilities and their families
for disability related expenses. This will recognize and promote
family contributions in a much more meaningful manner.
The Disability Expense Tax Deduction will:
• Permit the deduction of the full costs of disability-related
expenses;
• Not have a minimum deductible;
• Recognize a wider range of disability related expenses incurred,
including planning, social network development and maintenance,
and the procurement of information;
• Be transferable to family members who incur eligible expenses;
and
• Retain a modified Disability Tax Credit as outlined below.
Disability Tax Credit
Rationale
The Disability Tax Credit was designed to provide “more complete
relief” than the medical expense deduction, in particular
for expenses that are difficult to quantify, and to compensate for
unpaid time expended by family members. These items are most appropriately
recognized through a credit of a fixed amount.
It is, however, inadequate for several reasons, including:
• It is not refundable and therefore is of little or no value
to individuals with disabilities or families with low income to
whom it might be transferred;
• Its fixed dollar value, just over $1,000 when provincial
taxes are taken into account is inadequate; and
• “Disability” is narrowly defined, and eligibility
excludes many persons with disabilities, especially persons with
mental handicaps.
Solution
Modify the Disability Tax Credit to better fulfill its purpose of
recognizing disability-related costs that are indirect and difficult
to itemize. The new Disability Tax Credit will:
• Be refundable;
• Be increased to recognize the real value of these expenses;
and
• Have broadened eligibility requirements to ensure that persons
with mental handicaps are included.
Old Age Security System
Issue
At age 65, individuals with disabilities, like everyone else, enter
the federal old age security system. This creates a dynamic between
the federal old age security system and provincial disability systems
that neither was expected to accommodate. The two systems differ,
are unclear or conflict in several ways, including:
• the treatment of earned and unearned income;
• medical, dental, drug and other benefits;
• asset exemption and qualifying limits; and
• the treatment of trusts.
The treatment of discretionary trusts is the most significant issue
of concern here. Individuals receiving provincial disability benefits
are often the beneficiaries of trusts that augment their modest
disability benefits. There is concern that federal policy will diminish
the utility of trusts as planning tools for families with disabled
members.
Solution
Establish protocols between the federal and provincial governments
to address the issues of transition from disability benefits to
old age security. Ensure that tools and mechanisms for securing
the future retain their value when persons with disabilities turn
65. Implement laws and policies to protect the interests of persons
with disabilities turning 65.
Support the Creation of a Provincial Disability Tax Deduction
Issue
Provincial governments have the jurisdiction to provide disability
income (prior to age 65) and disability services. Provincial investment
is primarily in the supply side. This limits the options available
to persons with disabilities and their families. This is a disincentive
to family investment; and it ties persons to services that often
preserve barriers to relationships and citizenship.
Persons with disabilities, families and provinces all need mechanisms
that will:
• provide opportunities for individualized solutions that
utilize the capacities of the person, the families and the community;
• stimulate systemic change;
• recognize contributions and leverage investments; and
• promote collaboration and innovation.
Solution
Provincial governments have had the capacity for several years to
enact refundable and non-refundable tax credits and low-income tax
reductions since the ratification of the joint federal/provincial/territorial
tax-on-income (TONI) paper in 1998. Some provinces, for example
Newfoundland, have utilized this mechanism to benefit citizens with
disabilities and their families.
Investment through the tax system in a provincial disability tax
credit, deduction or rebate has the potential to efficiently accomplish,
promote or support many of the social policy goals of the Federal
Government, provincial governments, families and persons with disabilities.
These social policy goals might include:
• Investment in the development of social networks;
• Enabling individuals, families and communities to utilize
their capacities to solve their own problems;
• Increasing choices available to individuals with disabilities
and families, including the option of individualized funding;
• Promoting a shared responsibility; and
• Leveraging investment by families and the Federal Government
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