Who pays?

Low-income gays, lesbians
will lose under tax changes

Extending benefits won't put taxpayers on hook, study says

Janice Tibbetts, Southam News
Ottawa, November 15, 1999


A majority of gay and lesbian couples will be financial losers when the federal government rewrites dozens of laws to include same-sex partners, says a Finance Department study.

Ottawa, which plans to change dozens of statutes next year, will save an estimated $20- million a year in tax revenue, mainly at the expense of the poorest gays and lesbians. "You would have losers and most would be low-income earners," said Albert Wakkary, a tax policy officer and author of the paper, obtained by Southam News.

The biggest financial setback is that about two-thirds of same-sex couples will have to forgo the approximately $28-million they collectively claim in the goods and services credit for low- and middle-income earners because partners will be required to combine their income. As a result, about 93,000 of an estimated 140,000 gay couples in Canada will have to pay almost $300 more per year in income tax.

On the other hand, the government will lose about $8-million in other benefits, mainly the married and equivalent-to-married credit for supporting a dependent. Although the overall savings to the $77-billion tax system will be almost negligent, they dispel suspicions among critics that extending benefits to same-sex couples would be a drain on taxpayers.

The government also gained tax revenue when it changed legislation in 1993 to extend equal tax treatment to common-law couples. But tax breaks that affect common-law couples, such as child benefits, will be virtually non-existent for same-sex couples.

Ottawa is basing its figures on the assumption that 1.5% of couples are gay. The estimate comes from a 1990 Statistics Canada study on consumer finances, and includes homes in which two unrelated adults of the same sex live together, excluding students. The survey, which did not ask about sexual orientation, concluded that over 90% of same-sex households consist of two-income earners.

There is a concern that bringing gays and lesbians under the spousal umbrella could make the tax system harder to police because there is no way to confirm same-sex relationships in the absence of a marriage licence. The prospect that couples will only claim their status when it is financially beneficial is a problem that also exists on a much larger scale for common-law couples of the opposite sex, says the paper.

The potential for abuse could be reduced if the government adopts registered domestic partnerships, in which all couples in relationships of economic dependency, ranging from widowed siblings to even old army buddies, simply have to sign up to be included in the benefits and obligations currently reserved for married and common-law couples.

Anne McLellan, the Justice Minister, said recently that the government is considering the prospect. "Recognizing registered domestic partnerships could reduce abuse by providing veritable proof of a relationship," said Mr. Wakkary's paper, which was prepared last month and is based on 1994 data.


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February 2003 / Last revised: February 8, 2003
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