Ottawa wages war against Canadian families through the income tax system, making it more difficult for parent to raise their own children.

When personal income tax was introduced as a "temporary" measure in 1917, families with children were granted a $3,000 basic exemption from income tax. Three thousand dollars doesn't sound like much, but adjusted for inflation it works out to $40,000 in 2003. In 1917, personal income tax was paid only on earnings in excess of what a family needed for housing, food, clothing and other essentials. Wages needed by a family to maintain a basic standard of living were simply not taxed, period.

But oh, how times have changed.

The Canadian family in 2003 doesn't come remotely close to being able to keep its first $40,000 to sustain itself. A basic personal exemption of $7,765 plus a spousal exemption of $6,800 (Bruce?) makes for $15,000 (I will correct this number, here and below throughout), after which the lowest personal income tax rate of 16% kicks in. Aside from the personal and spousal exemptions, Canada's tax system doesn't provide further exemptions to recognize the cost of caring for children. If it costs $200 per month to provide a child with food, clothing, school supplies, toys and other amenities, Ottawa has no qualms about taxing away 16% of this amount.

Canada's tax system does allow a Child Care Expense Deduction for parents who pay to put their children in day care. But parents who care for their own children, whether alone or with the assistance of grandparents or other family members, get no recognition for their efforts to raise the next generation of citizens, employers, employees and taxpayers.

Does anyone think that a family of four can live on $15,000 per year in 2003? Consider the cost of food, electricity, car insurance, school supplies, clothes, sports, hobbies, and toys - not to mention rent or mortgage payments. If a family of four can't live on $15,000 per year, why does Ottawa start taking away 16% of earnings in excess of that amount? Why not let a family keep its first $40,000 tax-free, like Canada did in 1917 and like the U.S. does today?

But doesn't Ottawa give away billions of tax dollars through the Canada Child Tax Benefit and other spending programs? Yes, and these payments help to keep families in poverty. That's because these payments dry up completely as family income rises, killing incentives to work and earn. Studies by the C.D. Howe Institute and the Institute for Research on Public Policy have shown that as a family's income rises from $15,000 to $35,000, the family loses between 60% and 100% of each dollar that is earned. These losses takes two forms. First, the Canada Child Tax Benefit, other federal payments, and provincial welfare payments are reduced or "clawed back" when parents work and earn money. Second, as earnings increase the family must start paying personal income tax, the CPP tax and the EI tax. The federal government taxes money away from families who don't even earn enough to provide properly for their own needs. You would think that all five parties in the House of Commons would agree to denounce this as unconscionable, but no such luck.

In contrast, an Albertan earning $110,000 per year will pay 29% federal income tax plus 10% provincial income tax on each additional dollar she earns, keeping 61% of her earnings for herself. But a family struggling to raise its income from $20,000 to $25,000 (or from $25,000 to $30,000) will be lucky to keep just 40 cents of every dollar earned by working. A talented and educated person is discouraged from creating more wealth because the tax system takes away 39% of each additional dollar he earns. Why would a lower-income person work hard for the sake of keeping only 40% (at most!) of his earnings, most of which will be lost to claw-backs and taxes?

So what should Ottawa do to end its war against Canadian families?

First, the basic personal exemption from income tax should be raised from $7,765 to $15,000 for every adult - including the spouse. Whether a couple has children or not, shouldn't the first $30,000 be available to pay for things like food and the rent or mortgage? And why shouldn't a single person be able to keep all of the first $15,000 that she or he earns in a year?

Second, the Child Care Expense Deduction should be expanded to benefit all children and all parents. To replace the Child Care Expense Deduction, an income tax exemption of $2,500 per child would help each and every Canadian parent to provide adequate food, clothing and other necessities to children.

For example, a family of four (mom, dad, two kids) would pay no federal or provincial income tax on the first $35,000 earned.

That's not quite as generous as the income tax exemption in place in 1917, but it's a large step in the right direction. Making families' basic needs a "tax free zone" will increase incentives to work.

More Canadians will enjoy the dignity and self-respect of earning their own money to provide for themselves, rather than relying on tax-dollar hand-outs from government.

Most importantly, these two changes will give all Canadian families a break from the tax collector, and make it easier for parents to provide for their children.