CHILD SUPPORT GUIDELINES

Why is the issue of child support so controversial?

It stems from the Supreme Court of Canada decision in the case of Ms. Thibodeau. For those unfamiliar with this decision, Ms. Thibodeau (the payee) argued that she ought not to be obligated to pay income tax on the support/maintenance being paid to her by her former husband (the payor) for the children of the marriage. Women’s Advocacy Groups lauded the lower court decision declaring that such treatment constituted discrimination. The Supreme Court of Canada decided that the funds were taxable in her hands and tax deductible to her former husband.

As 60%- 70% of the actual voters showing up to vote are women and Women’s Advocacy Groups would support changes to the legislation, the Federal Government pounced on the issue like a lion on fresh meat.

One thing was certain. Somebody was going to pay the taxes on that source of funds. There would be no windfall for recipients of support in Canada. A dramatic change in the philosophy of support was to occur. It would be wrong to assume that most members of the legal profession are conversant with the intricacies of the Income Tax Act. The Government of Canada pressed on and introduced the Federal Child Support Guidelines.

In a recent news article July 17, 1997, then Attorney-General Uijal Dosanjh suggested that the new federal child maintenance guidelines are ‘simpler and straightforward’ giving rise to ‘less involvement of lawyers and fewer cases going to court’ because individual obligations are now identifiable from a ‘chart’. He contended that only the payor’s income needed to be identified from this chart, which would then be read in conjunction with the number of children in the family. To his mind, this formula will ‘automatically’ result in a Court Order reciting a specified sum as child support.

In kindly terms, these statements are misleading and inaccurate. As well, the comments appear to be part of a concerted effort on the part of both federal and provincial legislators to sell the public on another piece of legislation, which best serves the best interests of both levels of government, not the public interest. In truth, the new child support guidelines have had the effect of constituting the single most significant tax grab since the introduction of the GST.

The Province adopted the federal child support guidelines. Given the changes to the federal Income Tax Act, and the manner in which ‘child support’ will be treated for tax purposes, the Province was left with little choice. Both levels of government now have a vested interest to convince the public that a simple painless remedy has been found. If this new process does not work, the government will point blame at the courts and the lawyers. This is the same mentality that operated in an effort to introduce no-fault automobile insurance where the government deemed the benefits to their own pocketbook out weighed the public benefit.

Prior to May 1, 1997 both levels of government participated in a cost sharing process to assist divorced parents spread out their financial resources to support children residing in two separate households. By the application of certain tax deductibility rules the payor paid child support to the parent with whom the children lived primarily.

In traditional marriages, and many common law relationships, one parent had remained at home to tend to the household and child care responsibilities while the other parent sought employment outside the home. In these situations the stay at home parent had no employment income. Even in cases where both parties worked and resorted to day-care services to facilitate a dual income family there was a disparity in the employment income produced by each parent. Upon marriage breakdown the parent with whom the children primarily resided often had a significantly lower income when compared to that of the payer.

With the tax deductions available for children and the use of one child as a ‘spousal equivalent’ deduction, more often than not, no income taxes became payable on the support received as income. This resulted in the total use of all money received as support and constituted the ‘disposable’ income of that family unit on marriage breakdown.

Under this family assisted program both levels of government made a total contribution of approximately $410 million each year. The provincial governments contributed $170 million with the federal government’s share being $240 million. The new child support guidelines will produce a net gain of some $15 million in its first year of operation to the federal government alone. A recent study provided approximate numbers whereby the net gain in federal tax revenues amounted to $255 million in the first year, $305 million in the second year and $360 million in the third year.

The stated purpose of the guidelines introduced May 1, 1997 was to help parents, lawyers and judges set fair and consistent child support awards in divorce cases. Child support paid under orders or agreements made on or after May 1, 1997 would no longer be taxed as income to the recipient or be tax deductible for the payor. Even though the legislative intent is laudatory and commendable, it suffers from a number of basic flaws. The most serious flaw is the assumption that the guidelines will result in greater disposable income to the parent with whom the children reside and thus, ultimately, enhance the children’s standard of living. This might be true if mom and dad earned the same annual income. However, this is simply not the case in the vast majority of divorces.

Another underlying rationale for the Guidelines was to limit the court’s discretion in awarding child support. The fluctuation in the amount of child support awarded by different judges in similar fact situations was alarming. Moreover, there was an identified need to curb legal expenses and the court time required to argue the issue of child support. This would leave more money in the hands of the parents to pay the costs of meeting their children’s needs.

As a lawyer and mediator in the area of family law for some 35 years I feel that the legislation is actually regressive. There are more discretionary factors now than ever before to be considered by the judge. As a result, the lawyer is faced with an even greater obligation to consider the ‘exceptions’ set out in the legislation to determine the obligations of the client. The paperwork has also been unnecessarily increased as the Court requests more information to properly carry out their judicial function. In the majority of cases, custodial parents will discover to their dismay that the former disposable income they received is, in fact, significantly smaller. The amount of litigation will increase, not decrease, and the resulting legal costs to parents will grow. Unfortunately, lawyers will continue to bring applications to Court, out of a deemed necessity to protect themselves, and insist that the Court set the amount of child support rather than negotiate in reliance on the Guidelines and all its variables. The scale on which child support amounts are calculated received a welcome increase on May 1, 2006.

The groups that will benefit most from this new legislation is, in fact, the governments and at the expense of the children and their parents. The least the federal government could have done was provide an option to parents to participate in the system which would have better served the interests of children of divorced parents.

Those parents who entered into a separation agreement or court order prior to May 1, 1997 will be treated under the old rules provided they make no changes to the pre-existing agreement or order. WARNING: the federal government has now mailed out a ‘do it yourself kit’ to most divorced parents to enable them to voluntarily convert from the old system to the new system. Unfortunately, parents who do not obtain proper advice will discover too late that they have signed away their existing benefits in ignorance. If any divorced parent is contemplating a variation of their pre-May 1, 1997 order or agreement with respect to child support, it would be preferable that they see an accountant before seeing a lawyer. It would enable them to determine what financial loss will be occasioned to their disposable income under this somewhat debilitating legislation.

Statistics suggest that of those marriages celebrated within the past 10 years approximately 50% will result in divorce. Many will become single parents. Most will be women. It is this group which has the most to lose under the current legislation. Without the initial support of Women Advocacy Groups this legislation could never have seen the light of day. Yet the add-ons and exceptions have now caused many members of these same groups to re-think their support of the legislation. Unfortunately, it is too late.

Statistics suggest that in mediated settlements approximately 95% result in joint custody with primary residence being acknowledged with one parent and physical care is given to the other parent at certain specified times. In the result, fathers often use their resources to pay child and/or spousal support/maintenance as opposed to legal fees in the fight over custody. They are more apt to pay because they participated in the resolution of the issue and were not left with the feeling of having ‘lost’ custody of their children.

In today’s modern marriage there does not appear to be any substantial commitment to working or growing within the relationship. All the hard work was expended in the chase of one another to get married. With that accomplished the parties moved on to other tasks. They assume the relationship will sustain itself, as if by magic. My brother in law, a psychiatrist, once told me that life is hard and then you die. Scott Peck, MD took this bumper sticker slogan one step further. He added that once you accepted the premise that life is indeed hard, life and the journey through it becomes easier. Most successes in life are directly attributable to the amount of effort we put into the venture. Any garden left untended will reduce itself to weeds.

Legislation ought to be considered which would provide for mandatory ADR in non violent marital matters. Fifty per cent of Canadian marriages celebrated in recent years are expected to end in Divorce. Divorce is preceded by Separation. Many people do not proceed with a Divorce for religious or other personal reasons. Statistics relative to marriage or live-in breakups is bound to be higher. It is the largest segment of the population affected by such laws or policies and yet the least attention appears to be given to the drafting and formulating of such legislation. By Policy, the Government assumes to dictate a logical solution to an illogical emotional response. It is time for a review.