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Shouldn't Quebec be looked upon as the best example of economic policies gone wrong? Have they gotten a single policy right in regards to their economy in the past 20 years?

Another reason to not look at the Quebec model of childcare can be seen in the most recent issue of the NBER digest. More specifically, "Canada's Universal Childcare Hurt Children and Families" by Baker, Gruber & Milligan.


Their findings are disturbing; the worsening of behavioral & health dimensions for the children that(are) participated in the Quebec childcare program. Also the program collects $1,874 per child in daycare taxes (due to more working mothers) and spends $4,725 per child, not too cost effective.

The "have-not" province might as well just send the bill to the "have" provinces! Looks like more transfer payments headed to our friends in Quebec!! Sounds to me like they need to give more power to the Feds to run their province, they are clearly incapable.

In your horizontal equity analysis, you have fallen into the common trap of overlooking an essential element, namely the distortion associated with the the absence of taxation on unpaid work (home production of childcare and household services) carried out by stay-at-home parents. The income associated with this unpaid work should be taxed under a comprehensive income approach (according to the Haig-Simons measure).

Since taxing unpaid household work is a political non-starter, horizontal equity would require a subsidy to those purchasing market-provided childcare equivalent to the size of this taxation distortion. And in the presence of this distortion, it is not legitimate to claim that the only difference between mother A and mother B is their preferences about wanting to go out to work. These preferences are distorted by this bias. Only when the bias has been removed and these choices are being made in a policy-neutral environment could you claim that the only difference between them is underlying preference.

(Of course, this bias only exists because of income tax. Thus shifting from income tax to value-added tax is another way to deal with this bias).

That's a good point. But it's worth noting that in Quebec, the lowest quartile doesn't pay income taxes.

Actually, taxing unpaid housework would is not such a bad idea since the 'employer' (i.e. the working spouse) would be entitle to deduct the cost of employment. This would allow couples to reduce their overall tax burden. The current regime creates an incentive for both spouses to work for less money because their total tax bill is lower. IOW, it is wrong to say the tax free status of non-paid work is a subsidy that must be rectified via subsidized daycare.

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