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Canada’s child-support guidelines: a $20B scandal on deck

March 21st, 2013 by Robert Franklin, Esq.
Lucien Khodeir is perhaps Canada’s reigning expert on its child support laws.  He’s written 10 articles and two books on the subject.  He has attempted to enlist the aid of the Attorney General of Canada in correcting child support laws that violate Canada’s Divorce Act.  Fathers and Families is proud for Lucien to give readers his knowledge and insight about what is surely one of the greatest scandals in the country’s history.  He is a Toronto tax consultant and the author of two books critical of Canada’s child-support guidelines available at: http://www.childrenwith2homes.ca/

Sixteen years ago, the Attorney General of Canada (AGC) was negligent when he recommended the establishment of mandatory child-support guidelines (Guidelines) which he knew or should have known were without the authority of the Divorce Act (Canada’s federal law on divorce). His negligence has harmed nearly half a million parents, caused nearly $20 billion in damages, and painted the backdrop of the longest running and most expensive scandal in the history of Canadian politics.

Before separated parents enroll their child in an activity, they have to agree on how they will share the enrolment fees. They may share the fees equally or in proportion to their incomes (for example, if the fees are $300 and one parent earns twice what the other parent earns, then the higher-income earner pays $200 and the other parent pays $100).

The sharing of child-related expenses in proportion to the parents’ incomes is known in Canadian family law as the Paras principle following the mention of that principle by an appellate court in the 1970 case of Paras v. Paras. After receiving widespread acceptance by the courts, the principle was written into the Divorce Act in 1985.

In 1996, the AGC contemplated the implementation of the Guidelines and the removal of the Paras principle from the Divorce Act. On May 1st, 1997, the Guidelines came into force but the Senate preserved the Paras principle in the Divorce Act.

All the amounts of child support in the Guidelines are calculated by one mathematical formula (Formula). While cited four times in the Guidelines, the Formula is strangely not defined in them. Another mathematical formula in the Guidelines with other objectives is defined in them as expected. The Formula is defined in a technical report which the AGC reluctantly released nearly a year after the Guidelines came into force.

According to the report, the Formula assumes that the child-support recipient (Recipient)

• earns whatever income the child-support payer (Payer) earns,
• spends all her time and the Payer spends no time with the child,
• incurs all child-related expenses and the Payer incurs no child-related expenses,
• spends a prescribed percentage of her income in child-related expenses, and
• resides only with the child and the Payer resides alone.

For example, if the Recipient has three children and an income of $1,000, the Formula deems her child-related expenses to be $500: 50% (the prescribed percentage) of $1,000.

The Guidelines are illegal because the Formula discriminates, without the authority of the Divorce Act, against two identifiable groups of separated parents: the higher-income- earning parents and the child-support-paying parents.

When the Formula ignores the Recipient’s income, it discriminates, without the authority of the Divorce Act, against the higher-income earner.

If the Payer is the higher-income earner, the Formula deems the Recipient to earn an income greater than her actual income. Since the amount of child support is correlated to her child-related expenses that are a prescribed percentage of her income, the amount of child support, based on her deemed income, is greater than the amount of child support based on her actual income. The parents’ child-related expenses are then not in proportion to their respective incomes to the detriment of the Payer who pays a higher amount of child support than is reasonable. The higher amount of child support violates the Paras principle and is therefore outside the authority of the Divorce Act. For example, when the Payer earns $120,000 and the Recipient earns $60,000, the support for three children of $26,000, which the Formula calculates, violates the Paras principle, but the lower amount of $21,000 follows the Paras principle.

Conversely, if the Payer is the lower-income earner, the Formula deems the Recipient to earn an income lesser than her actual income. Since the amount of child support is correlated to her child-related expenses that are a prescribed percentage of her income, the amount of child support, based on her deemed income, is lesser than the amount of child support based on her actual income. The parents’ child-related expenses are then not in proportion to their respective incomes to the detriment of the Recipient who receives a lower amount of child support than is reasonable. The lower amount of child support violates the Paras principle and is therefore outside the authority of the Divorce Act. For example, when the Payer earns $60,000 and the Recipient earns $120,000, the support for three children of $14,000, which the Formula calculates, violates the Paras principle, but the higher amount of $15,600 follows the Paras principle.

Consequently, the child support generated by the Formula harms the higher-income- earning parent regardless of whether that parent is the Payer or the Recipient.

The Formula discriminates, without the authority of the Divorce Act, against the Payer when it recognizes the Recipient’s child-related expenses, ignores the Payer’s fixed child-related expenses, and credits the Recipient with the Payer’s variable child-related expenses. Fixed child-related expenses are not affected by the time spent with a child. Variable child-related expenses are. For example, if one doubles the time spent with a child, then one expects the variable child-related expenses to double but expects the fixed child-related expenses to remain the same. Examples of variable child-related expenses are food and entertainment. Examples of fixed child-related expenses are a bed and an extra room.

An example of a child-support calculation before the Guidelines came into force best illustrates the consequences of recognizing a Recipient’s child-related expenses, ignoring a Payer’s fixed child-related expenses, and crediting the Recipient with the Payer’s variable child-related expenses.

Suppose that a Payer’s child-related expenses are $5,000 (as $4,000 fixed and $1,000 variable) and a Recipient’s child-related expenses are $7,000 (as $4,000 fixed and $3,000 variable). The total child-related expenses are then $12,000. If the parents earn the same income, then their child-related expenses should be the same. If the Payer pays a child support of $1,000, he causes his child-related expenses to increase to $6,000 and the Recipient’s child-related expenses to decrease to $6,000. Therefore, the child support of $1,000 is reasonable.

If a court ignores the Payer’s fixed child-related expenses of $4,000 and credits the Recipient with the Payer’s variable child-related expenses of $1,000, then the total child- related expenses are $8,000 (the Recipient’s child-related expenses of $7,000 and the Payer’s variable child-related expenses of $1,000 attributed to the Recipient). The Payer then owes the child support of $4,000 which is half of the total child-related expenses of $8,000. When the Payer pays that child support, he causes his child-related expenses to increase to $9,000 and the Recipient’s child-related expenses to decrease to $3,000. The parents’ child-related expenses are now 3 to 1 when their incomes are 1 to 1. The child support of $4,000 violates the Paras principle and is therefore outside the authority of the Divorce Act.

The deficiencies of the Formula have caused 340,000 parents to pay $100 million every month above what may reasonably be considered to be a fair amount of child support.

By May 1st, 2013, the Guidelines will have caused nearly $20 billion in damages.

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