OTTAWA—The New Democrats want to eliminate child poverty by taking money away from the very rich and giving it to low-income Canadians.

“This will be a dollar-for-dollar transfer in benefits from those who need it the least to those who need it the most,” NDP Leader Thomas Mulcair said Friday in a speech at the Progress Summit, a conference organized by the left-leaning Broadbent Institute.

Mulcair says that if the NDP forms government after this year’s election, he would close a “tax loophole currently enjoyed by CEOs on stock options” and use the additional federal revenues to increase both the Working Income Tax Benefit and the National Child Benefit Supplement.

Mulcair says this would help the party recommit to a pledge — spurred by Ed Broadbent when he was NDP leader through a motion passed unanimously by the House of Commons in 1989 — to eliminate child poverty in Canada.

The original deadline was the year 2000.

The speech contained no further details on the policy announcement, but current rules allow company employees — usually senior executives — to pay taxes on only 50 per cent of their earnings from stock options as part of their compensation packages.

In its latest Tax Expenditures and Evaluations Report, the federal finance department projected the employee stock option deduction would cost $750 million in 2014.

The NDP said it would take all of that money and use it to increase the Working Income Tax Benefit and the National Child Benefit Supplement, which provide tax relief to low-income families.

But Larry Chapman, the executive director and CEO of the Canadian Tax Foundation, said the move would not actually increase federal revenues, because if employees were no longer allowed to use the stock option deduction, the options could be deducted by corporations.

“These kinds of changes, they make for great political theatre, but I don’t know whether the NDP would really get much money in the end,” Chapman said in an interview Friday.

Still, the message of income inequality and its impact on the wider economy that is making its way into most speeches by Mulcair in the months leading up to the election got a boost from TD Bank chief economist Craig Alexander, who said current trends are likely to get worse.

“We’re having very little growth but what income growth we’re getting tends to be at the very high end of the income scale,” Alexander told a session on unequal wealth distribution on Friday.

Alexander said there is growing recognition that distortions in income distribution can threaten a country’s economic prowess.

“There’s a point where (a high level of income inequality) actually becomes corrosive. It actually starts to undermine your economy. It actually starts to hamper growth,” he said.

“When you talk about entrenched income inequality, what you’re really saying is people are not going to achieve their full potential. And that by definition means you are going to end up with a sub-optimal outcome. That’s because it means people are not being fully utilized, they are not actually being able to unlock all their potential,” Alexander said.

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Alexander said governments need to address the problem with multi-faceted solutions that take into account the need to “lean” against income inequality while at the same time not undermining Canada’s economic strengths.

“We need the Canadian economy to grow, we need income to rise and then we need to divvy it out. So we actually have to run policies that maintain competitiveness in Canada but we also need to find policies that prevent income inequality from rising materially,” he said.

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