Ottawa gets family benefit, tax mix wrong
In many ways, the Canadian government promotes policies that dissuade responsible parenting and in some cases, encourage irresponsible parenting. In general, the Canadian tax code works against the traditional two-parent family. Income splitting between spouses is still a far-off dream. Also, there is the Canadian Child Tax Benefit which effectively pays parents progressively more the higher their degree of financial irresponsibility.
The Canadian Child Tax Benefit (CCTB) and its affiliate programs are “tax-free monthly payments made to eligible families to help them with the cost of raising children.” To determine a family’s eligibility, the government uses family income (line 236 for the tax aficionados) and the number of dependent children under 18.
Instead of localizing the problem of child poverty, the CCTB nationalizes it. Instead of helping people with the warmth and support only a community provides, the CCTB sends cash in a small brown envelope. Instead of holding people accountable to act in the best interests of their children, the CCTB insulates them from making difficult decisions. For society at large, the CCTB exonerates all Canadians from helping their neighbours by forcing their charity via government taxes. “Let the government take care of them,” we might say. But the government botches the job.
Here is the CCTB in action: I have four children. If we had a family income of less than $23,000 per year, I would be eligible for $1,101.08 a month – more than $13,000 a year in tax-free income. In Ontario, with the provincial program, my entitlement would be $1467.74 per month or $17,000 per year. Working full-time in a job that pays $10 an hour would only give me $20,000 in pre-tax income, of which I would be liable for EI and CPP payments (and potentially even childcare costs). My four children are good generators of government entitlements.
If a woman lived in a chronically depressed area where unemployment was very high and she wasn’t able to get a job anyway, having more children is the surest way to more income. For each additional child, the annual CCTB income increases over $4,000.
Of course, being a single mother living hand-to-mouth on CCTB is not the ideal circumstance to raise any child. But the way the government program works is by making her more eligible for CCTB if she has more children. If she already has one child, the possibility of putting a second child up for adoption may not even pass through her mind. According to Canada Adopts there are virtually no healthy babies for adoption at birth in Canada “because of the growing acceptance of single parenthood and our generous social programs.” In the United States, the birthrate of women receiving welfare or income assistance is 4.14 children per woman, almost twice as high as those who receive no such benefits. In Canada, the best predictors for whether a woman will have three or more children is if the woman was under 25 at the time of her first birth, if she has not completed high school, and if she doesn’t have a job – a woman very eligible for CCTB.
Single parenting is never the best circumstance for raising a child. UNICEF said in a recent report that “there is evidence to associate growing up in single-parent families and stepfamilies with greater risk to well-being – including a greater risk of dropping out of school, of leaving home early, or poorer health, or low skills and of low pay.” Strikingly, UNICEF does not mention income as a similar threat to child well-being. Even when controlling for income differences, the children of single-parent and blended families are statistically worse off.
In addition to encouraging unemployed parents to have more children, it also discourages low-income families from trying to make more income. Imagine a family with an annual income of $42,000 and three children under six living in Ontario. Taking an extra weekend job to raise their annual income by $1000, the family would lose $413.04 in tax-free CCTB benefits (or $544.55 of pre-tax income) and owe 24.15% in income tax (provincial and federal). This leaves a net gain of $213.95. Those extra weekends spent away from home give them only 21 cents per dollar.
With realities like this, it’s no wonder Canadian families feel like they can’t get ahead.
According to the Ministry of Finance, five per cent of all taxes generated go to Child Benefits, which include CCTB, Universal Child Care Benefit and other programs. Of course, those who receive the greatest benefit do not pay income tax at all. Furthermore, parents that pay taxes are the most likely to have children who will pay taxes in the future.
Of course, government policy shouldn’t be exclusively based on who pays the most tax. But the Canadian government needs to do more to incentivize two-parent families. Implementing income splitting might be a good first step, but leaving hard-working families with more real income when their paycheque makes it into their account might be another. Wouldn’t taxpayers, especially those with children, appreciate a 10 per cent discount on their taxes?
We are all responsible for the plight of the poor. To use the well-known cliche, Canadian citizens need to teach others to fish in our own communities, rather than continually giving them fish from the national government. They just can’t seem to get family benefits and tax policy right.
Lena Schuck, a former mathematician, is a homemaker in Regina, Sask., with her four pre-school aged children.