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By: Richard Shillington
OTTAWA: According to recent leaks, there may finally be a reintroduction of a federal tax credit for all children. This would end a decade of blatant tax discrimination against parents. This is welcome but politically easy - a tax cut for middle and upper-income families.
Presumably, the move would be a key piece of Paul Martin's federal budget expected this month. It has already been spun as the "Children's' Budget." We'll see.
This budget could be an opportunity to put right three main failings in Ottawa's treatment of children.
- First, the government must repair the Child Tax Benefit, a program based on good intentions, but fatally flawed because it ignores the majority of poor children.
- Then it must fix the tax system to recognize that kids affect their parents' 'ability to pay' income taxes.
- Finally, the government must index supports for children to the cost of living.
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The value of the Child Tax Benefit has been going down for most children -- including poor children. Due to inflation and "partial indexing" it's worth less every year. |
Despite its flaws, the Child Tax Benefit (CTB) has long been touted as the main weapon in the federal government's so-called war on child poverty. Yet, governments have colluded so that increased federal supports are offset dollar-for-dollar by reduced social assistance. Welfare kids, the majority of poor children, are no better off.
Those left out of the CTB include those on social assistance, on-reserve Aboriginals, the vast majority of single-parents and anyone unable to work because of disability or lack of child care. As well, low- and modest-income families with earnings between $25,000 and $45,000 continue to see their support erode. Only one-third of poor children have received any increase in financial support from the CTB and it's overdue. The last federal budget which increased support for social assistance families was in 1985.
Governments' 'claw-back' of the CTB from welfare kids encourages the notion that they are somehow undeserving. This move has drawn condemnation from the United Nations as a human rights violation.
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Canada is one of the few countries with no tax deduction or credit for children |
In fact, the value of CTB has been going down for most children, including most poor children. The reason? Ottawa refuses to index the benefit to inflation. As a result the value of the CTB erodes each year. This erosion is quiet and insidious, it attracts no media attention and it is a trend offset only by the occasional pre-election increases - inevitably heralded by boasts of government concern for poor children.
After adjustments are made for inflation, the CTB actually spends less on children today than it did in 1984. In other words, many poor children now receive less assistance than they did over a decade ago. Yet the only public announcements have been of increases in support, not eductions. How does the government get away with it?
In 1998, Diane St.-Jacque's (P.C. from Shefford, Que.) private member's motion called for the CTB to be indexed to inflation. All but 14 Liberal MP's voted against the motion. Why? Because a non-indexed benefit is the source of untold political capital. By allowing inflation to erode the purchasing power of their support for children, governments can increase support before elections to demonstrate their "concern" for child poverty - at no cost to the federal treasury.
Tax fairness for parents has received considerable attention lately. Canada is almost alone in having no tax deduction or credit for children. How can Ottawa say, as it did in 1997, "the tax system must recognize special circumstances that affect the ability to pay tax." but have no tax recognition for children? Doesn't having children affect the ability to pay?
A new child tax credit, as leaked, would be a good start. Other needed reforms take more courage; indexing the CTB to inflation would mean giving up a favorite tool of political deception. As well, extending the CTB to welfare families would invite to the 'surplus banquet' those children in Canada with the least political profile but the greatest need.
Richard Shillington, Ph.D., is a statistician who specializes in the quantitative analysis of health, social and economic policy. He appears regularly before committees of the House of Commons and the Senate, and frequently provides commentaries for television, radio and newspapers on issues of taxation, human rights and social policy. Richard's Straight Goods column will appear weekly.
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