Global News with Tammy Schirle 28 September 2019
Millennials — the largest living generation in Canada — are having children, a development that’s put young families at the centre of the federal election campaign.
All the major parties have been courting the vote of millennials wading into the world of nappies and strollers. The election pledges range from better and cheaper childcare to the prospect of free tuition for the students of tomorrow. But there’s also a plethora of ideas aimed at adding more money to parents’ pockets.
Here are the main highlights when it comes to proposed tax and benefits changes targeting families with children:
The Conservatives were the first to unveil a major campaign promise for young parents, pledging to introduce a 15 per cent tax credit for maternity and parental Employment Insurance (EI) benefits.
For parents making $50,000 a year, the change would translate into around $4,000 in tax savings, according to the party. The tax credit is non-refundable, meaning that it would lower parents’ overall bill at tax time rather than result in a tax refund. Families who can’t take advantage of the full credit because their taxes are too low can use any leftover amounts in future years.
Conservative Leader Andrew Scheer is also pledging to boost federal contributions to registered education savings plans (RESPs) for parents saving for their children’s higher education. Ottawa’s top-ups would increase from 20 per cent to 30 per cent of every dollar families put into an RESP, up to $2,500 a year. This means up to $750 in free money every year, up from the current $500.
Scheer also wants to bring back the Harper-era tax credits for children’s fitness and arts programs, which, he said, used to be “incredibly popular” with parents. The fitness tax credit would allow families to claim up to $1,000 per child for expenses related to sports activities. Parents who claim the maximum would receive a tax refund of $150 per child.
For the second tax credit, parents would be able to claim up to $500 for costs related to arts and other educational activities, worth a tax refund of up to $75 per child.
The total cost of the measures would work out to $1.9 billion per year by 2023-24, according to Global News’ calculations based on independent cost estimates provided by the Parliamentary Budget Officer (PBO) for each proposal.
The Liberals are promising to boost the Canada Child Benefit (CCB), a signature policy of the Trudeau government, by 15 per cent for the first year of a child’s life. The change translates into up to $1,000 more per family.
But arguably the Liberals’ biggest promise is about paid leave. The party is promising to make maternity and parental leave benefits tax-free at source, which would result in a bigger paycheque from the government for families who receive the benefits. The party says a parent earning around $45,000 a year at work would receive approximately $1,800 more.
Other changes include adding 15 weeks of paid leave for adoptive parents, who currently qualify only for parental leave — or up to 35 weeks of standard benefits — but not for the 15 weeks of maternity leave reserved for birthing parents.
The Liberals are also floating a plan to create a guaranteed paid family leave that, they say, would provide assistance for all parents, including those who don’t qualify for paid leave through the EI system. The program, which the party said would launch in 2021, would also combine paid leave and CCB benefits.
The party estimates the total cost of these proposals at $1.2 billion by 2023-24. At the time of writing, the Liberals had not yet provided an independent cost analysis by the PBO.
New Democratic Party
The NDP, which has made affordability a key theme of its campaign, is eyeing a series of changes to the EI program that would also affect paid leave for parents.
The party is promising to raise EI paycheques to 60 per cent of regular earnings, up from the current standard of 55 per cent. It also wants to establish a pay floor of $1,200 a month for anyone receiving the benefits.
For parents specifically, the New Democrats are also pitching the idea of a shorter parental leave that would pay a higher benefit. This would be a third option for parents, who can currently choose between a standard 35 weeks of paid parental leave at an income replacement rate of 55 per cent or spread the same amount of benefits over 61 weeks at a 33 per cent rate.
The party also says it wants to introduce double leave for parents who have multiple children at a time, such as twins or triplets.
The party has not provided a cost estimate for these proposals.
The Green Party of Canada hasn’t made tax and benefit changes for parents a major part of its campaign message so far. However, it has proposed to axe RESPs in favour of a $16.4-billion plan to make post-secondary tuition free.
The party has also talked about the idea of establishing a Guaranteed Livable Income program that would replace much of the federal social safety net. The Greens pitch this, in part, as a way to reduce child poverty.
The party told Global News it also plans to follow “the example of Quebec and several other countries and make maternity/parental leave more inclusive, more flexible and better paid.”
What the experts are saying
Comparing the Conservative and Liberal proposals on paid leave, Lindsay Tedds, an economist at the University of Calgary’s School of Public Policy, said that erasing the tax on EI benefits is a simpler way to boost parents’ income.
How much parents would save with the Conservatives’ tax credit would depend on factors such as the parents’ regular earnings, the timing of the birth and whether the parent on leave will return to work, Tedds noted.
While some may get the full 15 per cent worth of credit when they file taxes, others may see no actual tax savings. And although parents can carry forward the unused part of the tax credit to future years, the tax credit is of little use to parents who decide not to go back to work or earn around $12,300 a year or less, a level of income that’s already exempt from tax.
That uncertainty would make it difficult for parents to budget for the first year at home with a new child, said Tammy Schirle, a professor of economics at Wilfrid Laurier University.
The Liberals’ tax-free approach, she said, is more straightforward: parents get to keep all of their EI cheque. However, the Liberal plan would result in an unnecessary tax break for high-earning families and those with generous employer top-ups, she added.
Schirle said the NDP’s idea of adding the option of a shorter leave would “make a lot of sense” for some families who struggle to make ends meet with the current EI income-replacement rate.
Still, policies that simply tweak the existing EI system fail to reach at least one in six parents who typically do not qualify for the benefits. The Liberals’ guaranteed paid family leave and the Greens’ basic income program would address that issue, although the latter especially is scant on details, Tedds said.
Tedds is also critical of the Conservatives’ arts and fitness tax credits, which she said would complicate the tax code and unnecessarily “clog up the system.”
Schirle echoes that sentiment, adding that what amounts to a 15 per cent discount on the cost of after-school activities isn’t enough for families who can’t afford them.
Still, once you add up the Conservatives’ tax credits and their RESP expansion, those initiatives amount to nearly $1 billion once fully phased in, noted economist Trevor Tombe, also at the University of Calgary.
“They add up to some pretty significant dollars,” Tombe said.
Tombe noted that the Liberal and Conservative plans for broader tax cuts would also have different impacts on parents, depending not just on earnings but also on factors like family structure.
The Liberals have pledged to gradually increase the amount of income exempt from tax from around $12,300 to $15,000 a year for anyone earning under $147,000 a year. The Conservatives want to lower taxes on the first $47,630 of income from 15 per cent to 13.75 per cent over four years.
Once fully phased in, the Liberals’ plan would mean that “if you’re a family with just a single earning adult or a single parent, then you could claim up to $30,000 in income initially tax-free,” Tombe said.
That’s because single earners who are financially responsible for the other spouse can claim the income exemption twice through the spouse or common-law partner amount. The same holds for single parents, who can claim the eligible dependent amount.
“That’s what leads to benefits for lower-income families to be notably higher under the Liberal proposal than the Conservative one,” he said.
Under the Conservatives’ plan, both parents would have to earn $47,630 or more in order to get the full benefit of the tax cut, he added.
Still, families who are currently paying income taxes would see savings under both the Liberal and the Conservative proposals, Tombe said.
Tammy Schirle is an economics professor at Wilfrid Laurier University.