In what is shaping up to be the “families with children” election, another federal party has unveiled a plan geared towards helping parents with the costs of raising their kids.
Following the NDP’s proposal for a big, new, one-size-fits-all federal daycare plan – which I critiqued in an earlier column – the Conservatives have announced their rival scheme: leave childcare to the market and use the tax code to lighten the load for parents.
Many have focused on the controversial “income splitting” part of the Conservative plan. But there are a few additional pieces that voters should be aware of which spread the benefit a little more broadly.
The Conservatives will increase the monthly Universal Child Care Benefit (UCCB) from $100 to $160 per child under six and have introduced a $60 per month payment per child between the ages of 6 and 17. They will also increase the amount of daycare expense that parents can write off by $1,000 and will increase the child fitness tax credit from $500 to $1,000 a year.
There are parts of the Conservative plan that I prefer to the NDP plan, including the lack of a large, new government-run program, the validation of choices other than daycare, and the smaller price tag. I am also relieved that the Conservatives capped the benefit that high income families could receive under income splitting at $2,000.
However, there are some criticisms to be made as well.
The Conservatives have made little mention of what they are taking away: the child tax credit. While families will receive a (taxable) $720 per year boost through the increased UCCB, they will lose about $338 per year through the loss of the child tax credit. This would mean a net gain of $382, except the UCCB is taxable (while the child tax credit was not) meaning that the actual benefit is even smaller. How much smaller depends on your tax rate, but at the end of the day these changes mean significantly less in a parent’s pocket than the highly touted $60 a month figure and in most cases less than half.
This maneuver seems to have been cynically designed to give the appearance that parents are receiving more than they actually are. Unlike the UCCB, which is received by parents as a highly visible monthly cheque, the child tax credit was factored into a person’s overall refund at tax time and will hardly be missed.
Then there’s income splitting. The tendency of this plan to largely benefit high-income families at great expense to the treasury has already been widely panned by critics. But I am not necessarily persuaded of the alleged “unfairness” of the status quo.
Imagine one family with a single breadwinner who earns $150,000. Down the street lives a dual-income family, with each spouse earning $75,000. Both families earn identical incomes, yet the single-income earner’s family pays considerably more income tax. Income splitting solves this supposed imbalance by allowing the single breadwinner to “shift” some earnings to the spouse.
Perhaps this argument has some merit for families with both parents working full-time, but one earning far more than the other. I’m less convinced we need to help families with a single breadwinner, because this case for income splitting ignores the significant savings and non-economic perks of having a parent at home.
A family with a single breadwinner does not have to pay for daycare, unlike a dual-income family. These saving alone would more than balance any additional tax burden the single-income family would bear.
Also, having a parent at home frees up significant time for both parents in the evening and on weekends while the working family is catching up on laundry and dishes. So, even if both of our imagined families earn equal incomes, the one with the single breadwinner is still significantly better off.
Income splitting is not all bad. It does provide some relief to families who need it – such as a single income, two-parent family with modest incomes and three or more children, where one parent stays home simply because the cost of daycare outweighs the lost income. Unfortunately, income splitting also gives a significant windfall to many who really don’t need it.
The most glaring failure of Tory plan (particularly compared to the NDP plan) is how little it has for those on the lower end of the income scale. The Department of Finance has a document on its website entitled “Helping Families Prosper” that helps cut through the maze of benefits, taxes, credits and deductions to see what these changes mean in terms of dollar and cents for Canadian families in varying circumstances.
The backgrounder considers the case of “Alison,” a single parent making $45,000 per year with a child under four. Alison is exactly the kind of parent who deserves help raising her child.
Alison’s net entitlement under the Conservative plan? $420 per year, or about half the cost of putting a child in daycare for a month. The NDP universal daycare plan would give her a far greater benefit in a single month than the Conservative plan does in an entire year – assuming she is able to find a space for her child, which, given Quebec’s experiences, is far from assured.
Families will likely appreciate having a few extra dollars in their pocket, but the Conservative plan severely misses the mark in terms of providing help to many families, like Alison’s, who really need it. Instead the Conservatives have chosen to focus on correcting an “unfairness” that affects only 15 per cent of Canadian families – many of which have high incomes to begin with.
Kyle Carruthers is born and raised Yukoner who lives and practises law in Whitehorse.