Is the expense of child-rearing about to get a tax break?

 

By Laura Bohnert

Do you have kids who are under the age of 18? You may be about to get a boost in your child benefit, the Federal government suggests.

The decision to increase payments to families who receive the Canada Child Benefit was included in the economic update, released on October 23 by the Federal government.

The $22-billion Canada Child Benefit (CCB) program was initially introduced in July of 2016, and the recent updates to the program are being implemented in an attempt to match the benefit to higher costs of living, providing an inflation-based adjustment each year that will align the CCB model with that of the Canada Pension Plan and Old Age security.

As a result of the adjustment, the government will spend an additional $5.6 billion over five years; however, by the looks of the update, those adjustments will continue as the overall cost of living in Canada fluctuates.

The CCB change, which has come into effect close to two years earlier than anticipated, will also impact the qualification threshold, which will also adjust alongside the cost of living.

The CCB provides a monthly, income-based payment to families with children under the age of 18. Currently, the maximum CCB payment is $6,400 per child under the age of six, and $5,400 per child aged seven through 17. That amount decreases corresponding to income as the family net income reaches $30,000. The increase to the CBB will allow the average Canadian family with two children to see an increase of approximately $200 next year, and $500 in 2019. For instance, a family that currently receives an annual $6,400 benefit could see that figure increase to $6,496 as of July 2018, and to $6,626 by 2019-2020.

The CCB increase has been defended by the Liberal government as a means of helping to lift the economy. The Liberal government promotes the program as a means of providing more money for families to raise their kids with—but how does that strategy benefit the economy overall? Doesn’t it simply mean an overall tax increase?

It’s an economy-driven decision that is focussed on the future. Providing parents with more money to raise their kids with allows the kids to participate in more opportunities, thereby increasing their ability to participate in the opportunities that will allow them to become more active members of society, members who will be able to better benefit the overall economy. For instance, a little extra government funding could allow parents to set a little more aside for post-secondary education, which could turn that child into a higher-earning member of society who is capable of greater entrepreneurial or research-based achievements—achievements that could increase the future job economy.

Alternatively, those savings could be all the difference to a child who can’t quite afford to participate in organized sports like hockey. Those funds could help that child develop team skills—or the athletic skills necessary to become the next big name for Canada in the Olympics.

It’s an investment in creating more opportunities for the future thinkers and leaders of the country; of course, there are short-term benefits as well. Families with more money in their pockets can spend more, and that increased spending goes right back into the economy, supporting local businesses along the way.

Not everyone is happy with the new adjustment. Some argue that the CCB is a burden to taxpayers who work hard and have to watch their dollars support other people’s families. Some suggest the CCB is a welfare equivalent, which allows parents to stay home with their kids while the government supports the child rearing process.

Unfortunately, the CCB program doesn’t offer quite enough funding to cover child rearing costs, let alone the combined expense of child rearing and the basic cost of living. In 2015, the average annual expense of child rearing was calculated at $13,366 per household (regardless of income level), which means the CCB program does not provide enough funding to allow a parent to forego working entirely while still continuing to support his or her family. The CCB may, however, especially now that inflation is included in the process of determining that benefit, cover enough of the expense of childcare to allow a parent to return to work. That would enable the net household income to increase overall, thereby decreasing that family’s dependence on such programs as the CCB, and gradually enabling that person to contribute more in taxes to a program that is aiding his or her own situation as well as the situations of countless other Canadian families who could survive better with that help.