No evidence Conservative tax credit made kids more active, analysis shows
TheGlobeandMail.com – news/politics/globe-politics-insider
Oct. 28 2013. Bill Curry
The fight to win over hockey moms and dads is a common cliché in political strategy and analysis. Sometimes they are called the Tim Hortons crowd, average Canadians or simply the middle class – a group all federal parties on Parliament Hill claim to champion.
A key way in which the Conservative Party has shown its solidarity with working families is through targeted tax breaks – including the Children’s Fitness Tax Credit that was launched in 2007. The Conservatives promised in the last campaign to double the credit when the deficit is erased. The budget is scheduled to be balanced in 2015, but the government has lately been mum on doubling the fitness credit.
The goal of the incentive is to encourage more physical activity among children and to give parents a tax break.
A new analysis of the federal program recently appeared in the Canadian Tax Journal. The project by eight researchers took a deep look at income tax return data from 2007 to 2009, as well as academic surveys. The report – which marked the conclusion of three years of research – provides the first detailed glimpse of who is using the program and whether it is encouraging children to become more active.
It found the credit is more likely to be used by higher income Canadians, is more likely to be used by parents of boys and only 15 per cent of survey respondents agreed the credit allowed them to enrol their children in programs they would not have otherwise been able to access.
“It remains unclear whether the availability of the CFTC actually does increase participation in physical activity,” states the report, a finding that lends support to the general criticism that tax credits tend to reward behaviour that is already taking place.
The second point of common criticism when it comes to the fitness tax credit is that the federal money is not targeted at Canadians who need it most. It is a point the report’s authors agree with and they say the evidence is clear.
“Arguably, the strongest criticism of the CFTC to date has been that it favours families with higher household incomes,” the report states. “Our findings provide strong objective evidence that these concerns around equity are warranted.”
Specifically, the average annual household income of those claiming the credit was approximately $115,000 compared to the population average of approximately $80,000. The report also found that approximately 46 per cent of families claiming the credit earned more than $100,000 annually.
Thirdly, some – including the Registered Nurses’ Association – had expressed concern in 2007 that the credit would favour boys, given that they are more likely to be enrolled in organized sports like hockey.
The most recent report found that turned out to be true. It found that families with at least one male child were 12 per cent more likely to claim the credit.
Despite the lack of strong evidence showing the effectiveness of these programs, they are spreading at the provincial level. British Columbia, Alberta and Ontario all offer similar credits.
One of the report’s authors, Koren Fisher, a PhD candidate with the College of Kinesiology at the University of Saskatchewan, said the program could be tweaked to address some of the shortfalls identified by the research.
The program does seem to make a difference in helping lower-income Canadians access programs that would otherwise be out of reach, but the program is not available to individuals who pay little or no tax because of their income. The report suggests making the credit available to people who do not pay income tax. She also speculates that low-income Canadians who do not use professional tax services may not be claiming all available credits.
“We would like to see it being well-used across income groups,” she said in an interview. “I think it’s something to take a look at.”
The existing federal credit allows parents to claim up to $500 per child, which would save up to $75. The program cost $120-million in forgone revenue in 2012.
The 2011 Conservative platform estimated that doubling the Children’s Fitness Tax Credit would cost $130-million a year.
Finance Minister Jim Flaherty was recently asked what he was planning in terms of tax reductions once the budget is balanced.
“I have no plans beyond 2015,” he said. “I want to make sure we get to the goal, that we balance the budget and then there will be choices to be made and I’m sure there will be lots of views expressed – including [by] the Prime Minister.”
Bill Curry covers finance in Ottawa.