Social Policy in Ontario

Federal budget is good time to reframe child benefits as family benefits

Posted on March 22, 2016 in Social Security Debates

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TheGlobeandMail.com – Opinion
Mar. 21, 2016.   Frances Woolley

Frances Woolley is associate dean and professor of economics, Carleton University

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The Harper government was good for families. It introduced benefits and credits that provided universal acknowledgment of parents’ moral and legal responsibility to care for their children. Moreover, it recognized that fathers are parents, too, with new tax credits that dads could and did claim.

Most or all of the Harper-era credits and benefits for families with children will be axed in Tuesday’s budget. The Trudeau government made an election promise to reform benefits for families with children. It will create a new Canada Child Benefit, with more money for low- and middle-income families, financed by cancelling “tax breaks and benefits for the wealthy.”

The Liberal Party’s election promise is credible, partly because it has been done before. In the 1980s and 1990s, governments financed increased benefits for poor and middle-income children by cancelling benefits for rich children. It’s a classic move that makes good economic and political sense.

From an economic point of view, parents with steady jobs – and fathers, in particular – are the best taxpayers. When their taxes increase or their benefits are cut, they suck it up and keep working, because the mortgage has to be paid (technically speaking, they have highly inelastic labour supplies). Cutting the various tax credits for better-off families introduced by the Harper government is unlikely to have significant negative effects on parents’ work efforts, so it makes good economic sense.

From a political point of view, money for needy children is an easy sell. Yet people who aren’t little and cute deserve support, too. Canada is relatively unusual in rolling so much support for low-income families into child benefits. In the United States, parents with low wages are supported by the Earned Income Tax Credit; the United Kingdom is gradually replacing its Child Tax Credit with a new Universal Credit. Could Canadians also acknowledge that low-income workers, not just their children, deserve support?

If child benefits were reframed as family benefits, they would be structured differently. Currently, all families with the same number of children and the same total income get roughly the same child benefits, regardless of the number of adults in the family. This wouldn’t work for family benefits, because adults eat, too, and their needs would need to be taken into account when setting family benefits levels.

Basing benefits on total family size would have another advantage: It would ameliorate “marriage penalties.” If benefits are based on total family income, with no consideration of the number of adults in the family, then when two single parents move in together, and their incomes are combined, they will lose benefits. Right now, the Canada Child Tax Benefit works this way, and creates non-trivial marriage penalties.

Not one of the child benefits or credits that the Harper government introduced contained a marriage penalty. No single mother lost her Universal Child Care Benefit payment as a result of moving in with her partner. If the Trudeau government replaces UCCB and the other Harper-era credits with one big, refundable, income-tested payment, it will likely introduce new marriage penalties, unless it is willing to fundamentally rethink the way that child benefits are delivered.

Another flaw with the “child benefits as money for deserving children” narrative is that it suggests, implicitly, that some children are not deserving. Yet the basic principle of our tax system is that a person’s taxes are based on his or her ability to pay. At every income level, people who support children have a lesser ability to pay taxes than people who do not. Children are not like yachts – a luxury, a choice that can be made one day and unmade the next. Children are people, too, and as such merit universal recognition in the tax-benefit system.

If I had my way, I would retain some element of universality in the Canadian child benefit system. I would do something else radical, too: rethink the default payment of monies to mom.

There is overwhelming evidence that women are more likely to spend money in ways that benefit children, such as food and children’s clothing. But at $9,850 per year for a two-child family earning $45,000 annually, the Liberal’s campaign-promise child benefits would be more than grocery money.

When benefits are a significant portion of a family’s budget it makes sense to target at least part of the payment to the person who is mainly responsible for paying regular bills. According to the 2014 Canadian Financial Capability Survey data on couples with children, roughly a third of a time it is mom, a third of the time it is dad, and a third of the time it’s both parents equally.

Paying child benefits to mothers meets what feminists call women’s “practical gender needs.” It makes it easier for mothers to care for their children. But it does not fundamentally challenge gender roles, or call into question the basic idea that women should always and inevitably be the primary caregivers.

Dads today are more involved in caregiving work than their fathers were. Moms are homemakers and breadwinners, and everything in between. Canada’s maternity and parental leave programs recognize this. While some leave is available only to mothers, other leave can be taken by either parent. We could organize benefits for families the same way: making some payments available only to the primary caregiver, but making it easier for couples to share cash benefits, like they share so much else.

Every federal government over the past 20 years has increased spending on families with children. The resulting system is not ungenerous. But it is needlessly, pointlessly, complex.

The new Liberal government has a golden opportunity to take what is a large sum of money and create, from scratch, a new and better system of child and family benefits. Let’s hope they do it right.

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Tags: budget, child care, economy, featured, ideology, jurisdiction, participation, standard of living, tax

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