Social Policy in Ontario

Andrew Jackson is adjunct research professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute.

In last month’s fall economic statement, the federal government promised to enhance the Working Income Tax Benefit (WITB) through additional annual funding of $500-million starting in 2019. Canadians were invited to provide input on how the additional funding should be used, with the details to be announced in the 2018 federal budget.

The WITB is a refundable tax credit paid to single people and families with low earnings and is intended to raise the incomes of the working poor and to provide an incentive to move from welfare to work.

But, while the new funding is welcome, the WITB is relatively ineffective in raising the incomes of the working poor, and does not greatly help social-assistance recipients transition to employment.

It should be reformed so as to provide a supplement to wages in real time, should provide a higher maximum benefit and should be phased out much more slowly as employment income rises so as to reduce high marginal tax rates for the working poor.

In conjunction with higher minimum wages, an enhanced WITB could serve as a meaningful response to the rise of precarious and low-paid jobs. Currently, some 70 per cent of working-age Canadians living in poverty have some (albeit often very little) employment income, and about one in five working Canadians are employed in insecure and/or low-paid jobs that fail to provide an adequate income for those who do not live with higher earners.

In 2016, the WITB paid out $1.1-billion in refundable tax credits to 1.4 million Canadians, making the average benefit less than $1,000 a year. Thus, the WITB is a small source of income for low-income, working-age households, amounting to only about 2 per cent of total income supports for this part of the population.

Following a recently announced increase of $250-million a year from 2019 to cushion the impact of increased Canada Pension Plan (CPP) premiums, the WITB will provide a maximum annual benefit to singles of $1,192. Benefits are phased in above earnings of $3,000, and are phased out at a rate of 14 per cent on incomes of more than $12,000. No benefit is paid once net income rises above about $21,000.

For families (mainly single parents with children), the maximum benefit is $2,165, phased out at the same rate of 14 per cent as incomes rise above $17,000. (Note that program parameters differ somewhat between the provinces.)

For both singles and families, benefits are phased out at levels of income that fall well below the poverty line. A single person is, using Statistics Canada’s Low Income After Tax measure for 2015, considered to be living in low income if she has an after-tax income of less than $22,352 ($31,611 for a two-person household).