Many families with university or college students get a rare bit of good news around tax time. They find out students are eligible for tuition tax credits worth an average of $2,000 per year that can be transferred to parents in the likely event the student hasn’t made enough money to pay taxes. Students who don’t want to share or whose parents don’t earn much can save them up and get a break on income taxes when they start working full-time. It’s a big break. So big, in fact, that it can amount to between 31 percent and 43 percent off tuition, depending on the province. How many people know they exist before starting school? Surprisingly, no one knows how many.
It makes you wonder why the government doesn’t just give students the money before they pay tuition. The C.D. Howe Institute, a non-partisan think tank, wonders about the same thing. Christine Neill, a Wilfrid Laurier University economist, has written a commentary on the $1.6-billion of education tax credits the federal government hands out each year. Amazingly, she says it’s the first real analysis of them, despite various iterations of the credits being around for decades.
Neill’s main argument is that if poorer Canadian families were able to get the money up front, they would be more likely to send their kids to university or college in the first place. A tax credit prospective students don’t know about or can’t use until years into the future when they’re working full-time doesn’t do much to encourage lower-income people to pursue higher education. A refundable tax credit they can access while in school, on the other hand, would increase access and wouldn’t cost taxpayers more, she writes. She makes the same argument for textbook credits.
She’s not the only one who thinks so, apparently. “[These] tax credits face almost unanimous opposition from analysts who have paid close attention,” she writes, “not because of their aims, but rather because they are one of the least effective and least equitable ways of achieving [them].”
The federal Liberal Party under Michael Ignatieff apparently agreed, making education central to their 2011 platform. They proposed replacing credits with money directly deposited into education savings plans for 14-to-17-year-olds. Neill suggests that would be a lot harder for families to ignore.