Who will benefit most from the set of tax cuts for families unveiled by Prime Minister Stephen Harper in a campaign-style event just north of Toronto last week? It’s a question economists and tax experts have been hashing out, but, so far, the federal Finance department has refused to release the figures needed to clear up the confusion.
Partial numbers I’ve been able to persuade the government to give me suggest that the $4.6 billion in tax relief Harper announced will be spread out among families at different income levels, more or less in proportion to their share of the population. That sounds fair. But the fact remains that those with high incomes will pocket a lot more cash, on average, than those earning much, much less.
In case you missed it, Harper announced two big changes. The first is a tax credit, worth up to $2,000, calculated by letting the higher-earning spouse in a couple with kids transfer up to $50,000 of income to the lower-earning spouse. In total, Canadian families will pay $1.9 billion less in taxes as a result of this income-splitting measure in 2015-16.
The second is a boost to the so-called Universal Child Care Benefit, from $100 to $160 a month for each child under the age of six, as well as a new $60-a-month payment for each kid aged six to 17. This measure will cost Ottawa an estimated $2.6 billion in 2015-16.
Harper also announced a hike to the deduction for child care expenses, to $8,000 a year from $7,000, which is, no doubt, of great interest to moms and dads paying for daycare, but overall, this measure is expected to amount to only about $65 million for 200,000 tax-paying families.
It’s not an easy package to sort out. Finance Minister Joe Oliver is urging us to consider the whole contraption, rather than its separate moving parts. He has tossed out the figure that two-thirds of the benefits will go to middle- and low-income families, and also said the cuts won’t disproportionately benefit the wealthy.
Oliver’s assertions struck me as a good starting point for some analysis. So, following his lead, I asked his office and department for a separate breakdown of the projected distribution of the benefits of each of the proposed tax changes for families at different income levels. So far, the government has refused to give me this basic information, without which, I don’t see how the tax package can be fairly judged.
What the Finance department deigned to provide was data on the distribution of tax relief from all the proposed new measures lumped together. It’s frustrating that Oliver won’t reveal details of the separate impacts of the tax-splitting credit and the higher universal benefit. Still, the figures they gave me tell us something, at least.
Overall, the family tax measures announced on Oct. 30 by the Prime Minister are worth about $4.6 billion. Of that total, 36 per cent, or slightly less than $1.7 billion, will go to 1.7 million families with incomes under $60,000. It averages out to $970 per household, according to the Finance projections.
Families making $60,000 to $120,000—the 1.2 million households that we might see as the core of the Canadian middle class—will cumulatively get 32 per cent of the benefits, or $1.5 billion, which averages out to $1,219 per family.
Moving into the more prosperous strata of the income spectrum, some 675,000 families making $120,000 to $180,000 will divide up 18 per cent of the benefits, or just under $800 million, for $1,183 per family, on average.
But the biggest average benefit goes to the roughly 460,000 families with incomes over $180,000—on average, fully $1,452 per family. The department expects these high-earning households to soak up about 15 per cent of the $4.6 billion in total relief under Harper’s family tax package, or about $665 million.
It’s possible to spin these numbers several ways. Critics will fasten on the glaring fact that families making $180,000 or more will pocket about 50 per cent more in tax savings (that nice $1,452 average benefit) than families making under $60,000 (the still no-doubt-very-welcome $970).
But the government would prefer we not just compare dollar figures. The Finance department sent me a table showing tax relief from all the new measures taken together as a share of federal tax paid by families with kids.
Seen this way, the average family making $30,000 to $60,000 benefits to the tune of 31 per cent of its previous federal tax bill, while the average family making $180,000 or more enjoys relief worth just four per cent of its federal taxes. This must be what Oliver means when he says of the tax package, “It’s very progressive.”
But can Ottawa afford or justify tax breaks, just now, for hundreds of thousands of families doing reasonably or very well—those earning, let’s say for argument’s sake, higher than the midpoint of all incomes? In 2012, according to Statistics Canada, the median family income was $74,540, including all two-parent and lone-parent families, plus couples without children.
And about those couples without kids, or, for that matter, taxpayers who are single: I have not heard a compelling reason why the generous suite of tax cuts announced by the Prime Minister excludes them. The government clearly boosted the Universal Child Care Benefit, at least in part, to do something to help single parents, so Harper wasn’t left offering only the major benefit that income-splitting represents to some two-parent families.
But why do well-off couples, even if they are raising kids, need a tax break ahead of struggling single men and women, or couples who happen not to have children?
That’s another set of questions about fairness, though. There’s more than enough to debate here while sticking with Harper’s focus on families with children. If only his government were willing to release the analysis of impacts, for each of its proposed changes, that’s needed for the debate to be an informed one, based on facts, rather than a clash of slogans, based on best guesses.
Tax relief from the proposed changes, as a share of federal income tax paid, by family income (2015)