Federal budget gives low-income families a break - with fewer strings

Theglobeandmail.com
March 22, 2016
By Erin Anderssen

A summer windfall is on its way for the vast majority of Canadian families, who will get fatter child benefit cheques from Ottawa starting in July.And what they see is what they get – no tax strings attached.

As promised in the election, the Liberal budget creates the new Canada Child Benefit. According to the government, nine out of 10 families will see a boost in their payments, with the average annual increase almost $2,300.

The new benefit corrects some significant flaws in the approach taken by the Conservative government. For starters, Ottawa is no longer sending money to families each month only to ask for a chunk of change back like an April Fool’s joke, come tax time – a punchline now facing many Canadian families who collected the increase in benefits that arrived last summer.

Instead of giving a small amount of money to those who didn’t really need it, a chief criticism of the Universal Child Care Benefit, the new benefit gives more money to parents who could really use it. So if your household income is more than $200,000, you can pretty much stop checking the mailbox.

In his speech, Finance Minister Bill Morneau called the new child benefit “the most significant social policy innovation in a generation.” He might be overselling the innovation part. This is more of a streamlined, luxury upgrade of what existed before, simplifying a number of complicated programs into one lump sum. (It will cost $5.3-billion more than the previous packages, for a total of $23-billion over the next year.) And it’s still a long way from a daycare solution, with spaces short and fees rising in Canada’s biggest cities - although the Liberals did budget $500-million to create a national, yet-to-be-defined child care “framework” with the provinces, territories and First Nations.

On the other hand, the government says the new benefit will pull 300,000 children out of poverty - a step to be applauded, considering Canada’s consistently lousy record on child poverty. And for lower middle-class families on a tight budget, like Nandini Prashant and Prashant Panekat - recent immigrants from India, raising their 8-year-old son and 15-year-old daughter in Calgary - it’s an influx of cash just when they need it most. The family is getting by on less than $40,000 a year – Ms. Prashant, who was a physiotherapist in India, now works as a casual mail sorter at Canada Post; Mr. Panekat, an engineer by training, is delivering mail. “It’s been a rough ride,” he says, especially with the economy collapsing in Alberta.

With the new benefits, according to calculations by Kevyn Nightingale, an accountant at MNP, who analyzed the budget, they will get about $9,450 - roughly $2,600 more than before - money they will try to put toward soccer registration, education savings, possibly a second car so Ms. Prashant might find a better job. But this money “is meant for the kids,” Mr. Panekat says, and they will “try to use most of it for their upbringing and development.”

This is what happens when, instead of tossing a few dollars at parents who will barely notice, you give enough money to make a difference to struggling families who spend it on their kids and put it back into the economy. To cover the cost of the new program, the Liberals cancelled income splitting for families - as promised - and is also dumping the children’s recreational and arts credits, two programs inherited from the Conservatives that did little for working families who couldn’t afford activities like piano lessons in the first place.

The new benefit is more efficient, easier to understand, with a clear bottom line. No accountants needed: Just check your cheque. Liberals have, however, phased out the amounts at a slightly steeper rate than promised during the election, particularly for higher-income families with more kids. (They’ve also fudged on a pledge to index the benefits to inflation, saying it will happen by 2020.)

So the new CCB is a better deal for Stephanie Eby, a single mom in Langley, B.C., with a three-year-old daughter. Based on her $65,000 salary as a recreation co-ordinator, she should get around $3,950, approximately $1,400 more than before. But for Charlotte Masemann, a stay-at-home mother with three children over six, and her husband, Erik de Vries, a civil servant in Ottawa, this means slightly less money – with their household income of $125,000, their benefits will fall to $4,750, as much as $1,100 less.

Ms. Masemann says she can live with a little less if it means the difference is going to poor families. “I like to know my tax dollars are being used for the greater good,” she says.

Besides, she point outs, her family is doing well now, but their income wasn’t always so high. It’s as Mr. Panekat observes in Calgary: “When you have, you give, and when you don’t have, you are able to depend on others – that is the way society should work.”

Some day soon, he predicts, his family will be among the haves, paying back. For now, the extra money arriving this summer is a well-designed lift to help families like his get there.