2017 Federal Fall Economic Statement highlights
Published on 25/10/2017
Economic update in short
The federal government tabled its 2017 Fall Economic Statement on October 24. The update included an announcement of two changes that Maytree has called for — immediately indexing the Canada Child Benefit to account for inflation, and a significant enhancement of the Working Income Tax Benefit. These recommendations were the focus of Maytree’s submissions to parliamentary committee studies for Budget 2017 and the Canadian Poverty Reduction Strategy, as well as an op-ed and a policy brief.
While the fall update has far fewer initiatives than the average budget, the government in fact announced more new spending commitments than in the 2017 Budget (which added $3.6 billion in spending over five years). The update also focused on the government’s revised approach to small business/private corporation taxation.
Economic and fiscal context
The economy is generally far stronger than analysts expected six months ago at the time of the last budget — real GDP growth is projected at 3.1% for 2017, up from 2% projected in the budget. For now analysts remain conservative looking out to the next few years — projected growth returns to around 2% for future years, which is where it was expected to be previously.
That economic boost translates to higher than expected government revenues this year and going forward. While some of that revenue boost will go to new spending, most of it is currently set to reduce the size of projected deficits. These smaller deficits translate to an improvement in the projected-debt-to-GDP ratio which is set to decline over the next few years, rather than remain fairly stable as Budget 2017 projected.
Canada Child Benefit
- The government will index the Canada Child Benefit to inflation, starting July 1, 2018 (CCB payments normally get updated on July 1). Both the maximum amount of the benefit and the level of household income at which the benefit starts getting reduced will be indexed each year.
- Those amounts will be increased by 1.5% next year (there will be no “catch up” increase for the time the benefit was not indexed). Future increases are expected at around 2.0% each year.
- Maytree called for indexation of the Canada Child Benefit when it was first introduced without indexing in Budget 2016. In last year’s Fall Economic Statement, Minister Morneau announced that the government would begin indexing the benefit in 2020. At that time Maytree and the Caledon Institute of Social Policy jointly called for the government to index the benefit immediately.
Working Income Tax Benefit
- Maytree recently published a backgrounder on the WITB. You can read it here.
- The government announced a $500 million annual increase to funding for the Working Income Tax Benefit (WITB), starting in 2019 (a 43% increase). The WITB is a cash payment aimed to boost the incomes of people who are working but still have very low incomes.
- The goals of the WITB are to reduce working poverty and to help overcome the “welfare wall” where people lose some support from benefits as they start to work.
- The current maximum annual benefit for the WITB is $1,043 for a single person or $1,894 for families. That was already set to increase to a maximum of $1,192 for singles and $2,165 for families in 2019, as part of the increase to the Canada Pension Plan, in order to make up for increased CPP payroll contributions by low-income workers. That increase represents a $250 million annual investment. The $500 million annual investment comes in addition to the increase associated with the CPP deal, which also takes effect in 2019.
- The government has promised to announce how the benefit will be further enhanced with the new funding in Budget 2018. The money can be invested in increasing the maximum benefit or changing the income levels at which the benefit begins to phase in and phase out.
- As some provinces customize the design of the WITB to meet local circumstances, the phase-in will allow those provinces to determine how their provincial design should fit with the new investment.
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