Publications, opinions, and speeches

Caledon

Cut the Tax Cut

Published on 07/01/2015

In its November 2014 Update of Economic and Fiscal Projections, the federal government unveiled a set of measures for families with children that will take effect in 2015. One of the major changes, the Family Tax Cut (also known as ‘income splitting’), caught most of the media attention. But that tax cut was only one component of a larger package. Several associated measures were brought in at the same time – partly to offset the criticism that the government knew would be coming its way on the flagship Family Tax Cut. The monthly $100 Universal Child Care Benefit (UCCB) paid to families with children under age 6 will increase to $160 a month. The UCCB will be extended to families with children between the ages of 6 and 17. These households will now receive $60 a month, purportedly in respect of child care costs. The limits for the Child Care Expense Deduction will rise by $1,000 to compensate for losses over time from freezing the maximum amounts. (Deductions are the most regressive form of tax cut because they provide the greatest tax savings to taxpayers in the highest tax bracket.) The government can claim that all families with children will ‘win’ as a result of this package of reforms. While all may gain modest amounts, some will certainly win more than others. The Fiscal Update presents several case examples to illustrate how the new measures will affect different family types. The examples make clear that most families will receive limited financial assistance compared to well-off, one-earner households with children that have been chosen for a tax windfall. The combined impact of the measures will help the rich get richer. The commentary argues that different policy choices could produce a more fair and equitable distribution of income.

ISBN – 1-55382-635-7

Summary

In its November 2014 Update of Economic and Fiscal Projections, the federal government unveiled a set of measures for families with children that will take effect in 2015.

Topic(s)

Government spending and tax, Income security