Delivery of Social Benefits through the Personal Income Tax

This paper is the text of a speech delivered at the Symposium on the Personal Income Tax held at the University of Calgary in April 2015.

The personal income tax is an ideal system for certain social purposes and a less-than-effective mechanism for other social objectives. As a means of delivering income security benefits, it doesn’t get much better. The personal income tax is the national railway of social policy. It respects the principles of equity and portability. There is no intrusive administration.

The personal income tax is less than ideal when it comes to other social purposes, such as support for participation in the arts or recreation, or the provision of child care, caregiving or disability supports.

There are questions of design, policy and philosophy. With respect to design, most of the tax credits introduced for social purposes take the form of non-refundable credits. Individuals must owe income tax in order to gain any benefit. As a result, non-refundable tax credits leave out households that pay little or no income tax. The policy purpose of non-refundable tax credits, at least in theory, is to enable Canadians’ ability to pay income tax. It is difficult to see how the spate of recent boutique tax credits meets this objective. From a philosophical perspective, we need to ask whether it is best for a nation to incentivize and reward the behaviour of selected households or whether to invest in social goods that can be used by the entire population.

ISBN – 1-55382-650-7