If you don’t pay, you can’t play: the Children’s Fitness Tax Credit

On October 9, 2014, the Prime Minister reiterated his 2011 election campaign pledge to boost the Children’s Fitness Tax Credit, one of his government’s growing arsenal of ‘boutique’ or targeted tax benefits. The maximum amount of fitness-related expenses that can be claimed will double from $500 to $1,000. In addition, starting 2015 the program will be made refundable to expand its reach to more low-income families, hitherto excluded.

These changes may look good on the surface. In fact, the Caledon Institute has recommended that many of the current targeted tax credits be changed from non-refundable to refundable to ensure greater fairness among Canadian households  We commend the government for making this important advance in the architecture of the Children’s Fitness Tax Credit.

But dig deeper into the announcement and we find that the Children’s Fitness Tax Credit remains a limited benefit that may or may not be smart politics but is flawed public policy.  To qualify for the Children’s Fitness Tax Credit, families first must spend money on fitness-related programs. Many low-income families cannot qualify for the credit because they cannot afford to shell out any of their limited income on fitness activities.

There is also a more fundamental question:  Are tax measures the most appropriate policy instrument to achieve the social objectives of targeted tax credits such as the Children’s Fitness Tax Credit? The critique presented here suggests that Ottawa should jettison the Children’s Fitness Tax Credit and explore another approach – investing in community programs and amenities rather than individual income benefits.

Some functions in society are best carried out through social investment rather than individual tax breaks. Tax benefits targeted to certain groups do not build a country with public amenities that can be enjoyed by all citizens, regardless of income.