The ESPC plans to occasionally analyze social policy commitments of the Alberta political parties on its blog. Today, we start with the child tax credit promise made on March 29 by the Wildrose Party.
Wildrose describes its proposal as follows: Through the Child Tax Credit a Wildrose government would enable Alberta families to keep more of their hard-earned money in their pockets by providing parents and guardians with a $2,000 tax deduction for each child under the age of 18. This means families will have an extra $200 per year for each child, (Wildrose Party of Alberta, 2012).
Even though it has a similar sounding name, the Wildrose Party proposal bears little resemblance to the Alberta Child Benefit proposal being championed by the ESPC and other Alberta anti-poverty groups. Because the Wildrose proposal is structured as a tax deduction, only those families paying provincial income taxes will receive any benefit from the Wildrose child tax credit. The higher the familys income, the greater the benefit they will receive. Meanwhile, low and modest income families will receive little or no benefit.
The ESPC ran the Wildrose proposal through the Alberta Finance Personal Income Tax Calculator. This is what we found. A single mother with two children would need yearly employment income of $37,000 before even starting to receive the child tax credit. She would need a family income of $77,000 before receiving the maximum $200 per child tax credit. Sound like many single parents you know?
To provide greater benefit to families with low and modest incomes, a child tax credit needs to be refundable. A refundable tax credit provides the maximum benefit to the lowest income families, and benefit levels are gradually reduced as income rises. The federal Canada Child Tax Benefit and a number of parallel provincial child tax benefits are set up this way.
A better model for Alberta to follow is the Ontario Child Benefit. More information on the Ontario benefit is available here. For the same amount of money the Wildrose Party proposal will cost, Alberta could implement a child tax benefit providing up to $400 per child for this provinces lowest income and most vulnerable children. This would be a more responsible public investment as the greatest benefit would flow to the families needing it the most.