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Comment: Child tax credit a small diamond in the rough

With the provincial election coming in May and time running out for this legislative session, it is uncertain whether the B.C. Liberals’ 2013 budget will pass.

With the provincial election coming in May and time running out for this legislative session, it is uncertain whether the B.C. Liberals’ 2013 budget will pass. And, even if it is enacted, public opinion polls suggest that this could be a very short-lived budget, given a strong possibility of a change in government after the election.

There is a notable social-policy innovation in the budget that would be regrettable to toss in the partisan and electoral waste bin, however.

The advance is in provincial family policy and, indeed, in income-support policy more generally, in the form of the proposed B.C. Early Childhood Tax Credit.

An odd feature of this new tax credit is that it does not take effect until 2015-16, the third year in the fiscal plan of this year’s budget — light-years, in political time, after the next provincial election. The planned Early Childhood Tax Benefit has several promising and positive features.

First, the stated aims are “to improve the affordability of child care and assist families with the cost of raising young children.”

Second, the tax credit is refundable. This means it is provided as a cash benefit to families with no taxable income, something which non-refundable tax credits do not do by design.

Third, the tax credit is income-tested. This means the maximum benefit would be available to all eligible families with family net incomes under $100,000, and the benefit phases out gradually at the level of $150,000 of family net income.

Fourth, these features result in a virtually universal program, providing benefits to about 90 per cent of all B.C. families with young children under the age of six.

Fifth, the refundable tax credit would be paid monthly to eligible families, the actual amount determined by their annual personal income-tax returns from the previous tax year.

Sixth, this new provincial benefit will complement (rather than detract from) existing federal benefits such as the Canada Child Tax Benefit, the National Child Benefit Supplement, and the Universal Child Care Benefit, thereby enhancing the total annual benefits to families with one or more children under the age of six. To ensure co-ordination, the new B.C. tax credit will be administered through the Canada Child Tax Benefit system.

As announced in Budget 2013, the Early Childhood Tax Benefit has some limitations. It is admittedly a modest amount: $55 per month or $660 annually for each child under the age of six. This equates to a few dollars a day; a far cry from the objective of improving the affordability of child care. Overall, it is estimated to cost $146 million in support in 2015-16 for an estimated 180,000 families across the province.

Another limitation is that the tax credit does not appear to be indexed to inflation, that is, adjusted to the annual increase in cost of living. This could be readily addressed.

Still another limitation is the inattention to recognizing the additional costs families typically shoulder for the care of children living with significant physical and intellectual disabilities. This shortcoming in the design of the tax credit could be addressed by including a provincial disability supplement, possibly a flat amount rather than income-tested, that would go to all families in the province raising children with significant disabilities.

The amount could be based on an estimated average amount of costs to families. Of course, the costs of raising children with disabilities do not stop at age six. A plan could be endorsed with the objective of extending the age group covered progressively over a stated period of time.

These limitations and ideas, and others, can serve as topics for further discussion, including during the 2013 election campaign. The ideas also represent opportunities for subsequent improvements to this tax credit and to wider conversations about what role this tax credit could play in a provincial poverty-reduction plan.

The B.C. Early Childhood Tax Credit offers an encouraging policy platform for social reform.

Amid the rough and tumble of our provincial politics, it would be regrettable, in the coming months, to lose sight of this small diamond.


Michael J. Prince is Lansdowne Professor of Social Policy at the University of Victoria and the co-principal investigator of a research project called Disabling Poverty, Enabling Citizenship, with the Council of Canadians with Disabilities.