|When federal Finance Minister Jim Flaherty delivered his second budget recently, the political left – the opposition parties, special interests and labour unions – railed against it for not funding universal childcare or environmental projects. The right – including the Canadian Taxpayers Federation and the Fraser Institute – complained that it did not restrain spending or offer broad-based tax cuts. While these are important issues, the most important consideration for Interim readers is how the budget affects families. To many, it is the most family-friendly budget in years. As University of Calgary political scientist Tom Flanagan, a close confidant of Prime Minister Stephen Harper, said in the Globe and Mail, whatever the budget’s problems, it accomplishes something that “conservatives should loudly applaud;” specifically, “better treatment in the tax code of families.”
On March 19, Flaherty announced several new initiatives to lighten the tax burden of working families while funding programs targeted to them, including money for university or college education and public transit.
The centrepiece was a new Child Tax Credit of $2,000, which will provide up to $310 of tax relief per child to more than three million Canadian families. Combined with the $100 per month (taxable) refundable tax credit for child care for children under six that was implemented last July, Canadian families with a young child will have over $1,000 more in their pockets than they would have had just 18 months ago.
Combined with targeted tax breaks for kids who are in organized sports, a typical family earning $70,000, with a child under six who is in gymnastics and a child over six in hockey, will realize a tax savings of over $1,500 each year. The savings will be more for families earning $50,000. That is not necessarily life-changing, but it is significant. It also sends a signal that the government values children and family life.
Parents who are saving money for their children’s post-secondary education will get a bigger break. Not only is the investment a tax shelter, the government has raised the limit on payments into registered education savings plans and it is increasing Ottawa’s contribution.
For families who have disabled children, the government created the Registered Disability Savings Plan. The RDSP works much like education saving plans, by providing a tax shelter for money put away to pay for a disabled dependent’s future care. But unlike other savings plans, it will not be taxable when it is removed to pay for the care of a person with a disability.
The RDSP reinforces a family’s responsibility to care for its members but doesn’t penalize families for doing so. Jack Styan, executive director of Planned Lifetime Advocacy Network, a disabilities support organization, told the Vancouver Sun, “We’re facing right now the first generation of people with disabilities that are going to outlive their parents.” Parents will now be able to breathe a little easier if they can put away a few funds for the care of disabled adult children after their own passing.
Flaherty also increased the spousal allowance exemption, thereby eliminating the so-called marriage tax penalty. Upon announcing the exemption during his budget speech, Flaherty said,. “It is good public policy to encourage commitment and marriage, not penalize it.”
He could have also achieved this by permitting income splitting; that is, allowing household income to be split between couples and thus have it taxed at a lower rate by avoiding higher tax brackets.
Even new spending on infrastructure was dressed up as good for working families. Indeed, Flaherty stressed the family-oriented reason for giving money to public transit: parents need to get to work and children need to get to school.
Fr. Raymond de Souza, a Catholic priest and National Post columnist, wrote that, whatever its economic merits, the budget is “wise and creative” social policy, because it ends tax provisions that punish married couples among whom one spouse remains at home. It also provides new benefits for families with children.
The day after the budget, with a sports store in the background, Flaherty said the Conservatives had delivered “a strong budget for Canadian families.” He said these families will “see their needs are being reflected” in the government tax and program priorities.
The Conservative budget signaled that it values families – or at least their votes. Critics cynically say the Harper government is merely pandering to its socially conservative base. Others say it represents a long-overdue change in thinking in Ottawa.
Ray Pennings, vice-president of the Work Research Foundation, said, “The state is a guardian of the public good, but should defer to the other institutions of civil society who are often better placed to deal with particular issues.” The key “other” institution is the family. As Pennings said of the child tax credit and refundable choice in child care subsidy, “These policies recognize the importance of supporting parents as they raise the next generation of Canadians.”
Dave Quist, executive director of the Institute for Marriage and Family, said the new tax advantages for families demonstrate that Flaherty “understands the importance of a strong family in Canadian society.”
If there was a down side for families in the budget, it was that Ottawa will give the provinces $250 million annually for daycare. Earlier this year, the Conservatives dropped their original plan to subsidize the creation of childcare spaces in the private sector, preferably at the place of mom or dad’s employment, but few businesses were interested. Quist said, “Childcare would be best left in the hands of parents, rather than giving the money to the provinces for one form of institutional, centre-based daycare.”
Nonetheless, the focus was on families. Maclean’s headlined its coverage of the budget, “The family guy.” The Toronto Sun ran with “Focus on the family,” while the National Post went with, “Jim Flaherty’s family-friendly budget.”
During the Mulroney and Chretien governments, finance ministers would jet off to New York and Japan to meet with investors. Their budgets were designed with national debt ratios in mind and the budget’s overall affect on the ability to attract investment. But the Conservatives are now trying to woo those who sit around the kitchen table, rather than the boardroom table. The day after he delivered his budget to Parliament, Flaherty was on every major news channel, meeting various stakeholders in Toronto and making campaign-like stops in his Whitby, Ont. riding. Investors came second to regular Canadians (families, you might say) who vote. Preferably, for Flaherty, for the Conservatives.
While the critics on the political right bemoan the fact that little was done to address Canada’s productivity and competitiveness, the budget gave families a leg up. That is much more important than priming the economy.
Oswald Clark is The Interim’s economics reporter. Paul Tuns is the paper’s editor.