Thank you.
Thank you to committee members.
The Edmonton Social Planning Council is pleased to participate in these pre-budget consultations. The ESPC is an independent, non-profit social research organization focusing on issues of poverty and low income, with the goal of building a more healthy, just, and inclusive community.
This ESPC brief responds to the first question posed by the committee, which asks, what federal tax and program spending measures are needed to ensure prosperity and a sustainable future for Canadians?
Any recovery from the current economic recession is likely to be slow. Poverty generally goes up during recessions. This makes it imperative that next year's federal budget expand investments in Canada's people, especially its children. These investments should support the development of a poverty reduction strategy complementing the initiatives under way in most Canadian provinces.
The ESPC therefore makes the following recommendations: one, that Budget 2010 increase the basic Canada child tax benefit by $400 annually, in addition to normal indexing, for the first child, with proportionate increases for additional children; two, increase the basic Canada child tax benefit by $200 annually, in real terms, for the subsequent four budget years, starting with Budget 2011; and three, index the working income tax benefit starting in Budget 2010, with further increases beyond the indexing being phased in after the economy recovers from the current recession.
I want to speak in more detail about the child tax benefit. The child tax benefit, including the national child benefit supplement for low-income families, is an important social policy measure that helps reduce child and family poverty. The child tax benefit is also a parental recognition program designed to compensate parents for the extra expenses involved with raising children.
Budget 2009 made a modest additional investment in child tax benefits by raising the upper limit on net family income required to receive the maximum benefit; however, there is the potential to do so much more as government revenues recover in coming years.
To help pay for the recommended changes, the non-refundable child tax credit should be eliminated. It is a poorly targeted program disproportionately benefiting higher-income families. The $1.5 billion in savings should instead be invested in the basic child tax benefit, allowing it to be increased by about $200 annually at no extra cost to government.
The ESPC's position is that any real increases to child tax benefits should be to the basic benefit, with indexing only of the NCBS portion, that is, the supplement, in future years. This avoids creating a poverty wall caused by the already steep phase-out rates of NCBS benefits as family income rises.
We propose that benefit reduction rates remain the same as those currently existing. Applying the real increases in child tax benefits to the basic benefit will also assist more Canadian families with the costs of raising children, thereby helping to offset the loss of the non-refundable child tax credit. Currently, child tax benefits are fully phased out at $107,000 of net family income. Under our proposal, by July 2014, child tax benefits will only be fully phased out above $200,000 of net family income.
The universality of the universal child care benefit should be retained as it provides extra support to younger families with children of preschool age, who incur extra child care costs compared to parents of school-aged children. The UCCB also replaced the supplement for children under age seven that existed prior to July 2006; however, the UCCB should be non-taxable, indexed, and better integrated with the child tax benefit system.
The effect and estimated additional cost of these recommended changes is summarized on the table on page 4 of the written brief that I have presented. Also, phasing in benefits over five budget years recognizes the constraints the current economic recession is placing on government expenditures. As the economy recovers, the federal government will have increasing fiscal capacity to make these investments in Canada's children.
We estimate that this single measure of enhancing child tax benefits, once fully implemented, could lift at least one in five Canadian children out of poverty.
While I recognize that this is a little bit of a technical presentation, I'd be pleased to answer any questions you may have.