21st October 2019 is an important day for Canadians. It is the day when Canadians will decide by way of voting, who will represent them in Ottawa and hence, which of the party(s) will make government for the next four years. The current federal government was voted in power four years ago in September of 2015 when Canadians fed up with the Steven Harper [a], shunned him and decided to vote for Justin Trudeau.
The election might not be as partisan of an issue in Canada then it is in the United States, where individuals strongly identify themselves with the political party they support. However, it appears to be heading in the same direction. In the United States, a major portion of the population have pre-decided who they will be voting for regardless of what policy measures the party and the electoral candidate have proposed as part of their election manifesto. Due to this, there is not a lot of scrutiny performed over the proposed policy measures than there should be. The majority of the scrutiny leading up to and subsequent to the election seems to be regarding the individual political candidates and their personal lives, which serves no purpose other than entertainment. Canada, as I said before, doesn’t have it that bad, however, based on the onset of identity politics, we might end up going this path. The purpose of this paper is to critically analyze the major election promises made by the Conservative Party of Canada for this election.
Mr. Andrew Scheer, leader of the conservative party of Canada released his fully costed platform to the general public on October 11th, 2019 in the afternoon right before the Thanksgiving long weekend. Justin Trudeau took a shot at his main rival in this election campaign while referring to the timing of this release by stating that no one releases an important message at 4 pm on a Friday long weekend. Pierre Poilievre (MP for the conservative party), argued, however, that the reason for this timing was “because they wanted to release it in prime time which is right before thanksgiving dinner; families come together and talk politics”. [b].
Whatever the rationale for the timing of the release, an analysis of the policy proposals included in the platform and their respective effectiveness is the need of the hour. Are these policy measures indeed effective in achieving their said objectives or simply recycled policy measures from the Harper days? After all, his opponents argue that Mr. Scheer is nothing but a mini-harper.
This is essentially a task to uncover the real substance behind these policy measures; do these promises actually have some weight or are these just empty promises made to win votes. In this paper, I have analyzed four main elements of the conservative platform and they are as follows:
A. Universal tax cut.
B. “Tax-free” EI maternity and parental benefit
C. Green public transit tax credit
D. Child fitness credit and Child arts credit
The future for a lot of working middle-class Canadians appears to be full of challenges and anxiety. Ask any middle-class Canadian, and they will tell you that affordability of their standard of living for themselves and for their families is one of their main causes of concern. Hence, I have looked at the four above policy proposals from the lens of affordability.
Before I begin with my analysis of each of the above-mentioned policy measures, lets us learn a little bit about the conservative party of Canada, its values and mission as well as about the American Insurance broker who leads the party going into this election.
The conservatives are currently being led by Mr. Andrew Scheer when he took over this responsibility in May of 2017. Scroll across the Conservative website, and you will come across the following quote from Mr. Scheer. “I have a vision for Canada where taxes are low, government is limited, opportunity is unlimited, freedom is shared and people are put before government!”
This quote sums up the vision of the conservative party for the future of Canada. The conservative party and Andrew Scheer are strong proponents of reducing overall taxes, and hence increasing disposal income for the average Canadian. Scheer’s overall messaging throughout the election campaign has been increasing affordability for the average Canadian. Another aspect of Andrew Scheer’s platform is his ambition to improve the universal health care system of Canada. Lastly, he says he stands for the members of the government being held accountable for their actions. I am not sure how much of this is truly part of his vision for Canada, versus just a political strategy to use to demonstrate how corrupt and double-faced Justin Trudeau has been (hint the SNC-Lavalin corruption scandal).
In regards to the Canadian resource sector, Mr. Scheer appears to be of the opinion that pipelines such as the Trans Mountain Pipeline are in the national interest and hence he sees it as the responsibility of the federal government to use every tool at its disposal to provide comfort to investors that Canada stands behind the pipeline project. He is also in favor of repealing the carbon tax, getting the pipelines started and eliminating foreign funding groups from participating in the debate around pipelines.
DISCLAIMER: This paper is meant to be a bipartisan work and I have tried my best to help ensure that the analysis performed below is as fact-based as possible. This is not an endorsement for any of the parties running for election this year.
Universal tax cut
One of the most important elements of the Scheer campaign is the introduction of the universal tax cut. This is one of the many ways in which Mr. Scheer plans to make life more affordable in Canada for those struggling to make ends meet. As the name suggests, this is supposed to be universal and hence is expected to reduce overall federal taxes for all taxpayers. This tax cut is going to reduce the federal tax percentage for the lowest tax bracket from 15% to 13.75%. The reduction will be implemented progressively, starting with a decrease to 14.5% on January 1, 2021, followed by a decrease to 14.0% on January 1, 2022, then finally falling to 13.75% on January 1, 2023. [c]. The conservative party’s website claims that “a two-income couple earning an average salary would save over $850 per year.” [d]
Right from the onset, one should start questioning the effectiveness of this policy measure in tackling affordability. Do all taxpayers need a tax cut or only those who are considered low or middle to low-income earners? According to estimates made by the Parliamentary budget office, the following is a year over year estimate of how much this tax cut would cost the federal coffers:
The founding pillar of Scheer’s campaign is affordability and this tax cut is the cornerstone of his platform. Therefore, an analysis must be performed to determine whether or not this policy measure is indeed going to help make life more affordable for the individual who are currently on the lower end of the income-earning spectrum. So, is this an effective policy measure grounded on hard facts and concrete analysis or simply an ineffective marketing gimmick to give out an illusion of a tax cut to the electorate? Let’s analyze this now.
The total benefit an individual can receive as a result of this 1.25% reduction in the Federal tax rate applicable at the lowest tax bracket is going to be around $573 [e]. The only way to reap this full benefit is if the individual tax filer earns greater than equal to the lowest tax bracket amount of $45,916. If the tax payer’s taxable income is less than this amount, then the benefit they are going to receive as a result of this tax cut is going to be less than $573. Please note that the amount for the lowest tax bracket has changed during the 2019 tax year to $47,630, however considering that the 2019 taxation year statistics are not available, the 2017 tax bracket has been used for the analysis below.
To determine if this is indeed beneficial for the average individual taxpayer, an analysis must be performed to see the proportion of taxpayers who fall within the various tax brackets. For this analysis, the 2017 tax filer’s data from CRA’s website has been used. This data shows the number of individual tax filers that fall within each of the income categories. The following is the visualization of the tax filer’s data:
[f] – Please refer to Table 1: Individual Tax Filers by Province or Territory and Tax Bracket (2017 Tax Year)
Within this income categorization, the lowest income earners are those that are earning $45,916 or less. As can be seen in the chart above, these individuals amount to 66% of the total tax filer’s population in Canada. This analysis is consistent with that of Toby Sanger of the Canadians for tax fairness, who said that
“So-called “Universal Tax Cut” of @AndrewScheer is hardly universal. 2/3 of Canadian tax filers make less than $46,000 so wouldn’t fully benefit, while close to a third who fall below taxable thresholds wouldn’t benefit at all.”[g]. Further analysis of the income categorization was performed by David Macdonald of the Canadian Center of Policy Alternatives in which he concluded that “The bottom 1/3 see basically no benefit, as they don’t pay income tax. Top 1/3 get closer to max benefit. Have to make at least $52K in 2023 to get full benefit, ie richest 1/3 of Cdns” [h].
Based on the analysis performed above, it is clear to see that this policy measure has failed to adopt a targeted approach and instead has adopted a broad brush approach which will fail to realize it’s said the objective of making life more affordable for the lower-income earning tax payer. A saving of $573 in taxes is a substantial amount of savings is expected to help out lower-income taxpayers. However, considering the fact that two-thirds of taxpayers will not be able to realize this full benefit from this tax cut (as their annual taxable income is lower than the amount of the first tax bracket), this proposed tax cut does not appear to have been well thought out.
The universal tax cut will result in a substantial decrease in government revenue (as demonstrated above in the parliamentary budget officers report). The conservatives have also reiterated as part of their platform, that they intend to balance the budget in five years after taking on power. Balancing budget in the face of a dramatic reduction in government revenue means greater federal government spending cuts. The real question is that whether or not this universal tax cut is really worth it considering (as noted above) it is not even going to help achieve its said objectives. Because more likely than not, this is going to translate into a $6 billion reduction in government spending.
Policy alternatives
In summary, the conservatives (if they were to come into power), should un-universalize this tax cut and should target low and middle to low-income taxpayers. Mechanisms should be included within this plan that prohibits high-income taxpayers from taking advantage of this tax cut. One way of doing so would be to provide a refundable tax credit to those taxpayers earning less than the lowest bracket amount. The eligibility for this credit should be based on the overall taxable income of the taxpayer. The refundable aspect of this tax credit will help ensure that the taxpayer receives cash from the government when they file their tax returns. Not only will this change the universal tax cut into an effective policy measure to help tackle the issue of affordability but also ensure that is it equitable for all taxpayers.
Since, (under my proposed policy alternatives), higher-income taxpayers are not going to be able to take advantage of this universal tax cut, this will limit the increase in deficit (by reducing federal government spending) only to the extent of the tax credits provided to lower-income taxpayers.
“Tax-free” EI maternity and parental benefit
The conservatives as part of their affordability plan promised to provide a non-refundable non-transferable tax credits up to 15% of the income earned by the tax payers from Employment insurance as part of their maternity/parental benefits. This policy measure was tabled by the conservatives as part of Bill C-394 in April 2019 [i], however, it was met by voices of disagreement by both the Liberal and the NDP ministers. Their concern was that, although they supported the idea of assisting Canadian families to cope with the additional financial burden of raising a child, this specific policy measure was not an effective one at addressing that concern.
So the question is, is this policy measure really an effective one? Is this really going to effectively help families be in a better position to afford expenses that come up with raising a new child or will it (as the NDP MP Niki Ashton says) “increase inequality as it will do nothing to help lower-income families”.[j].
In order to perform this analysis, let’s first understand how the employment insurance for parents works.
There are two types of benefits provided to new parents. One is maternity benefit and the other is parental benefit. As the name suggests, maternity benefits are only eligible for women who have recently given birth or are pregnant while parental benefits are for parents who have a newborn or a newly adopted child.
Under the current rules, if you meet the eligibility criterion for Employment insurance then you receive:
– Maternity benefit – up to 55% of your current earnings, to a maximum of $562 a week for 15 weeks.
– Parental benefit – up to 55% of your current earnings, to a maximum of $562 a week for 35 – 40 weeks.
The opposition’s lack of endorsement of this policy measure and its ineffectiveness can be broken down into the following aspects. Below I have discussed each of them separately.
A. This policy measure is not effective since not everyone is going to be eligible for EI, especially the low income tax payers. The major qualification to be eligible for these benefits requires that one has accumulated a total of 600 insured hours 52 weeks before the start of their EI claim. Based on some estimates, up to 30% of the new mothers are not eligible for these EI benefits. [k]. This policy measure does not address this issue regarding ineligibility of taxpayers for the EI benefits.
B. This policy measure is not structured in a way to provide relief to those parents that actually need this financial assistance to cover the cost of raising a newborn.
i. Since this is a tax credit (and not a direct payment from the government like the Canada Child Benefit), the parents only realize the benefit of this once they file for their tax return and not immediately when the child is born. This means that parents will have no direct relief from this program from the time of the birth of the child to the time their tax returns are assessed by the CRA.
ii. The semantics around this tax credit are misleading as this is being advertised as a tax free benefit when it is anything but. First of all, tax payers eligible for these benefits are still going to be subject to provincial tax on these EI benefits. Secondly, the weekly EI benefit payments received are going to be disbursed on an after tax basis. This means that if an individual was supposed to receive $562 per week in EI maternity or parental benefits, the actual amount received is going to amount to $477.7 or 85% of the EI benefit since the federal 15% tax is going to automatically be deducted. Therefore, now parent(s) have $80 less per week to spend on their new born child – on important things such as diapers, baby formulas etc. Compare this to the child care benefit and you will learn that the Canada Child Benefit (CCB) payments are tax free and are paid out on a tax free basis.
C. This policy measure results in increased inequality – in other words, this policy measure will benefit the high income earning parents more than it will provide a relief to the low income parents who actually need this financial assistance.
i. This policy measure is structured as a non-refundable tax credit. Non-refundable tax credits, benefit high income taxpayers more than they benefit low income taxpayers since the taxable income of the low income taxpayers is not enough to reap the full amount of the credit. Refer to the analysis performed below which clearly demonstrates that the overall benefit received (in terms of tax savings) made by high income earners is greater than the benefit received by low income earners. This being the definition of inequity.
In summary, in its current form, this policy proposal by the conservative government is not going to be effective in achieving its said objective. The said objectives being easing the financial burden of raising a child, hence making it affordable.
Consider Jessica, a new mom, who earns about as much as the average Canadian (i.e. $38,700 annually), is expecting to give birth in January 2020. Assuming she qualifies for the EI maternity and the parental benefits, she is going to be receiving (in addition to the Canada Child Benefit payments) a weekly payment of $347 ($410 before tax) for the next 50 weeks. This is going to be the amount she earns as income for the next 50 weeks regardless if this proposed policy becomes law or not. The reason for this is that the conservative plan doesn’t intend to waive the 15% federal tax deduction on weekly EI benefit payments received by the parents, but rather simply to provide a non-refundable tax credit to Jessica when she goes on to file her personal tax return in 2021. The way Jessica sees this, there is no real change in her income, so how is this election promise helping to ease the financial burden on Jessica of raise a newborn child?
Policy alternatives
The following amendments to this policy would allow for it to more effective policy measure.
– Change the structure of the EI benefits payments by ensuring that the payments received by the parents don’t have the 15% federal tax deducted from it already. In essence, this would be similar to how parents receive the Canada Child Benefit payments, and would result in an actual improvement in the ability of parents to be able to take care of their children. Considering that the parents receive the EI benefits for a maximum period of 50 weeks up, this change would impact them directly during this first year of the child to be in a better position to take care of the new dependent.
– To ensure consistency with the semantics of the advertisement, this plan should include a provision to provide a tax credit that covers not only the federal portion of the tax but also the provincial tax on the EI benefits. This will help ensure that the parents receiving these benefits are not met with unexpected tax bills to pay when it comes to filing for their personal tax returns.
– Similar to how there is no eligibility criterion for the Canada Child Benefits (Other than being a parent), the eligibility for the EI benefit payments should be changed to make it less exclusive. The majority of parents who are not eligible for the EI maternity or parental benefits are those who are not able to satisfy the requirements of the 600 insurable hours. An assumption can be made that these ineligible individuals do not have a stable job and hence can be assumed to be lower-income earners. These are the parents who should be one of the main recipients of this proposed financial assistance but are often (30% of the time) not even able to meet the eligibility to receive EI benefits.
– Change the structure of this tax credit from a non-refundable tax credit into a refundable tax credit. This will help ensure that this policy is more equitable across the board since the benefit received by the parents are not going to be defined based on their taxable income for the year.
– As noted above (in the quantitative analysis), the low-income earners benefit the least from this proposed policy, then comes the average income earners and then comes the high-income earners. Sound equitable? Absolutely not. Why? Well, because it is just not. In order to ensure that this policy is equitable or at least fair, the following changes should be made.
- Since the policy objective is to ease the financial burden of raising a child, tax credit should only be made available to those who are considered low income or middle-class families. Families who make more than the average annual salary or individuals who make more than the average individual salary should not be eligible for this credit. As part of this change, the government would have to perform some further analysis to be able to concretely define low, average and high-income earners. If this charge is not made, then (as demonstrated in the quantitative analysis below), the top percentile earners in this country stand to benefit the most from this tax credit.
- Ensure that the payments received by all taxpayers under this program are consistent in absolute terms and not based on a percentage of the income earned by the individual before they applied for the EI benefits. The reason for this is that (as demonstrated above in the quantitative analysis), the average income earning taxpayer is set to benefit from this tax credit more than the taxpayer earning minimum wage. If the EI benefits paid out is an absolute amount regardless as a percentage of your income, then (holding all things equal and assuming that this is changed from a non-refundable into a refundable tax credit), the benefit received by all eligible taxpayers will be the same from this tax credit.
Green transit tax credit
The Harper government had introduced the public transit tax credit aimed to make public transit more affordable for low income households. This policy measure was also to aimed at encouraging more people to use public transit in an attempt to reduce personal vehicle usage, as this would help reduce greenhouse gas emissions and reduce overall commute times. When the Liberals came into power in 2015, they scrapped this tax credit, citing various academic research that had concluded on how this tax credit was not an effective policy measure at achieving any of its objectives. These research concluded that this tax credit was a very expensive and more importantly, ineffective way for the government to make public transit more affordable, encourage more ridership and help reduce greenhouse gas emissions.
Now, the conservatives as part of their 2019 election platform is promising to bring this tax credit back claiming that for “a family of four in the GTA that regularly takes the TTC would save almost $1,000 per year!” [l]. This tax credit is yet another one of the proposals made by Mr. Scheer to help keep more money in the pockets of the Canadians and allow for life to become more affordable for the average Canadian. Others however have disagreed with this, stating that these are the same ineffective recycled policy measures that the Tories had implemented when Mr. Harper was in power; they didn’t work then, and they sure will not work now.
The Parliamentary budget office estimates the following cost of the program:
Before we begin to analyze if this transit tax credit is indeed an effective policy measure or not, let us first understand how this tax credit works. For full disclosure purposes, this is a non-refundable tax credit. Semantics are important here because non-refundable tax credit benefits higher-income earning taxpayers more than they benefit the lower-income earning taxpayers.
This “green” public transit tax credit provides regular users of public transit across Canada a 15% non-refundable tax credit on the amount they have spent on public transit throughout the taxation year. This is a tax credit and hence individual taxpayers will only be able to reap its benefit once they file their tax return, and not while purchasing their monthly pass. Therefore, a taxpayer who will pay $300 a month to commute from Mount Pleasant Go station in Brampton to Union Station in Toronto every workday will continue to pay $300/month even after this tax credit has been passed into law. This taxpayer will only receive a non-refundable tax credit worth 15% of the amount spent on public transit during the year when they file for their tax return. In the example of an individual above, assuming that a total of $3,600 is spent on public transit a given year, this taxpayer will be able to use this non-refundable tax credit to shelter $540 ($3,600 * 15%) of tax owing to the CRA.
The conservatives continue to state that this is a much-needed tax credit when at a time there is a real need to encourage wide scale use of public transit, especially in the face of a global climate crisis. They have made three claims regarding the effectiveness of this policy measure.
– They claim that this non-refundable tax credit will make the use of public transit more affordable for low income earning Canadians.
– They also claim that this tax credit will help encourage people who are currently using personal vehicles to commute to work using public transit, helping to reduce congestions on-road and in essence commute times.
– Lastly, they claim that due to the increased ridership of public transit (see point above), total greenhouse emissions will reduce and help Canada towards its overall objectives of reducing its carbon footprint.
So is this policy measures actually effective or should it continue to remain on the shelf amongst other ineffective Harper policies. Let us analyze these claims one by one.
Makes public transit more affordable
One of the key policy objectives revolving around the conservative platform is the notion of making life affordable for the average Canadian. This is indeed a very important objective and something that should be the priority of every government regardless of who comes into power. However, is this policy really going to make the use of public transit more affordable? Consider the quantitative analysis below.
Based on this analysis, the following insights can be derived:
– This tax credit does not provide any relief to the taxpayer during the course of the year and the taxpayer will have to continue to spend the same on public transit as before. They will only be provided with relief in terms of a reduction in total tax owed to the CRA, which (as demonstrated in the quantitative analysis performed) is $540. This holds true for low, average as well as high income earners.
– Although the absolute amount of the benefit is going to the same for all taxpayer regardless of their taxable income, this credit is still non-refundable in nature and hence is going to (as discussed earlier) benefit higher-income earning taxpayers more than lower-income earning taxpayers.
Increase overall ridership of public transit, reduce congestion, commute time and in effect the carbon footprint of transportation vehicles
Considering that both of these claims are extremely interlinked together, they have been grouped and analyzed together. To analyze these claims, reference has been made to research studies already conducted on the effectiveness of this policy measure under the Harper government. A research conducted by professors at the University of Ottawa in 2016 on the effectiveness of this policy on increased ridership concluded that “the tax credit increases ridership by between about 0.25 and 1 percentage points, depending on assumptions. The large majority of recipients of the PTTC are those that would have taken transit regardless of the availability of the tax credit.” [m].
In a CBC news report, a TTC spokesperson said that putting an end to the tax credit would result in 2.5 million fewer rides on an annual basis. Additionally, the then CEO Andy Byford said at the time the credit “has undoubtedly had a positive impact” on Metro pass sales and ridership numbers and scrapping it “will erode at least some” of those gains. [n]. Comparing this to the total ride TTC gave out in the 2017 year, and one can easily determine that this amounts to only 0.5% [o] reduction in the total ride provided in the year. Hence, TTC’s own estimates are in effect consistent with those concluded upon by the University of Ottawa researchers.
A report published by the right-wing Frontier center for public policy in 2011 performed a thorough analysis of two of Harper’s tax proposals, one of which was the public transit tax credit. Based on its analysis, while only 25% of the individual tax filers reported an annual income of over $50,000, 39% of the public transit tax credit was claimed by individuals from this group (i.e. taxpayers having annual income over $50,000). This suggests a skewing of claims made by individuals who earn more than the average income in Canada. [p].
As indicated above, the claims of increased public transit ridership and a subsequent reduction in greenhouse gas emissions are linked together. If this policy measure is not able to effectively increase the public transit ridership (which, based on the sources above, it will not be able to do), commuters will continue to commute to work using their personal vehicles. Thus, the objective of reduced greenhouse emissions will not be achieved.
A 2008 report by the Auditor General’s office on the effectiveness of these policies concluded that “Environment Canada lowered its initial estimate of annual reductions in greenhouse gas emissions from 220,000 tonnes to about 35,000 tonnes expected as a result of the Public Transit Tax Credit—a reduction that will have a negligible impact on Canada’s greenhouse gas emissions, despite the $635 million reported in the 2007 Budget as the cost of the Tax Credit.” [q].
Based on this overwhelming research, it is evident that the Harper era public transit tax credit was not an effective policy measure since it neither made the public transit more affordable (in material terms to low-income commuters), nor did it increase public transit ridership and hence it did not result in the reduction of the carbon footprint of the daily commuters. Hence, as Professor Nicholas Rivers says “we conclude that the PTTC (Public Transit Tax Credit) is an expensive approach to achieving either public policy objective”. [r].
Policy alternatives
In summary, it is clear that this policy measure is an ineffective yet very costly proposal. This policy is not only ineffective but also complicates the tax act by introducing such credits. From a policy perspective, the objective of increasing ridership and the objective of making public transit more affordable are two divergent policy objectives. What is meant by this is that the only way to increase public transit ridership is to encourage those who commute to work in their personal vehicles to use public transit. However, these same individuals are the ones that more often than not able to afford public transit, but chose to use their personal vehicles due to convenience. The real affordability issue is for those who are lower-income earning taxpayers, who already use public transit and will continue to do so since they cannot afford to commute to work on their personal vehicle (if they even have one).
The conservatives should consider alternative policy measures that are going to help achieve both objectives of increasing ridership as well as to make public transit more affordable for low income earning taxpayers. One of the most effective manner to do this is to increase investment in public transit infrastructure. This will help increase capacity within the public transit infrastructure, allowing for a reduction in prices of public transit while also increasing the capacity for public transit. This investment should constitute adding more capacity on the existing route as well as expanding the network. A prime example of this is the Oakville Go station line. Numerous high income earning taxpayers ride this line to downtown Toronto every day instead of driving downtown in their personal vehicle since it is more convenient for them to take the Go train.
Another policy alternative that the conservatives should consider is the introduction of targeted public transit subsidies to low income earning taxpayers. Logistically, this could be implemented by way of the federal government providing monthly pass waivers to individuals within this income class, which could then be converted into the local transit monthly pass either at a discounted price or for free. This will directly impact individuals from this income category by reducing their monthly public transit expenses.
Relaunch of the Child Fitness Credit and the child arts credit
The child fitness tax credit is a refundable tax credit which will allow parents to claim up to $1000 per child for fitness activities that they participated in during the year. This is a refundable tax credit, which helps ensure that the low-income parents whose income is not enough to take advantage of the entire amount of the tax credit, will see the unused portion of the credit refunded to them. Parents with children with disabilities can claim an additional $500 per disabled child as part of this credit. [s].
In regards to the fitness credit, the conservatives have proposed the child arts credit permitting parents to claim up to $500 per child for expenses related to arts and educational activities. The conservatives (correctly recognizing the changing times) have expanded this credit for activities such as studying a language or learning science, math or coding [s]. Similar to the fitness credit, parents with children with disabilities can claim an additional $1000 per disabled child as part of this credit. [s].
Overall, as a result of these two credits (assuming that the average family has two children and none of them have a disability), the total reduction in your overall tax bill will amount to $450.
Both of these two tax credits were introduced by Mr. Harper and have been recycled by Mr. Scheer as part of his conservative election platform to make life more affordable for the average Canadian. Both of these policies were axed by the liberals when they came to power citing that these policy measures had been ineffective at achieving its said objectives. The said objectives being increasing youth participation in fitness and arts related activities. Not only were these ineffective, the liberals argued, these policy measures were also very expensive for the federal coffers. An estimate made by the Department of Finance made in 2017 indicated that the both of measures combined resulted in a decrease of tax revenue amounting to $155 million in 2013, $220 million in 2014 and $255 million in 2015. [t]. The PBO has also performed an analysis of both of these policy measures and based on their projections, the following is how much these are going to cost the federal government on a moving forward basis.
So the real question is whether or not these policy measures are going to be effective or not? To answer this question, relevant research studies have been relied upon such as the study performed by the Department of Finance of Canada in 2017 regarding this policy’s effectiveness. After reviewing this research, the following insights were derived. [u].
– This policy measure did not result in an overall increase in participation of youth in either fitness or artistic activities. This insight was derived after reviewing data from the Canadian Community Health Survey. As can be seen below, the overall percentage of children participating in fitness activities has remained stagnant over the course of the past decade (which is when the fitness credit was in effect).
- Both of these policy measures had been inequitable since these tax credits had been primarily “used by high-income families who would likely enroll their children in organized activities even in the absence of the credits” [u]. This insight was derived from tax filer’s data from the department of finance which clearly demonstrated that the take-up rate (the rate at which this tax credit was claimed) was exceptionally high for families who had a family income of $120,000 or above compared to the families whose aggregate income was less than that. (see below).
Policy Alternatives
In summary, (if the conservatives were to make government) they should take this criticism seriously and rethink this policy measure. If the objective is to encourage youth participation in fitness and artistic activities, then they should consider working directly with the municipalities by investing in direct and targeted subsidies at the school level and through other community organizations. This investment may take the form of investments in sporting and artistic equipment being made available to students and increase in the capacity of sports and arts-related after school program.
Conclusion
Overall the policy objectives that the conservatives are attempting to focus on are extremely important for the wellbeing of the average Canadian. However, as noted above, the policy objectives are not the most effective methods of achieving the said objectives. If the conservatives were to come to power, they should reconsider some of these policy measures and consider alternatives methods. The policy alternatives presented above (Although not yet demonstrated to be empirically more sound), are a good start for this exercise.
Reference material
[a] https://ipolitics.ca/2015/06/05/the-ekos-poll-harpers-approval-numbers-hitting-near-historical-lows/
[b] https://www.youtube.com/watch?v=chb1yhYjXOA
[d] https://www.conservative.ca/cpc/andrew-scheers-universal-tax-cut/
[e] Assuming that an individual earn $45,916, the benefit of this tax cut is going to be equal to the reduction in the tax rate of 1.25% times the taxable income of the tax payer $45,916.
[f] https://www.canada.ca/content/dam/cra-arc/prog-policy/stats/itstb-sipti/2017/tbl01-en.pdf
[i] https://www.cbc.ca/news/politics/pbo-tax-credit-parents-scheer-1.4656847
[j] https://www.cbc.ca/news/politics/pbo-tax-credit-parents-scheer-1.4656847
[k] https://www.cbc.ca/news/politics/andrew-scheer-ei-benefits-tax-free-1.5253218
[l] https://www.conservative.ca/cpc/andrew-scheers-green-public-transit-tax-credit/
[m] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2724768
[n] https://www.cbc.ca/news/canada/toronto/public-transit-tax-credit-elimination-cost-1.4071264
[o] Per the 2017 TTC statistics (https://www.ttc.ca/About_the_TTC/Operating_Statistics/2017/section_two.jsp), the total rides made in the 2017 year were a total of 533.2 million. Hence, a reduction in total annual rides of 2.5 million would amount to 533.2 million / 2.5 million = 0.469 % ~ 0.5% reduction in ridership.
[p] https://www.fcpp.org/files/1/FB091_PSTMiddle_F3.pdf
[q] http://www.oag-bvg.gc.ca/internet/English/parl_cesd_200812_01_e_31818.html
[r] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2724768
[t] https://www.fin.gc.ca/taxexp-depfisc/2017/taxexp1709-eng.asp
[s] https://www.conservative.ca/andrew-scheer-pledges-more-tax-relief-for-families/
[u] https://www.fin.gc.ca/taxexp-depfisc/2017/taxexp1709-eng.asp
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