This was the month the new Canada Child Benefit came into effect, and a whole bunch of parents got to go on a shopping spree ;) The Liberal budget (I talk a bit about that here) introduced this revamped program as a replacement to the existing Universal Child Care Benefit and the Canada Child Tax Benefit. The goal of the new program is to eliminate the tax break for the wealthy while increasing payments for low-income families. Payment amounts will now be based on income instead of being standard across the board; the less your family earns, the higher your monthly payment will be. Makes sense right? Well, let's talk about that.
First, let's talk about how much money you could potentially be getting. The income threshold to get the maximum payment is currently set at $30,000 for a family. That maximum will be $533/month ($6,400/year) for children under the age of 6 and for children aged 6 to 17 it will be $450/month ($5,400/year). One critical fact is that this is TAX-FREE money so when I say $533/month I actually mean $533/month in your pocket. These maximum amounts will decrease as your family income increases, and if you've got a household income of over about $150,000 the amounts you'll be receiving will be quite small. The actual cut-off levels depend on how many children you have and their ages. For example, if you have 4 children all under 6 (yikes!) your family income would need to be over $249,000 to be completely cut off but if you only have one child between the ages of 6 and 17 that cutoff goes all the way down to $157,000.
If you have children and want to figure out how much money is coming your way now and potentially in the future, you can play around with this calculator.
In theory, I like the new program better than the old one. Families with such high incomes don't really need the extra $160/month they had been receiving, but for families with incomes under $30,000, the increased amounts can significantly impact their lifestyle. However, I do have a few issues...
- What happens when your child turns 6? Sure, if your kids have been in daycare as young children and are now in full-time school those costs would have decreased, but this won't be the case if there was a stay at home parent. All of a sudden you are going to see a drop in your monthly income just because your child had a birthday and how many people will actually be prepared for this? For the under $30,000 income level, this would be a drop of $83/month of $996/year, and that's not nothing.
- What about the next election? Governments are on a four-year timeline. If the Liberals don't get in when the next election happens in 2019, there's a pretty darn good chance the new governing party will want to put their stamp on the Canada Child Benefit, and this could mean cuts to the monthly payments you are receiving or even removal of the program entirely.
- Now this one gets a little judgy, but hear me out. Do we really want this extra (and potentially temporary) money influencing someone's decision to have a child (or have additional children)? If your family income is under that $30,000 threshold and you have four children aged 1, 3, 5, and 7 you will now be getting $2,049/month or $24,588 from the CCB. That's quite a bit of money and would almost double that families annual income. Does that now make a case for adding another couple of kids to the mix?
It's obvious that one of the goals of the program is to encourage people to have children. The fertility rate in Canada was 1.59 for 2015 and has been hovering around that level for the last few years, and this means that we are well below the replacement level of 2.1 births per woman. Basically, without immigration, our population would be shrinking.
Find more statistics at Statista
With that in mind, does it really make sense to only provide the benefit to children born to lower income families? As a social program yes, it makes sense to aid those who need the money most, but as a program to encourage population growth, not so much. For that, it might make more sense to look at programs that subsidize child-care costs or more extensive parental leave legislation. Programs like those would make it more affordable for parents who want to get back into the workforce which provides a positive stimulus to the economy. Giving the highest benefit to the lowest income earners does the opposite; it encourages families to maintain a low income and have more children to get the highest (tax-free) payout from the government. Not to sound too harsh, but I know where I'd prefer my tax dollars to go.