Thursday, 28 July 2016

Canada Child Benefit

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 ;) Jokes! The Liberal budget (I talk a bit about that here) introduced this revamped program to incorporate the existing child tax benefits that the Conservatives introduced. This new program is extensive and will cost about $22.4 billion over the next five years. The real difference between this new program and the previous Conservative initiatives is that it is based on family income; 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 payment will be $533/month or $6,400/year for children under the age of 6 and children aged 6 to 17 it will be $450/month or $5,400/year. One very important fact is that this is TAX FREE money so when I say $533/month you will actually get $533/month. These maximum amounts will decrease as your family income increases and if you've got a family 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 cutoff 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. When I really start to think about things there are a few concerns that come to mind though. 
  • 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 wont be the case if there was a stay at home parents. 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 and 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 program 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 judgey but hear me out. Do we really want this extra (and potentially temporary) money impacting someone's decision to have a child (or have more 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. Certainly makes a case for maybe adding another 1 or 2 babies to the family. This is just my opinion but having 5 or 6 children is scary to me! 
It's obvious that one of the goals for 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 below the replacement level of 2.1 births per woman. Basically, without immigration, our population would be shrinking. 

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. 

What do you guys think about the new Canada Child Benefit? Supporters? Haters?


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