Ottawa Shifts Overall Spending on Child Benefits Away From Low-Income Families: Study

A woman takes three children on a bike ride in Vancouver on June 29, 2021. Don MacKinnon/AFP via Getty Images

The federal government is shifting the share of overall spending on child benefits away from lower-income families to middle- and upper-middle-income families at an even greater degree than previously thought, a Fraser Institute study says.

The study looks into the Canada Child Benefit (CCB)—a tax-free payment that was said to target low- and middle-income families—and how its tax-free benefits affect the distribution of the program’s overall spending.

It compares CCB spending adjusted for its tax-free status against both actual CCB spending and the spending done under the two previous federal programs that the CCB replaced in 2016—the Canada Child Tax Benefit (CCTB), which was tax-free, and the Universal Child Care Benefit (UCCB), which was not tax-free.

According to the study, the total value of the CCB in 2019 grew from an estimated $24.9 billion to $32.5 billion when the tax-free status of the benefit is included.

But it found that, when comparing the adjusted CCB spending against the actual CCB spending for all eligible families, households with incomes below $10,000 saw no change in their share of the overall distribution of spending. Meanwhile, households with incomes ranging from $10,000 to $70,000 saw a reduction in their share of total CCB spending, falling from 44.7 percent to 40.7 percent. Households with incomes above $70,000 experienced an increase in their share of total CCB spending, rising from 55 percent to 59 percent.

“The shifting of overall CCB spending towards middle- and upper-middle-income families when accounting for the CCB’s tax-free status is even greater than previous analyses concluded,” the study said.

It said the differences in the share of benefits across families with different income levels are larger when comparing the adjusted CCB spending—to account for its tax-free status—against the distribution of spending under the previous UCCB and CCTB programs.

Families with incomes less than $60,000 saw a reduction in their share of total CCB spending, falling from 42.9 percent to 29.7 percent, while families with incomes between $60,000 and $180,000 saw an increase in their share of spending, rising from 49.2 percent under the two previous programs to 66.8 percent. Families with incomes above $180,000 experienced a reduction in their share of total CCB spending from 7.9 percent to 3.5 percent.

“While the federal government often claims that child benefits go to Canadian families who need the money the most, the shift in overall spending tells a different story,” Jason Clemens, executive vice-president of the Fraser Institute, said in a news release on Aug. 18.

“At a time when Ottawa is running deficits with no end in sight, the CCB is yet another poorly targeted federal program.”