A busy year for Mr. Clawback
“The federal government will pump a lot of money into your pocket this month. They also plan to take a lot of it back.”
Even as the first cheques from the Conservative government’s beefed-up version of the Universal Child Care Benefit found their way into mailboxes across the country this July 20, Conservative MPs were sounding the alarm.
Some people aren’t signed up! Apply now!
Nunavut MP Leona Aglukkaq, for example, warned earlier this month that about 900 eligible Nunavut families are in danger of missing out on those cheques.
Let’s pretend, for a moment, that the timing of this $3 billion spending spree is not a shameless attempt to bribe voters ahead of the fall election. Let’s pretend its $3.5-million advertising campaign is a selfless act, merely informing Canadians about what they need to know.
And let’s pretend the federal government actually regards those 900 Nunavut families as people in genuine need and not a collection of votes that are ready to be bought.
In Nunavut, where at least half the population endures persistent cash poverty and gets by on social assistance for at least part of the year, this month’s batch of UCCB cheques might make a real difference.
Under the UCCB program, every family in Canada will get $1,920 a year for each child under six, up from $1,200 last year. And it now includes a new payment: $720 a year for each child between the ages of six and 17. This month’s cheque roll-out covers the first seven months of 2015: $520 per head for each kid under the age of six and $720 per head for each kid aged six to 17.
The federal government announced the expanded UCCB in October 2014 and included the measure in last April’s budget. Everyone, from millionaires to paupers, qualifies for it. Wealthy families get the cash even if they don’t need it.
This means many Nunavut families, depending on how many children they have and how old they are, can look forward this month to getting payments worth many hundreds of dollars. That’s an undeniable bonus for lower income people.
But as of this year, the UCCB replaces an older, non-taxable benefit called the Child Tax Credit, which was already on its way to being phased out.
And that’s the catch. The UCCB is taxable. At the end of the taxation year, those big cheques will be added to your taxable income, potentially increasing your tax payable and potentially reducing the size of your tax refund next spring.
Accurate estimates are hard to come by, but that likely means that for many people, after you file your income tax return, the federal and territorial governments will claw back somewhere between one-quarter and one-third of the benefit.
An analysis of the UCCB’s impact on families and on the national economy, published early July 21 on CBC’s national website, suggests that one way another, the $3 billion the government is rolling out this week may have a net value worth only half that amount or less.
But on top of that, if you subtract the Child Tax Credit, which doesn’t exist anymore, many people may keep only one-quarter to one-third of the UCCB benefit, the CBC report found.
That’s because of the combined effect produced by the taxable status of the UCCB and the elimination of the Child Tax Credit.
By the way, Mr. Clawback is not only a federal employee. He also toils on behalf of the Government of Nunavut.
There’s another similarily named but non-taxable federal benefit, called the Canada Child Tax Benefit. That one is geared to low income families with children.
And it remains untouched. Low income people still qualify for it. A portion of it, called the National Child Benefit Supplement, goes to low income families with children, based on information they supply in income tax returns. In 2013-14, the program paid maximum benefits of $3,654 a year for the first child, $3,397 for the second child, and $3,402 for each additional child, for those who qualify, depending on income.
But if, like many Nunavut residents, you happen to live on income support, the Nunavut government will claw that one back too. Most provincial governments don’t do that anymore and will let welfare recipients keep the benefit. But the GN still uses federal dollars to effectively subsidize its welfare bill.
Last year, Pat Angnakak, the MLA for Iqaluit-Niaqunnguu, complained about the GN’s clawback policy in the legislative assembly, but got a less than sympathetic hearing from Jeannie Ugyuk, the family services minister.
In any case, the revelation that 900 eligible Nunavut families are not listed in the federal government’s system is disturbing in itself.
Most of those people are likely in that position because they didn’t file an income tax return last year, or in previous years.
That’s the standard method for calculating and distributing most federal social benefits: the income tax system. If the Canada Revenue Agency doesn’t capture your current information, you don’t get the benefit.
The expanded UCCB may, or may not, turn out to be a useful or efficient social policy. That’s a matter of legitimate public debate.
And in the federal election campaign that lies just around the corner, you’re likely to hear a variety of competing claims and counter-claims from the three major political parties. Treat them all with the utmost skepticism.
By all means apply for it. You’re entitled to it. You can find application forms, including an Inuktitut version, at this website.
But don’t believe the hype. Yes, the federal government will pump a lot of money into your pocket this month. They also plan to take a lot of it back. JB