Archived Tax Expenditures and Evaluations 2002 : 4
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Tax Evaluations and Research Reports
The Impact of the Canada Child Tax Benefit on the Incomes of Families With Children
Since July 1998 the Canada Child Tax Benefit (CCTB) has been the key element of federal assistance to families with children. It has two components: a base benefit and the National Child Benefit supplement (NCB supplement).
In 2002 families with net income under the threshold of $32,960 receive a base benefit of $1,151 per child, with additional amounts for children under age 7 and for families with more than two children. With income over the threshold, the benefit is reduced, though at a rate low enough to ensure that middle-income families receive a measurable benefit.
The NCB supplement is the federal component of the National Child Benefit (NCB), a joint federal-provincial-territorial initiative. The supplement is targeted at low-income families, providing over $1,000 per child for families with net income under the $22,397 threshold in 2002. It is reduced with income above the threshold, and is fully phased out when family net income exceeds $32,000.
This paper illustrates the direct effect of the CCTB on the incomes of Canadian families with children. The 1996 Child Tax Benefit (CTB) is compared with the 1999 and 2004 configurations of the CCTB. The parameters of each system are applied to the 1999 population, enabling a comparison while holding everything else constant.
Using this methodology, this paper shows that:
- The CCTB substantially increases the level of federal child benefits going to Canadian families. Between 1996 and 1999 benefit increases were focused on low-income families. For example, families with income under $20,000 receive benefits of about $3,000 under the 1999 CCTB, about 50% more than under the 1996 system. Between 1999 and 2004 benefits continue to rise, but this time enrichments extend further up the income range.
- The CCTB has a positive - and growing - impact on income distribution. As a result of the 1996 CTB, over 30% of the families with under $10,000 in income (before child benefits) move into the $10,000 to $20,000 income group. With the 1999 CCTB, this increases to over 38% and with the 2004 parameters it reaches 42%.
- The CCTB reduces the incidence and depth of low income for Canadian families. Without child benefits, 16.8% of families would have been below Statistics Canada’s After-Tax Low Income Cut-Off (AT-LICO) in 1999. The 1999 CCTB reduces the share to 13.1%, and the 2004 CCTB further reduces it to 12.4%. In addition, with the 2004 CCTB the average income increase for families remaining below the AT-LICO is $3,445.
Since July 1998 the Canada Child Tax Benefit (CCTB)1 has been the key element of federal assistance to families with children. It is an income-tested benefit that has two components: the CCTB base benefit for low- and middle-income families, and the National Child Benefit supplement (NCB supplement), which provides low-income families with additional benefits on top of the base benefit.
The CCTB base benefit assists both low- and middle-income families with the expenses of raising children.
The NCB supplement is the federal component of the National Child Benefit (NCB), which is a joint federal-provincial-territorial initiative. The NCB initiative has three main objectives: to help prevent and reduce the depth of child poverty; to promote attachment to the labour market; and to reduce overlap and duplication by harmonizing program objectives and benefits across governments.
The purpose of this paper is to illustrate the direct effect of the CCTB on the incomes of Canadian families with children. A more comprehensive evaluation of the NCB - both the federal NCB supplement and the provincial/territorial component of the program - is currently in progress, coordinated by Human Resources Development Canada. Appendix 2 provides a brief description of the NCB evaluation.
This paper describes the evolution of the CCTB, from the previous system of assistance to families with children through to the mature CCTB system that will be in place by 2004. It then presents simulation results from Statistics Canada’s Social Policy Simulation Database and Model demonstrating the impact of the child benefit systems in 1996, 1999 and 2004 on the level and distribution of family income.
Evolution of the CCTB
The Child Tax Benefit
In 1993 the Government of Canada consolidated the previous system of child tax credits and the Family Allowance into the Child Tax Benefit (CTB), which provided a monthly payment based on the number of children and the level of family income. The CTB had two parts: a base benefit, available to most Canadian families2, and the Working Income Supplement (WIS), which applied to family earnings over a limited income range. The WIS helped offset some additional costs that low-income earners with children incurred when working. Unlike the base benefit, the WIS was payable on a per family basis.
The 1997 budget restructured the WIS by providing benefits on a per child basis. It was also enriched: the maximum amount paid for the first child exceeded the previous 1996 maximum WIS per family benefit.
The Canada Child Tax Benefit
In July 1998 the CTB (the base benefit and the WIS) was replaced by the CCTB, consisting of the CCTB base benefit and the NCB supplement. The CCTB base benefit is identical in structure to the CTB base benefit that it replaced, but the NCB supplement is quite different from the WIS. Whereas receipt of the WIS required employment income, the NCB supplement provides a universal benefit per child to all families with incomes below a threshold, above which it is phased out.
The NCB supplement is the federal component of the NCB - a joint initiative of federal, provincial and territorial governments3. The NCB was designed with the following three objectives:
a) To help prevent and reduce the depth of child poverty.
b) To promote attachment to the labour market by ensuring that NCB recipients are better off as a result of working.
c) To reduce overlap and duplication through closer harmonization of program objectives and benefits and through simplified administration.
Under the NCB the federal government provides supplemental benefits to low-income families with children. For families receiving social assistance in most provinces and territories, these federal benefits replace part of their social assistance payments4. This maintains the level of cash transfers going to families on social assistance, while increasing payments to low-income working families. Provinces and territories reallocate the newly available social assistance funds into benefits and services that further the goals of the NCB. Examples include supplementary health benefits and day care initiatives. The provinces and territories also spend additional funds - on top of the social assistance reinvestments - on these NCB programs and services.
As part of the Budget 2000 Five-Year Tax Reduction Plan, the CCTB was fully indexed for inflation effective January 2000, and further enhancements to both the base benefit and the NCB supplement will continue to be made until 2004. As a result of indexation and other enhancements, CCTB expenditures for the 2004 benefit year are estimated at $8.7 billion, up from $5.1 billion in 19965.
Structure of Benefits
Table 1 indicates the structure of the federal child benefit programs for the 1996, 1999, 2002 and 2004 benefit years. To supplement the table, Appendix 3 contains a chronology of changes to federal child benefits from 1997 to 2004.
The Base Benefit
The top panel of Table 1 describes the base benefit in each system. For example, the first column indicates that the 1996 CTB provided a maximum base benefit of $1,020 per child, with an additional $75 for the third and each subsequent child, and an additional $213 for each child under age 7. Families with net income below the threshold of $25,921 received the maximum benefit. Benefits were phased out at a rate of either 2.5% (for one-child families) or 5% (for families with two or more children) of each dollar of family net income above the threshold.
For instance, a two-child family with one child under age 7 could have received a maximum base benefit of $2,253. If this family had net income of $26,921, ($1,000 above the threshold) it would have had its base benefit reduced by $50 (5% of $1,000), resulting in a total base benefit of $2,203. If the family had net income of $70,981 ($45,060 above the threshold) it would have had its base benefit reduced by $2,253 (5% of $45,060). That is, this family’s base benefit would have been completely phased out.
The base benefit, threshold and reduction rates were the same in the 1999 CCTB as they were in the 1996 CTB. By 2004 the maximum benefit per child 7 years of age and over will increase to $1,1956 for a two-child family. The threshold will increase to $35,000 and the benefit reduction rate will be reduced to 2% for one-child families and 4% for families with two or more children.
The bottom panel of the table describes the WIS and the NCB supplement. For example, the first column indicates that the WIS added 8% to employment earnings above $3,750, up to a maximum of $500 per family, and that the supplement was reduced with income above $20,921.
By 2004 the NCB supplement will provide a maximum benefit of $1,342 for the first child, $1,128 for the second child and $1,048 for each additional child. Families will receive the maximum benefit until family net income reaches $23,256. After that the NCB supplement will decline at a rate of 11.4%, 21%, and 30% for one-, two- and three- (or more) child families respectively. As a result, for families with three or fewer children, the 2004 NCB supplement will be completely phased out once net income exceeds $35,000.
Federal Child Benefit Program Parameters
|Benefit per childa||$1,020||$1,020||$1,151||$1,195|
|Supplement for third and each additional child||$75||$75||$80||$83|
|Supplement for children under age 7b||$213||$213||$228||$237|
|Benefit reduction rated|
| Two or more
|First child||8% of employment income above $3,750, up to a maximum of $500||$785||$1,293||$1,342|
|Each additional child||$510||$1,009||$1,048|
|Supplement reduction rate|
| Three or more
Note: Amounts shown are in current dollars. Annual inflation of 2% is assumed for 2002 and subsequent years.
The combination of the base benefit and the supplement will be much higher in 2004 than it was in 1996. For example, the maximum benefit for a two-child family with one child under age 7 is $5,097 with the 2004 configuration of the CCTB. This is nearly double the maximum 1996 CTB benefit of $2,753.
Diagrams 1 and 2 illustrate the 1996 CTB and the 2004 configuration of the CCTB. These diagrams make clear the progressive nature of federal child benefits in Canada: low-income individuals receive an extra benefit (the WIS or NCB supplement), which is phased out quickly after net income exceeds approximately $20,000. The base benefit is also progressive, although the phase-out rate is much more gradual.
The diagrams also provide a visual comparison of the level of federal child benefits under the 1996 CTB and 2004 CCTB. The average benefits paid to recipient families increase significantly in 2004; in addition, many more families are eligible for benefits.
Amount and Distribution of the CCTB
This section compares the 1996 CTB with the 1999 and 2004 configurations of the CCTB according to the average benefits paid to various income classes, and the resulting change in the income distribution of families with children.
The comparison points were chosen for the following reasons:
- The starting point is the last year before federal child benefits began to be enriched in the late 1990s. In 1996 the WIS was still in place; there was no NCB supplement.
- The midpoint, 1999, is the final year before full indexation of the CCTB and other enhancements came into effect.
- The end point represents the mature CCTB - all changes to benefits, income thresholds and reduction rates legislated after 1999 will be in effect by 2004.
The numbers in the charts and tables in this section were produced by Statistics Canada, using the Social Policy Simulation Database and Model (SPSD/M), a micro computer-based product designed to assist in the analysis of the financial interactions of governments and individuals in Canada7. It can assess the cost implications and income distribution effects of changes in the personal taxation and cash transfer system. The SPSD is a non-confidential, statistically representative database of hypothetical individuals in their family context, with enough information on each individual to compute taxes paid to and cash transfers received from the Government. The SPSM is a static accounting model (i.e. it does not consider behavioural feedback effects) that processes each individual and family on the SPSD, calculating taxes and transfers using legislated or proposed programs.
Throughout this section, families are classified by income group. The income measure includes all forms of revenue received by a family except for CCTB (or CTB) benefits.8
The definition of “family” is a nuclear family: a married couple, a common-law couple or a lone-parent living together with their children under the age of 18. A married child and his or her spouse living in the household constitute a separate nuclear family, as does a child with his or her own children living in the household.
How Are the Child Benefit Programs Being Compared?
In order to isolate the effects of the three benefit programs (1996 CTB, 1999 CCTB and 2004 CCTB), the sample population is kept constant, based on 1999 demographic data. That is, the analysis applies the parameters of each of the benefit programs to the 1999 population, enabling a comparison of the three programs while holding everything else constant. All program parameters and other amounts are converted to 1999 dollars. Since 1999 demographic data is used, the results for the 1996 CTB and 2004 CCTB are hypothetical. They represent what these program configurations would have meant for the 1999 population had the 1996 CTB (or 2004 CCTB) been in place. In the interest of readability, the discussion below is kept almost entirely in the present tense, despite the conditional nature of the analysis.
Amount and Share of Benefits to Various Income Classes
Chart 1 displays the average amount of federal transfers in support of children provided to families in various income groups. It clearly illustrates the increase in federal support to low- and middle-income families resulting from the replacement of the CTB with the CCTB, and its subsequent enrichment.
Average Federal Child Benefits to Families With Children
Chart 1 also demonstrates the impact of the benefit reduction rate for families above the threshold. After family net income exceeds the threshold ($35,000 in 2004), CCTB benefits gradually decline. The reduction rate is low enough, however, to ensure that middle-income families receive a measurable benefit. This is consistent with the role of government in promoting taxation fairness and equity among individuals with different family circumstances.
The chart indicates that families with between $10,000 and $30,000 of annual income receive more federal aid than families with less than $10,000 of annual income. However, this is not due to the parameters of the CCTB. It occurs simply because families with incomes between $10,000 and $30,000 have slightly more children, on average, than families with incomes of under $10,000 in the 1999 population that is used.
Since the NCB supplement is targeted at low-income families, the proportion of aggregate CCTB benefits received by this group is much higher than its share of the population. Table 2 compares the share of families in four different income classes with the amount and share of aggregate benefits paid to those families under each of the program configurations.
Share of Families With Children and Share of CTB or CCTB Benefits by Income Class
|Total income||Share of families||Share of 1996 CTB||Share of 1999 CCTB||Share of 2004 CCTB|
|(%)||($ billions)a||(%)||($ billions)a||(%)||($ billions)a||(%)b|
Note: Shares are based on a 1999 population distribution.
The table is read as follows: the first row indicates that 15.3% of Canadian families have income (net of child benefits) up to $20,000 in 1999. Those families receive a total of $1.2 billion in 1996 CTB transfers, or 23.1% of the 1996 total. They receive $1.8 billion in 1999 CCTB transfers, or 29.8% of that year’s total. Finally, they receive $2.2 billion in 2004 CCTB transfers, or 27.5% of the total. The first two rows of Table 2 indicate that families with income up to $40,000, who make up less than 40% of Canadian families with children, receive about 60% of aggregate benefits under the 1996 CTB and about two-thirds of benefits under the 1999 and 2004 CCTB.
Table 2 illustrates how federal child benefits paid to various income classes evolve over the 1996 to 2004 period. Between 1996 and 1999 the introduction of the NCB supplement increases both the amount and share of total federal child benefits going to families with up to $40,000 income. Between 1999 and 2004 benefits continue to increase; this time the enrichments extend further up the income range, bringing more families into the program. This necessarily reduces the share of total benefits paid to families with income up to $60,000. As Table 2 indicates, however, all families are better off as a result of these enrichments.
Impact of Child Benefits on the Income Distribution of Families With Children
This section demonstrates the direct effect of the child benefit programs in 1996, 1999 and 2004 on the distribution of income among families with children. Since the provincial/territorial component of the NCB also affects income distribution, it is more informative to consider the joint effect of the CCTB and the NCB than to consider the CCTB benefits in isolation. Recall that the NCB supplement replaces part of the social assistance payments made by the provinces and territories. The social assistance recoveries are then reinvested in programs that benefit low-income families with children while promoting attachment to the labour market.9
Results reflecting both the CCTB and the provincial/territorial component of the NCB are labelled “CCTB/NCB.” The analysis considers only the direct effect of the cash transfers. The impact of the NCB on family incomes due to increased participation in the labour market is not taken into account.
Chart 2 shows the distribution of family income excluding all federal child benefits and the provincial/territorial component of the NCB (the “No Child Benefits” case), and under each of the three child benefit program configurations. It indicates that the direct effect of the CCTB/NCB is to raise families out of the lowest income classes and into the $30,000 to $60,000 income range.
While it shows the final net impact of child benefits on income distribution, Chart 2 masks a lot of the underlying movement up the income scale. To illustrate the extent of this movement, Chart 3 shows the shares of families that move into a higher income group as a result of each of the three benefit programs. For example, the first three columns of Chart 3 indicate that 30.5% of the families who have under $10,000 in income in the “No Child Benefits” case move into the $10,000 to $20,000 income group as a result of the 1996 CTB; with the 1999 CCTB/NCB, 38.5% of the families with under $10,000 in income excluding child benefits move into the $10,000 to $20,000 income group; and the 2004 CCTB/NCB raises the share of families moving out of the under $10,000 income group to 42%.
Income Distribution of Families With Children
Movement of Families With Children up the Income Scale
Impact of Child Benefits on the Incidence and Depth of Low Income
While the goal of the CCTB is to provide income assistance to low- and middle-income families, it is designed so that a greater share of benefits goes to lower-income families. In particular, the NCB explicitly targets low-income families with a view to preventing and reducing poverty.
There is no universally accepted definition of “poverty,” so a quantitative analysis of this NCB objective is not possible. However, we can study the impact on families at the lower end of the income scale. This is most readily done using Statistics Canada’s After-Tax Low Income Cut-Off (AT-LICO).
Statistics Canada defines the AT-LICO as “the income threshold below which a family will likely devote a larger share of its after-tax income to the necessities of food, shelter and clothing than the average family would.”10 The AT-LICO varies by family type and location, ranging in 1999 from $11,817 for a two-person family in a rural area, to $38,416 for a seven- (or more) person family in a large city.11
The incidence of low income is measured as the percentage of families living below the AT-LICO. The first row of Table 3 shows that 16.8% of families in 1999 would be below the AT-LICO if there were no child benefits. This can be compared with the shares of families below the AT-LICO under the 1996 CTB, the 1999 CCTB/NCB and the 2004 CCTB/NCB as a partial measure of the success of these programs. For example, the 2004 CCTB/NCB reduces the number of families living below the AT-LICO by 4.4 percentage points, to 12.4%.
Table 3 also presents the average income increase of families who remain below the AT-LICO after receiving child benefits. For example, there is a $3,445 increase in the average income of the 12.4% of families remaining in low income under the 2004 CCTB/NCB. That is, the CCTB reduces both the incidence and the depth of low income.
Incidence of Low Income and Change in the Depth of Low Income
|All families with children|
|No child benefits||Percent of families below AT-LICO||16.8%|
|1996 CTB||Percent of families below AT-LICO||13.9%|
|Average income increase of families remaining in low incomea||$2,382|
|1999 CCTB/NCB||Percent of families below AT-LICO||13.1%|
|Average income increase of families remaining in low incomea||$2,991|
|2004 CCTB/NCB||Percent of families below AT-LICO||12.4%|
|Average income increase of families remaining in low incomea||$3,445|
|Note: Based on 1999 population distribution.
a As compared with the base case of no child benefits.
Through the CCTB, the federal government assists low- and middle-income families with the expenses of raising children. It has two components: a base benefit and the NCB supplement. The base benefit is available to most families - although the amount is reduced as family income increases. The NCB supplement, a component of the intergovernmental National Child Benefit initiative, provides extra assistance to low-income families.
Since its inception in 1998, several enhancements have been made to the CCTB. Consequently, by 2004 the benefit available to the typical low-income family will be nearly double the amount paid under the previous Child Tax Benefit system. Middle-income families are also better off with the CCTB.
The CCTB has had a positive - and growing - impact on income distribution. Families with total income under $40,000, who represent less than 40% of the population of families with children, receive about two-thirds of aggregate CCTB benefits. These benefits raise many families above the low-income cut-off, and reduce the depth of low income for those families still below the cut-off.
Appendix 1 - Program Acronyms Used in This Paper
The Child Tax Benefit; in place from 1993 to 1997. Provided financial support to low- and middle-income families with children. Consisted of the CTB base benefit and the Working Income Supplement (WIS).
The Working Income Supplement. As part of the CTB, the WIS provided a benefit to low-income families with children and earned income.
Canada Child Tax Benefit. The system of federal transfers in support of families with children after 1997. Consists of the CCTB base benefit and the NCB supplement.
CCTB base benefit:
Part of the CCTB. Provides support to low- and middle-income families with children. Identical in structure to its predecessor, the CTB base benefit.
The National Child Benefit supplement. This is part of the CCTB; it is the extra federal assistance provided to low-income families on top of the base benefit. It is also the federal component of the intergovernmental National Child Benefit.
National Child Benefit. A joint initiative of the federal, provincial and territorial governments (except Quebec - see footnote 3 on page 43). The NCB also includes a First Nations component. The NCB consists of the NCB supplement and provincial funding of various programs. The provincial NCB initiatives provide assistance to low-income families while promoting attachment to the workforce. Part of the provincial funding is from reinvestments of reduced social assistance made possible by higher federal NCB supplement payments.
The combination of the CCTB base benefit, the NCB supplement and the provincial/territorial income transfer components of the NCB.
Appendix 2 - NCB Evaluation
When the NCB was introduced, the federal, provincial and territorial governments agreed to undertake ongoing evaluations of the program, verifying that it meets its goals of alleviating child poverty and promoting attachment to the workforce. In keeping with this commitment, there is an annual progress report, which can be found on the Internet at www.nationalchildbenefit.ca. In addition, Human Resources Development Canada is currently coordinating a comprehensive evaluation of the NCB. This evaluation has three components.
The first component of the evaluation, “A Net Impact Assessment of the National Child Benefit on Social Assistance Dependency”, is a set of descriptive and quantitative studies attempting to measure the effect of the NCB on child poverty and parental work effort. It also attempts to determine if the NCB is the most cost-effective way to meet its stated goals. To supplement existing data sources, a number of surveys are underway to gather information about the NCB. The survey groups include:
- NCB clients.
- Federal and provincial program managers involved in the delivery of the NCB.
- Social policy experts such as academics.
Using the survey results and other data sources, the study will:
- Measure the effect of the NCB on the incidence, depth and duration of child poverty.
- Measure the impact of the NCB on labour market participation.
- Calculate the change in net income of low-income families who leave social assistance to work full time.
- Analyze the design and delivery effectiveness of the NCB.
The second component, “Provincial/Territorial Reinvestment Case Studies Module - National Child Benefit Evaluation,” is primarily qualitative and consists of a set of studies that look at the programs receiving provincial NCB investments and NCB supplement reinvestments.
This module has two sub-components: a “Program Cluster” sub-component, and a “What Works” sub-component.
There are five major “program clusters” funded with NCB reinvestments:
- Child Benefit/Earned Income Supplements.
- Child Care/Day Care.
- Supplementary Health Benefits.
- Early Childhood Services/Children-At-Risk Services.
Evaluation planning for each sub-component covers a four-year time frame. Each of the five program clusters are to be evaluated once over the course of four years. “What Works” case studies are also planned in each of the four years.
Each year the Program Cluster sub-component focuses on the reinvestments in a selected cluster or clusters examining rationale/relevance, design/approach, implementation/ delivery, and intended/unintended impacts.
In addition, a few programs from within the cluster being examined are selected for the “What Works” sub-component. These programs are examined in additional detail to determine key challenges, issues or obstacles they have faced, the approaches or interventions that have contributed to their success, and the approaches or interventions that “did not work,” but which provide useful information.
The third and final component of the NCB evaluation is an examination of the net impact of the NCB on families on social assistance in British Columbia, Saskatchewan and Manitoba. These provinces have created longitudinal administrative data sets, describing how their NCB initiatives address the barriers to employment facing families on social assistance. The evaluation uses this data to estimate the impact of the programs on the level of dependency on social assistance.
This paper is complementary to the NCB evaluation and to the annual NCB progress reports in that it examines the CCTB - the federal contribution to child benefits in Canada. As described in the section entitled “Evolution of the CCTB,” the CCTB consists of the NCB supplement as well as a base benefit, which is not part of the NCB.
Appendix 3 - Changes to Federal Child Benefits Since 1997
- Increased the maximum Working Increase Supplement (WIS) from $500 per family to $605 for the first child, $405 for the second child and $330 for each additional child.
- The Child Tax Benefit (CTB) was renamed the Canadian Child Tax Benefit (CCTB). The WIS (part of the CTB) became part of the intergovernmental National Child Benefit (NCB) initiative, and was renamed the National Child Benefit supplement (NCB supplement).
- Increased the maximum NCB supplement by $180 per child.
- Increased the maximum base benefit by about $85 per child.
- Increased the base benefit threshold by $4,083.
- Increased the maximum NCB supplement by about $190 per child.
- Increased the NCB supplement threshold by $293.
- Increased the maximum base benefit by about $13 per child.
- Increased the base benefit threshold by $1,996.
- Increased the maximum NCB supplement by about $280 per child.
- Increased the NCB supplement threshold by $530.
- Increased the maximum base benefit by about $35 per child.
- Increased the base benefit threshold by $960.
- Increased the maximum NCB supplement by about $35 per child.
- Increased the NCB supplement threshold by $653.
- Indexation for inflation.
- Indexation for inflation.
- The base benefit threshold must be at least $35,000, an increase of $2,040 over the 2002 level.
- The base benefit reduction rate will be reduced to 2% (from 2.5%) for a one-child family and 4% (from 5%) for a family with two or more children.
3 i) The Government of Quebec has stated that it agrees with the basic principles of the NCB. It chose not to participate in the NCB because it wanted to assume control over income support for children in Quebec; however, it has adopted a similar approach to the NCB. Throughout this report, references to provincial positions do not include Quebec.
ii) Many First Nations also participate in the NCB. [Return]
4 In 1998-99 New Brunswick and Newfoundland and Labrador chose not to reduce social assistance payments by the amount of the NCB supplement. New Brunswick continued this policy in 1999-2000. In 2000-01 and 2001-02, Newfoundland and Labrador, New Brunswick and Manitoba did not recover the NCB supplement increase. [Return]
5 The CCTB benefit year is not on a calendar-year basis: benefits are adjusted each year in July based on income reported on the preceding year’s income tax return. Therefore, the estimate of $8.7 billion refers to the period from July 2004 to June 2005. The estimate of $8.4 billion shown in the tax expenditure tables is based on the 2004 calendar year. [Return]
7 The simulations were performed by Statistics Canada, but the assumptions and calculations underlying the simulation results were specified by the Department of Finance. Therefore, the responsibility for the use and interpretation of these data is entirely that of the Department of Finance. [Return]
8 Note that CCTB payment amounts, as displayed in the previous section, are calculated based on family net income for tax purposes. Net income is obtained by deducting certain work-related expenses from total income. [Return]
9 Approximately two-thirds of the social assistance recoveries are reinvested in direct cash transfers (such as employment income supplements). These cash transfers are considered in the income distribution analysis, but in-kind benefits, such as supplementary health benefits and child/day care initiatives, are not. As a result, the improvements in income distribution resulting from the CCTB and NCB somewhat understate the improvement in the financial situation and well-being of low-income families. [Return]
10 Families who are expected to spend 20 percentage points more of their income on these necessities than the average family are defined as low-income. See "Low Income Cutoffs from 1990 to 1999 and Low Income Measures from 1989 to 1998," Statistics Canada, Income Statistics Division, 75F0002MIE – 00017, January 2001. [Return]
11 AT-LICOs use "economic families," while this paper has used "nuclear families" (defined on page 47) up to this point. Economic families are defined as a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law or adoption. By definition, all persons who are members of a nuclear family are also members of an economic family. However, economic families can also include children over the age of 18, elderly parents and other relations living in the same dwelling. [Return]