CHILD BENEFIT PLANS DESERVE REAL DEBATE
Conservatives are wrong to mock Trudeau over his differing approach
Rising in the House to ask a followup question of the prime minister, Justin Trudeau paused to make a philosophical point. OK, let’s just freeze the action right there. Such moments have in the past proved perilous for the Liberal leader, so it’s worth rewinding to see how we got here.
Trudeau had used his first question to attack the Conservatives’ recent tax proposals, on income splitting and tax free savings accounts, as giveaways to the rich.
“Why not,” he had asked the prime minister, “cancel those tax breaks and benefits that go to the wealthiest Canadians?”
In reply, Stephen Harper had noted his government’s tax cuts had “helped every single Canadian family in the country” — in contrast to the Liberals, he had said, who proposed to “take away from every Canadian family the Universal Child Care Benefit, to take away income splitting, to take away tax free savings accounts, to take away all of these things.”
This framing of the issue — we give you all things, while the Liberals would take them away — may have struck the Liberal leader as oversimplified. Some clarification was in order. OK, now roll tape.
“Benefiting every single family is not what’s fair,” he pointed out. “What’s fair is giving help to those who need it most …”
But by then his words were barely audible over the braying of the Conservative bench.
Ho ho. What did he just say? Benefiting every single family … not fair? Hee hee hee.
Harper, hardly able to contain a smirk, stood up to deliver the coup de grace.
“Mr. Speaker, you see what happens when someone goes off script.”
Trudeau’s comment was treated as a gaffe, largely on the strength of the Tory reaction. But there was nothing gaffe-like about it. It’s just a point of view, one the Conservatives disagree with.
Stripped of the theatrics, the exchange captures a fundamental difference in the Conservative and Liberal approaches to social policy this election. Compare, for example, the Conservatives’ Universal Child Care Benefit with the Canada Child Benefit the Liberals propose should replace it.
The UCCB, true to its name, is universal: the same $1,920 per child under six goes to every family, no matter what their income. The CCB, by contrast, is targeted, delivering more to those “who need it most,” that is, to families on very low incomes, than the existing mix of child benefits (including not only the UCCB but the targeted Canada Child Tax Benefit/National Child Benefit Supplement): a base benefit of $6,400 per child under six, versus roughly $5,900. The higher a family’s income, the less they receive, until at around $192,000, the benefit is withdrawn completely.
It’s not quite as simple as that. The Conservative benefit is taxable, meaning those on higher incomes give back some of it, whereas the Liberals’ is tax-free. Still, the broad lines of debate are clear: universal income support (Conservative) versus targeted (Liberal).
This is a remarkable turnabout. In the 1980s, when Brian Mulroney was in power, it was the Conservatives who attacked universality and the Liberals who defended it. The universal child benefit of those days was the “family allowance,” popularly known as the “baby bonus,” and it was costing the government plenty. So it was proposed to target it.
Why, Conservatives asked then, should a bank president be getting a cheque from the government? And indeed, the family allowance was eventually replaced by the Child Tax Benefit.
In response, Liberals (and New Democrats) nearly had a nervous breakdown. Why, this was nothing else but a “means test,” a return to the humiliations visited upon those “on relief” in the 1930s. It was, they said, essential that everyone receive the same benefit, to preserve a broad public constituency for these programs. If the benefits were restricted to the poor, political support among the middle and upper classes would wither.
It was an odd argument — support for redistribution could only be maintained by refusing to redistribute — but not as odd as seeing the Liberals now leading the charge for targeting, while the Tories insist on sending benefits to “every single family.”
In fairness, there are points to be made for both approaches. Sending out the same cheque to everyone avoids raising the implicit marginal tax rate on beneficiaries, as under a targeted system: withdrawing benefit at a rate of, say, $1 for every $5 in additional income has the same effect on incentives as if you’d slapped a 20 per cent tax on that same income.
The universal approach can also claim to being fairer, where fairness is viewed in terms of what economists call horizontal equity, or treating “like as like.” If the point of the benefit is to compensate for the costs of raising children — and if those costs, we are agreed, are non-discretionary — then arguably even couples on higher income should be eligible, if they’re to be treated fairly relative to childless couples with the same income.
But there’s a cost to universality. Not only does it raise the overall cost of the program, for a given level of benefit, but the corollary is also true: the benefit, for a given overall cost, will be that much less for those at the bottom than under a targeted system. The Liberals give up horizontal equity, in favour of vertical: by taking away the benefit from the rich, they can deliver more to the poor, albeit at the cost of raising the implicit marginal tax rate on everyone in between.
These are two legitimate choices, each with their own pluses and minuses. They deserve a full debate, not stagy displays of shock over phoney gaffes.
The higher-than-private-sector wages, generous and early retirement pensions, and other benefits matter because that money comes from the public treasury, funded by taxpayers. —
Mark Milke These are two legitimate choices, each with their own pluses and minuses.