Misleading the middle class

If a dollar and a quarter magically fell into your pocket, but then the loonie slipped out, most of us would still feel richer, at least a bit. But not the Fraser Institute analysts, who recently reported their findings that federal Liberal tax policies have hurt the incomes of most middle-class families with children (“Middle-class tax burden heavier: report,” Financial Post, Sept. 26).

They calculate that more than eight in 10 middleclass families now pay more in taxes because of Liberal government changes in 2016 that overturned some of the policies of their Conservative predecessors. The analysts’ findings are dominated by the abolition of income splitting for couples with children — the so-called family tax cut (FTC).

What the Fraser Institute analysis conveniently ignores are Liberal reforms to tax and transfer provisions for children in implementing the Canada Child Benefit (CCB). While the CCB reforms rescinded the FTC as well as the Canada child tax benefit, national child-benefit supplement, and the universal childcare benefit, the new system exceeded what it had replaced by $2 billion per year.

Tax-planning expert Jamie Golombek assessed the new program: “The Canada Child Benefit makes the system a lot easier, a lot cleaner and a lot tighter, and also a lot easier to administer. … The majority of people we speak to about it are quite positive because they’ll get more money.”

For almost all families at low, moderate, and middle incomes (up to $150,000), the CCB delivers larger benefits than the provisions it replaced. Whereas the universal of two-parent families had gained little (less than $500) or nothing from the FTC, so they too are substantial gainers from institution of the CCB.

The largest beneficiaries from the FTC had been higher-income one-earner couples — ironically, those who could best afford to keep one spouse at home and had the least need for benefits. Indeed, one perverse effect of the FTC was to discourage mothers from entering or re-entering the Conservative government’s commitment to income splitting.

So the shift from the FTC and Conservative government’s companion child tax and transfer policies to the Liberal government’s CCB was analogous to taking some money from families, but returning even more to them. Were families actually worse off because dollars received as transfers are less valued than dollars lost via tax changes?

Abolition of the FTC tax and transfer provisions for children cannot sensibly be evaluated without considering the policies that supplanted them. But that is precisely what the Fraser Institute analysts have done — ignoring the tax and transfer changes that benefited middle-class families while counting only the rescinded policy changes rigidly classified as taxes that were to the disadvantage of that group.

Asserting that Liberal tax policies have hurt middleclass families while ignoring the full policy reform — which in fact boosted the net incomes of most middleincome families — is at best semantic sophistry.