In a speech Monday morning, Conservative leader Stephen Harper touted the tax cuts under his government. He talked about the reduction in the GST from 7 to 5 per cent, the Universal Child Care Benefit, children’s arts and sports program tax credits, child care expense deductions, and income splitting, saying that these measures have saved Canadian families money every year.
“Friends when you put that all together, all the things our Conservative government is doing to help Canada’s families to get ahead, the average family now has more than six and a half thousand additional dollars in their pocket. That’s equivalent, by the way, to what Canadian households will spend every year on groceries.”
But does the average Canadian family actually save $6,500 because of the Harper government’s initiatives? Let’s go through it.
Who is average?
When asked about the source of Harper’s statement, the Conservative Party pointed to a chart in the 2015 budget.
In this chart, the fictional couple “Henry” and “Cathy” are used to illustrate the impact of nearly 10 years of Conservative tax measures on a “typical two-earner family of four.” Henry makes $84,000 a year, and Cathy makes $36,000, for a round total of $120,000 a year.
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This is hardly typical.
According to Statistics Canada, the average Canadian family made $88,905 in 2013 (all figures here have been adjusted to 2015 dollars). The difference becomes much more pronounced when you look at the median family’s earnings: $79,162. So Henry and Cathy make a full $40,838 more than the median family.
Henry and Cathy are even making a lot compared to the average Canadian couple, which made $95,236 in 2013, or the median employment income of a dual-earner couple with two kids: $105,428.
And why might you want to look at the median instead of the average? In this case, incomes can be greatly skewed by a few very high-income households. For this reason, many analysts prefer to use the median – the amount made by the household right in the middle.
It’s worth noting that the “Henry and Cathy” example was roundly criticized when the budget first came out too. So by many different measures, Henry and Cathy are above average.
Income-splitting
The other interesting thing about Henry and Cathy is the difference in their incomes. Henry makes $48,000 more than Cathy. This means that their family stands to benefit quite a bit from the recently-introduced income-splitting measures, as they’re in different tax brackets.
The Department of Finance calculates that Henry and Cathy got $1,865 from income-splitting.
If Henry and Cathy both made $60,000, they wouldn’t benefit much from this measure, according to an analysis by the Parliamentary Budget Office.
And, according to that same report, only 15 per cent of Canadian households stand to benefit from income-splitting. So, again, Henry and Cathy aren’t especially average.
Other tax credits and changes
The Department of Finance calculates the amount that Henry and Cathy save from GST cuts as $1,018. The couple also benefits by claiming the full amount for the Children’s Fitness Tax Credit ($1,000 per child), the Children’s Arts Tax Credit ($500 per child), and the Child Care Expense Deduction ($8,000 for their younger child and $5,000 for the older child). They also get the Universal Child Care Benefit: $1,920 for their younger child and $720 for their older one.
Henry and Cathy also take public transit, says the Department of Finance, so they claimed $1,150 from that, an amount “based on the projected average claim for two-earner couples with children in 2015.”
So here’s why it matters that Henry and Cathy have higher incomes than most: a higher-income family is more likely to be able to afford to put their children in art or fitness programs (since they have to pay up front and get the tax credits later) and they are also likely to spend more in general, therefore saving more GST than a family that spends less, if you’re looking at total dollar amounts. And that’s aside from the income-splitting issue.
A 2014 report from the Parliamentary Budget Office found that personal income amount changes benefit higher-income households the most in absolute dollar terms.
In relative terms, middle-income households do better, but that’s not what the Henry and Cathy example is looking at. In fact, the PBO found that in general tax changes between 2005 and 2014 have benefitted low-middle income earners the most as a proportion of their total household income. So it’s not all bad news if you don’t make as much money as Henry and Cathy.
Grocery bill
And will $6,500 cover the average Canadian grocery bill? Turns out, yes. According to Statistics Canada, in 2013, the average household spent $5,950 on food purchased from a store (excluding restaurants).
Sources: Statistics Canada CANSIM 111-0009, 111-0020, 111-0016, 203-0028, Parliamentary Budget Office, and Department of Finance, Budget 2015 and emails. The Department of Finance was unable to verify all figures calculated by Global News because of the election period, according to a spokesperson, though they did say that the figures “appear representative” of publicly-available information.
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