As the cost of childcare continues to weigh heavily on many Canadian families, the Ontario government announced its proposed plan to help low- and middle-income families deal with financial stress.
The Progressive Conservative’s Ontario Childcare Access and Relief from Expenses (CARE) tax credit, announced Thursday in the province’s budget, is set up to allow parents to decide what childcare options work best for them, according to Finance Minister Vic Fedeli.
But some childcare advocates are sounding the alarm, saying the rebate program does not go far enough in helping families covering skyrocketing costs.
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How does the CARE tax credit work?
The CARE tax credit is based on a sliding scale for families earning up to $150,000 in household income each year. Families earning $20,000 or less per year will qualify for 75 per cent of eligible expenses per child.
Under the tax credit, families with children under seven would receive up to $6,000 and children between seven and 16 would receive $3,750. Children with a severe disability would receive up to $8,250.
For example, a couple earning a combined $150,000 with two children under seven would receive $160 under the CARE tax credit. A couple earning a combined $80,000 with two children under seven would receive $6,240.
Families have to keep receipts for the childcare expenses and can start to claim the tax credit starting with the 2019 tax year.
The Ontario government said it’s worth an average of $1,250 per family and can be used for many childcare options, like in-home daycare and camps.
On top of this, the province is also pledging up to $1 billion over the next five years to create 30,000 new child-care spaces.
“The CARE tax credit would be one of the most flexible child care initiatives ever introduced in Ontario. It is a plan to put parents, and not the government, at the centre of the child care decision-making process,” Fedeli said in a statement.
“We want parents to be able to choose the kind of care that is best for their children so that they can go to work, run a business, or study to acquire new skills.”
Will it close the childcare affordability gap in Ontario?
Ontario is one of the country’s most expensive childcare markets. In Toronto, the median cost for childcare is $1,685 a month or $20,220 a year, according to the Canadian Centre for Policy Alternatives.
Of course, childcare fees vary by region and the child’s age. For childcare centres, the average infant fee varies from $51.00 per day in northern Ontario to $85.00 per day in Toronto. For toddlers, the range is from $42.00 to $66.00.
Because the cost of childcare is so high, Carolyn Ferns with the Ontario Coalition for Better Child Care, said the tax rebate does not help a lot, even for the lowest income families.
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“The total amount you can get tops at around $6,000. And the government claims it covers 75 per cent of costs, which means you have to find childcare that costs $9,000 a year,” she said. “This is far below the medium infancy rate of $20,000 in Toronto or $12,000 in Ottawa.”
For example, if a low-income family finds a childcare centre that charges $20,000 a year, the tax credit would leave them with $13,250 to cover on their own.
In a blog post in the Conversation, Gordon Cleveland, an associate professor of economics at the University of Toronto, said the tax credit will not be enough to close the affordability gap.
“The current child care subsidy system in Ontario calculates that families earning below $35,000 can afford to pay no more than $1,500 in total for child care annually,” he said.
Ferns said many lower-income families will still rely on subsidized daycare, something she is afraid the Ontario government may slash.
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“The budget did not outline what will happen to subsidized childcare or the early childhood educator wage grant. If these programs are cut, daycares may have to raise their fees and parents will lose subsidies,” Ferns said.
Ferns said another problem with the tax credit is the need to pay upfront costs before you get the money back. And because many families live paycheque to paycheque, this credit may not be a reality.
However, the Ontario government said starting in 2021, the credit families can apply for advance payments.
What about other provinces?
A 2019 study of childcare fees in Canada by the Canadian Centre for Policy Alternatives argued the best way for provinces to tackle unaffordable childcare costs is to cap fees and make up the difference with operational funding.
David MacDonald, a senior economist with the Canadian Centre for Policy Alternatives, said three provinces have intervened in childcare and set fees at lower costs than the market rate.
Quebec, Manitoba and P.E.I. have lowered the costs for residents by setting a maximum price, MacDonald said. Thee other provinces are mulling similar moves — Alberta, Newfoundland and Labrador and British Columbia.
During the Alberta 2019 election campaign, the NDP’s said if the party is re-elected, they will cap childcare fees at $25 a day. And the B.C. NDP government recently unveiled a $10-a-day childcare ‘prototype.’
“They’re making up the difference as a transfer to providers,” he noted. “In the Canadian context, that appears to be the most effective way of reducing childcare fees for parents.”
He cited Montreal as an example, where the average daycare cost is around $200 per month.
How much will CARE cost the province?
The Ontario Tories said the tax rebate is expected to cost the province around $389 million per year.
But a recent C. D. Howe study of the proposed childcare rebate said the actual costs may reach more than $1 billion.
“What parents will be getting is small, but the spending is huge,” Ferns said. “So why not put money into strengthening a childcare system, such as capping fees?”
— With files from Global News’ Maham Abedi and Andrew Russell