While both parties are making a pledge to make benefits for new parents tax-free, each party’s proposal includes different timetables for how quickly parents would see that relief from the government.
The Conservative plan
WATCH ABOVE: Conservatives propose new tax cuts
Andrew Scheer’s Conservatives say that, if elected, his government would give new parents a non-refundable tax credit of 15 per cent on employment insurance (EI) benefits, essentially eliminating the federal portion of the taxes.
The Conservatives have said that a person earning a salary of $50,000 would save about $4,000 under this plan. The Parliamentary Budget Office (PBO) has estimated this proposed tax credit would cost $600 million in lost revenue in the first year alone.
Scheer is also promising to increase Ottawa’s contribution towards registered education savings plans (RESPs) from 20 per cent to 30 per cent for every dollar families put in up to $2,500 per year.
“The government shouldn’t tax parents for the time they take to care for and bond with their new child when they’re already making such a huge sacrifice,” Scheer said at a press conference. The plan would include a carry-forward provision, meaning that unused tax credits can be used in the future.
The Conservatives also announced this week two 15 per cent refundable tax credits aimed at helping families enroll their children in sports and the arts. The boutique tax credits were first introduced by former Conservative prime minister Stephen Harper and later axed by Trudeau.
The Liberal plan
WATCH ABOVE: Trudeau pledges to boost Canada Child Benefit
Trudeau announced Tuesday that the Liberals will take the Conservative promise a step further by making maternity and parental leave benefits tax-exempt at source, meaning that no federal taxes would be taken off EI cheques when parents receive them.
“You’ll get every dollar right when you need it since no taxes will be taken off the EI cheque when new parents receive it,” Trudeau said at a parent-and-child centre in St. John’s, N.L.
The Liberal plan would only apply to the federal portion of EI taxes.
The Liberals are also promising that, if re-elected, they would increase the Canada Child Benefit by 15 per cent and create a 15-week leave program for adoptive parents. They’ve pledged to work with the provinces to create a guaranteed paid family leave for parents who don’t qualify under EI, as well.
The proposed measures would cost about $800 million in 2020-21, rising to $1.2 billion in 2023-24, according to Liberal party calculations. The PBO has not yet released its costing estimate on this measure.
The difference between that Liberal proposal and Scheer’s non-refundable tax credit is that, with Trudeau’s tax-exempt plan, families will see the income a year earlier.
What the experts are saying
Lindsay Tedds, an economist at the University of Calgary’s School of Public Policy, said the Liberal proposal would be lot “cleaner” to implement and would help parents when they are on a reduced income.
“People will understand it. They get the income, it’s tax-free, and they don’t have to worry about what happens to them at tax time,” Tedds told Global News.
“You get the immediate benefit in the year you are on parental leave.”
And while there are few details, the Liberals’ proposed guaranteed paid family leave could be a “game-changer” for Canadian families, Tedds said. Under the current system, a claimant must have accumulated at least 600 hours of insurable employment to qualify.
“Fifteen to 20 per cent of parents don’t qualify for EI,” she said. “We could actually have a universal parental leave system. That is huge.”
Jennifer Robson, a professor of political management at Carleton University, said higher-income Canadians generally stand to gain the most from tax credit incentives as the Conservatives have proposed.
“Bottom line is that even with the carry-forward provision the Conservatives built in, it could take somebody about two years to get the full value of the credit,” Robson said.
“However, neither of the proposals is actually expanding on EI coverage.”
Robson said the two 15 per cent non-refundable tax credits proposed by the Tories don’t actually help people access sports or arts programs.
“They reward parents for paying for lessons they would already pay for,” Robson said.
Aaron Wudrick, federal director of the Canadian Taxpayers Federation, praised both parties for plans that leave money in the hands of new parents.
“I’m glad that the parties seem to be settling on the idea it’s better to try and leave the money in the parents’ hands and see what works best with them,” Wudrick said.
Global News reached out to the Conservatives for comment on criticism around the party’s tax credit proposals but did not receive a response.
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