Financing the Canada Child Benefit

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Financing the Canada Child Benefit
  • This essay examines the extent to which current versus future taxes (i.e., borrowing) are being used to finance the expanded Canada Child Benefit (CCB).
  • Prior to the Liberals’ introduction of the CCB in 2016, in 2015 the previous federal government had planned a major expansion of the predecessor programs to the CCB, increasing their collective cost from $14.3 billion to $18.0 billion in 2015-16, an increase of 25.9 percent.
  • The CCB replaced existing programs with a single, tax-free payment to eligible parents with children under the age of 18. The benefits were increased for most families, particularly those with middle-income.
  • In 2016-17 (the first full year of the CCB), the program cost $22.1 billion, 22.8 percent higher than the expected costs for the previous programs (post expansion). Between 2016-17 and 2019-20, the CCB has cost a cumulative $20.0 billion more than its predecessor programs.
  • Using the 2015 budget as a baseline for federal finances, there was a transition from an expected cumulative $11.7 billion surplus over the 2016-17 to 2019-20 period to an actual cumulative deficit of $77.1 billion.
  • The transition to deficits (borrowing) cannot be explained by lower revenues during the 2016-17 to 2019-20 period. The revenues collected during this period are almost exactly the same as in Budget 2015: $1.274 trillion versus $1.281 trillion. Put differently, the cumulative revenues collected by the Trudeau government are only $7.0 billion lower (0.6 percent) than were budgeted in 2015.
  • The federal government has also benefitted from lower interest costs of $26.2 billion over this time.
  • Simply put, the federal government financed the expansion of the CCB by deferring taxes (i.e., borrowing). Given the pre-recession expectation that the federal budget would not be balanced until at least 2040—which has worsened post-recession—future generations will bear the costs of the current CCB expansion.
  • This effectively means that the children of the parents receiving the CCB transfer will bear the costs of the current transfer.

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