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Federal budget child-care tax break causes new headache for feds

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Scoffield, Heather
Publication Date: 
10 Mar 2010

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The federal budget's key anti-poverty measure cures one headache and causes another.

Changes to the tax treatment of the $100-a-month Universal Child
Care Benefit to help single-parent families "will create new
inequities," says the Caledon Institute of Social Policy, an
Ottawa-based think-tank known for its work on social security.

Critics of the benefit have long complained that it is subject
to income tax, penalizing single-parent families in particular. Last
week's budget acknowledged that, until now, single-parents could end up
paying more tax on their $100 per child benefit than a two-parent
family with the same income.

The budget set out to address the problem by allowing
single-parent families to claim the payments as income for their
dependents. The new measure means most single-parent families will
likely avoid paying any tax on their $100 because the money will be
claimed as their children's income.

But the change means two-parent families will end up paying more
taxes on their benefit than single-parent families of the same income.

"This is patently unfair," says the Caledon Institute. "So the
UCCB will remain a complicated and virtually incomprehensible social
program in terms of its real as opposed to apparent value to families."

Officials at the Department of Finance said the change was
intended to ensure consistent tax treatment between two-parent and
single-parent families, since single-parent families can't take
advantage of a spouse's lower income to claim the benefit.

The Caledon Institute, like many other social policy groups, has
opposed the benefit from the start. But even the conservative Institute
of Marriage and Family Canada, which is supportive of the scheme, sees
the inequity in the recent changes.

"It doesn't solve the problem," said executive director Dave
Quist. He hopes the measure is merely the first step toward income
splitting for all families.


- reprinted from the Canadian Press