OTTAWA — Is it better to be paid in credit or with cash?
That’s a question Liberals and Conservatives tussled over Tuesday in the ongoing federal election competition for the votes of middle-class families.
The Liberals promised an expansion to existing child and parent benefit programs, including a pledge to make maternity and parental benefits tax-free, effectively one-upping their Conservative rivals who’d made a similar pitch last week.
For the Liberals, the promise came in the form of a commitment to removing the taxes from the benefits.
“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 an event in St. John’s, N.L.
The Conservatives, who have also claimed to be making the benefits tax-free, are promising a tax credit. So parents would still see their benefits taxed by the government, but they’d get a tax credit in return.
The duelling pitches underscore the differing ideological approaches taken by the parties on how best to woo voters.
Since the campaign began last Wednesday, the Conservatives have focused nearly exclusively on promising a wide array of tax cuts.
By contrast, the Liberals have focused on increased program spending and, in the case of benefits for families, straight cash — both in taking the taxes off the benefits, and via the promise Tuesday to expand the existing Canada Child Benefit to give more money to parents with children under the age of one.
Conservative Leader Andrew Scheer argued the Liberals were in fact adopting a Tory tone by expanding the CCB.
The CCB sends parents a monthly cheque if their income is below a certain threshold. Under the previous Conservative government, there had been a similar program that saw all families — regardless of income — also receive a monthly payment.
“That is a Conservative principle, knowing that moms and dads make choices for their kids better than bureaucrats in Ottawa,” Scheer said at an event in Winnipeg.
He was there to promote his latest policy idea, a commitment to increase the amount of money the federal government puts into Registered Education Savings Plans. Like several others so far this campaign, it’s an updated version of something the Conservatives promised in 2015.
But behind-the-scenes, Scheer’s team was working furiously to explain why their parental benefit package was better then Trudeau’s. They’d already come under criticism for calling it “tax free,” as the benefits actually remain taxed.
In a background document circulated to reporters, they argued that with a 15 per cent tax credit applied across the board, people would benefit from the program equally, and in some cases see their tax savings be higher than the amount of money that’s currently deducted for taxes on the benefit cheques.
An analysis of their approach by Lindsay Tedds, a professor at the University of Calgary’s School of Public Policy, found that to what extent their tax credit actually benefits families depends on a host of factors, including other sources of income and other available tax credits.
How the Liberals plan would benefit families is also nuanced.
The Liberals did not explain Tuesday how they will structure the program, which would required overhauling tax laws. But if the benefits are tax-free, it may mean they won’t be considered income at all, much like the current Canada Child Benefit. So at tax time, they wouldn’t be counted towards a person’s overall tax burden, said Jennifer Robson, a professor at Carleton University.
“You end up with a ripple effect — not only are you saving the taxes on EI, but then the effective tax rate on all your other income also drops,” Robson said.
In turn, the Liberal promise could benefit those with higher incomes more than those in lower brackets, in terms of tax savings.