A made-in-Alberta child-tax benefit would reduce cost of poverty: Investment in poor would pay dividends to society, economy

John Kolkman, Opinion Editorial
Edmonton Journal, March 16, 2010

Alberta has experienced a modest drop in child and family poverty in recent years due to a strong economy and some reinvestment in social programs. Yet the 2006 federal census, taken at the height of the economic boom, found that 77,595 Alberta children (over one in 10) continued to live in poverty.

Moreover, even these modest gains will be put at risk if the Alberta government makes the wrong choices in its upcoming budget.

The government of Alberta should consider investing in a refundable child-tax benefit for low and modest income Alberta families. Alberta would thereby join several other provinces that have their own child-tax benefits to supplement federal child tax benefits.

Child-tax benefits (including the supplement for low-income families) already contribute significantly more to alleviating poverty than provincial social assistance payments. Introducing a parallel Alberta benefit — is the single-most important social policy innovation that would put a significant dent in the number of children living in poor families.

Refundable child-tax benefits have numerous advantages.

Unlike social assistance, there are no complicated rules stigmatizing low-income families.

Eligibility is determined by the Canadian Revenue Agency based on filing a tax return with benefits directly deposited into the family’s bank account.

Child-tax benefits are available to all families regardless of the source of income — working poor as well as those on income support. Lowincome families receive the maximum benefit, and benefit levels are gradually reduced as family income rises.

By piggybacking on existing federal child-tax benefits, an Alberta benefit could be introduced at no additional administrative cost.

At first glance, it may seem counter-intuitive to advocate a new spending initiative at a time the provincial government’s finances are tight. The last time the Alberta economy hit some turbulent waters back in the early 1990s, the government responded by making deep cuts to social programs including social assistance, affordable housing and benefits to Albertans with disabilities.

The results were predictable. Homelessness soared. Poverty spiked.

So did the number of children in government care. This time around the Alberta government must make better choices.

Investments in poverty reduction generally, and an Alberta Child Benefit specifically, would help stimulate the Alberta economy. Lower-income Albertans will spend increases in social benefits on necessary goods and services, thereby creating jobs and economic activity.

Fortunately, the Alberta government is in a much stronger budgetary position today than during the early 1990s.

By the time of the deep cuts of 1993, the then Getty government had been running multibillion dollar budget deficits since the mid-1980s.

By contrast, until this year, there has been a spectacular run of consecutive multibillion-dollar budget surpluses.

Some of these surpluses were deposited in a short-term savings account called the Sustainability Fund.

According to the most recent quarterly financial update, $13.3 billion is still forecast to be available in the Sustainability Fund even after covering last year’s deficit.

This fund is purposely designed as a short-term savings account to be used to cover the kinds of sudden and short-term declines in government revenues as are currently being experienced.

The government of Ontario adopted a poverty-reduction strategy in December 2008 which calls for a 25-per-cent reduction in child poverty over five years, thereby lifting 90,000 Ontario children out of poverty.

A cornerstone of Ontario’s strategy is more than doubling its refundable child tax benefit.

By July 2010, low and modest income Ontario families will receive up to $1,310 a year per child at a total annual cost to the provincial Treasury of $1.3 billion. I

If Ontario — facing much more severe budgetary challenges — can make a firm commitment to its children, surely Alberta can.

Assuming comparable benefit levels, and adjusted for differences in population, the corresponding cost to the Alberta treasury would be a relatively modest $350 million per year.

Failing to invest today in reducing child and family poverty in this province will only lead to even higher societal costs down the road. Based on a recent study in Ontario, persistent poverty could be costing the Alberta economy $8 to $10 billion a year in lost economic potential and extra costs for services like ambulances, hospitalization, child welfare, policing and corrections.

Including strategic investments in poverty reduction like an Alberta Child Benefit would pay dividends for all Albertans in the long-term.