Canada’s Allowance for Parents Is Like The Child Care Tax Credit, But Way Better

In doing so, they lifted 278,000 families out of poverty.

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A mailbox full of cash

In 2016, Canada introduced an income-tested benefit called the Canada Child Benefit. The benefit — which represented an increase in actual funds over the previously existing welfare plans that helped parents and families — subsequently lifted some 278,000 Canadian kids out of poverty. The Liberal party, who introduced the first expansion of the CCB, also just announced boosting the benefit to help babies — by giving families who have kids under one up to $1,000 more in real dollars by increasing the benefit by 15 percent per kid — and a 15-week paid leave for adopted parents, giving adopted parents the same benefits as those who have their kids through childbirth.

When asked about the plan, Canadian PM Justin Trudeau said: “No one should have to choose between their paycheck and their family, a choice that moms are still confronted with more than dads. People should be focused on spending time with their baby, not worried about how they’ll pay their bills.” Sold.

The plan is good — it clearly worked, and it worked quickly. But south of the Canadian border, American politicians haven’t made a similar program happen for their parents. Why not?

The United States has historically favored the older electorate over young people, their children, and working parents. As a result, American parents see slim benefits and none in the form of monthly cash. While the US has historically preferred in-kind benefits (such as food stamps and housing vouchers) over giving parents money, the CCB’s success should wash those concerns way: after the CCB was introduced, Canadian families saw about $200 more in CCB payments in 2017 and $500 more in 2019 and were given that money, tax free, every month, as though it were a monthly bonus or a small paycheck. And yes, the benefit payments are adjusted to increases in the cost of living and the qualification threshold for families also adjusts alongside the rising costs of living. In 2019, the max amount a family saw in benefits was almost $7,000. As the plan is limited to parents who make $30,000 a year or less, $7,000 is almost an extra third of their income. That’s a huge deal.

And because they CCB is given to parents monthly, families can budget their own finances with dignity. The benefit will likely soon be indexed to inflation, as well, meaning that the real value of the benefit would not change much over time — something that policy makers in the United States have failed to do when it comes to such benefits packages as Supplemental Nutrition Assistance for Needy Families (SNAP), the Child Care Tax Credit (CCTC), and Temporary Assistance for Needy Families (TANF). Those programs are largely annually appropriated and, in some cases, have not increased in real value or been indexed to inflation in decades — in fact, TANF funding is the same in non-inflationary dollars as it was when the program was introduced twenty years ago while it serves more people.

While plans like the Child Care Tax Credit exist, and are overwhelmingly popular, they are also only distributed at one point in the year — during tax refunds — and there are no CCTC benefits for the poorest Americans who have little to no income. Some parents who are receiving the CCTC use it to pay down debts they incurred over the year when paying for their children’s necessities. It would be much easier if they got that cash in hand monthly.

Politicians know this. There is more than one plan sitting on the House and Senate floors that would aim to be as beneficial to families as the CCB, and help more parents than just the very poor. A plan proposed in 2017 by Coloradan Democratic Senator Michael Bennet (who is still running to be the Democratic candidate for the presidency) and Democratic Senator from Ohio, Sherrod Brown was read twice and referred to the Committee on Finance. Nothing has happened since.

The American Family Act would expand the Child Care Tax Credit and, ultimately, make it look a lot more like the CCB. Today, the CCTC only gives families up to 1,000 a year who have an income; many poor people get little or none of the benefits. It is not indexed to inflation or to the rising costs of living. American families would get about $3,000 a year per child for kids 6 to 18 and over and $3,500 for families per child for kids 0 to 5. Instead of the CCTC, which gives families their refund in the yearly tax refund season, parents would get paid monthly, representing a real cash benefit that helps parents plan their own spending and pad their incomes to make sure that they can get by each month.

While the real cash benefits of the plan go down for higher earners, single parents who make $75,000 a year and married parents who make $110,000 would still see cash benefits, with benefits tapering off at any higher income than that. For the average middle class family, who takes home about $40,000 to $100,000 per year, real cash benefits would be enormous. And for the very poor, the poverty rate would drop nearly in half: the poverty rate among kids would drop from 16.1 percent to 8.9 percent.

There are other plans in motion in the United States — in Stockton, California, a program is being piloted that gives 125 families $500 a month to spend how they need and see fit. California expanded their Earned Income Tax Credit to give parents more money for the work of parenting. State-wide governmental paid family leave plans pay parents to stay home with their kids for the first few months of their lives at no cost to the employer. These plans both in the United States and abroad show a real shift in the way government officials and policy makers think about cash benefits. While cash benefits are still mired in the racist, paternalistic concerns that poor people don’t know how to spend their money, real proposals being put forth that just give parents cash are becoming increasingly popular. That’s a big deal.

The plan, like the plan in Canada’s, is expensive. But what’s also expensive is parents going into personal debt to buy necessities for their children; or choosing not to have children at all due to the financial constraints they are placed under. It is expensive to continue to give supplemental assistance programs that aren’t indexed to inflation or haven’t seen even a real cash increase in decades and force parents to work 80 hours a week at minimum wage jobs just to survive. It’s expensive for the average parent to spend a third of their income on child care while they work. Canadian government clearly saw this weighing on their parents and did something about it. It’s time we did, too.

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