Financial Impacts of Budget 2016 Measures on Selected Families with Children

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Summary
The Member of Parliament for Elgin-Middlesex-London, Mrs. Karen Vecchio, requested the PBO to provide an analysis of the impact of Budget 2016 measures for eight types of families with children:

·         Family 1:  Two-income family with two children aged five and under.  One earns $20,000 and the other earns $54,000. 

·         Family 2:  Two-income family with two children aged 10 and 12.  One earns $20,000 and the other earns $54,000. 

·         Family 3:  One-income family with two children aged five and under.  Employment income: $89,000.

·         Family 4:  One-income family with two children aged 10 and 12.  Employment income: $89,000.

·         Family 5:  Two-income family with two children aged five and under.  One earns $60,000 and the other earns $120,000.

·         Family 6:  Two-income family with two children aged 10 and 12.  One earns $60,000 and the other earns $120,000.

·         Family 7:  One-income family with two children aged five and under.  Employment income: $250,000.

·         Family 8:  One-income family with two children aged 10 and 12.  Employment income: $250,000. 

These families are not necessarily representative of the population.

The Budget 2016 measures analyzed for the families in this report include the:

1.       Change in personal income tax rates

2.       Repeal of Family Tax Cut credit

3.       Change in the Children’s Fitness and Children’s Arts tax credits

4.       Replacement of the Universal Child Care Benefit and Canada Child Tax Benefit by the Canada Child Benefit

5.       Adjustment of the Charitable Donation tax credit

PBO estimates that the Budget 2016 measures will increase disposable income for Families 1 to 4.  This is largely due to the increase in the total income for these families from the introduction of the Canada Child Benefit (see table below). The reverse is true for families 5 to 8, where families with older children will have a bigger loss in disposable income from Budget 2016 than families with younger children. 

Making all children’s benefits non-taxable and reducing of the second bracket tax rate to 20.5% will decrease total federal taxes for all eight families.  However, this will be more than offset by the increase in federal taxes due to the repeal of the Family Tax Cut credit for all families except Families 1, 5 and 6 (see table below).

Impact on disposable income from Budget 2016 measures to selected families with children