Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2021: part 9

Gender-Based Analysis Plus of Federal Personal Income Tax Measures: Impacts by Identity Factors other than GenderFootnote 1

1. Introduction

The Canadian Gender Budgeting Act was passed by Parliament in December 2018, enshrining the Government’s commitment to decision-making that takes into consideration the impact of policies on all types of Canadians. Among other things, the Act legislated a commitment that the Minister of Finance make available to the public analyses on the gender and identity impacts of tax expenditures. Pursuant to this requirement, the 2019 and 2020 editions of the Report on Federal Tax Expenditures (RFTE) included Gender-based Analysis Plus (GBA+) studies of existing personal income tax (PIT) expenditures. The main objectives of the 2019 study were to examine the overall impact of the federal PIT system on the distribution of income between men and women as well as the allocation of individual federal PIT expenditure benefits by gender and intersecting identity factors. The 2020 study complemented the first GBA+ by looking at how male and female spouses actually claim tax expenditures with family components – tax reliefs that can be used by either or both spouses or that are tied to the family situation – and how the selected benefit-sharing assumptions within couples impacts GBA+ results.

While the focus of the 2019 and 2020 GBA+ studies was on the impacts of the PIT system by gender, this year’s study focuses on differential impacts by other identity factors. It looks at the intergenerational, income distribution and interregional impacts of federal PIT measures independently of gender. In particular, the study examines whether the global PIT system and a set of individual tax expenditures benefit certain taxfilers more than others based on age group, income group, family type and area of residence.Footnote 2

The study is organized as follows. Section 2 presents details on data and scope of the analysis, describes the methodology used and discusses the identity factors considered with a statistical profile of taxfilers. Section 3 presents detailed results of the analysis by age group, income group, family type and area of residence and ends by providing a summary table of the results. Section 4 concludes the paper.

Background

2.1 Data and Scope of Analysis

This year’s GBA+ is primarily based on 2018 T1 return data, the most recent complete personal income tax dataset. It also uses Canada Child Benefit (CCB) and Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit 2019-2020 payment information, which is based on the income that filers reported in their 2018 tax returns. A merge with Statistics Canada’s Postal Code Conversion File (PCCF) was also performed to determine the area of residence of 2018 filers. By merging the postal codes reported on the identification box of 2018 tax returns with the PCCF, November 2019, information on their geographical location could be obtained (i.e., the standard 2016 Census geographic areas where their postal codes belonged – inside or outside census metropolitan areas (CMAsFootnote 3)).Footnote 4

The list of PIT expenditures under review includes those for which the main beneficiaries are identifiable in 2018 T1 return data and for which a breakdown based on identity factors can be performed. Registered plans were excluded from the analysis due to incomplete information.Footnote 5 Tax expenditures that mainly benefit taxpayers who are not resident individuals (e.g., non-profit organizations, other levels of government, non-residents) were also excluded due to the impossibility of identifying the sociodemographic characteristics of these beneficiaries.

The group of expenditures that has been retained for the analysis is essentially the same as the one studied in the 2019 GBA+, which was based on 2016 data. New expenditures in the analysis include the Canada Caregiver Credit, which was introduced in 2017, and the Investment Tax Credits, which had previously been excluded due to the difficulty of breaking down the variety of credits available (e.g., the Mineral Exploration Tax Credit, Apprenticeship Job Creation Tax Credit and Investment Tax Credit for Child Care SpacesFootnote 6). The Tuition Tax CreditFootnote 7 was also split in two parts, i.e., the part claimed for tuition incurred by a taxpayer and the part transferred from a dependant. The most recent data was also detailed enough to allow the inclusion of four additional employment expense deductionsFootnote 8:

Measures that have been replaced or repealed since 2016 are not part of the current analysis (e.g., the Children's Arts Tax Credit).Footnote 9

2.2 Methodology

As in the 2019 GBA+, this study will first focus on the overall impact of the federal PIT system on the redistribution of income across filers of different age groups, income levels, family types and areas of residence. Second, it will examine whether a selected set of individual PIT expenditures provide a relatively higher benefit to taxfilers in these specific identity groups.Footnote 10

To examine whether the global federal PIT system redistributes income between groups, it begins by comparing various concepts of income and tax payable. In order to have a redistributive impact toward a specific identity group, the federal PIT system has to:

It then examines the impacts of individual PIT expenditures by calculating statistics on the number of beneficiaries as well as on the total amount of benefits received for each of the tax expenditures considered by age group, income group, family type, and area of residence.

In order to control for pre-existing income inequality between identity groups (i.e., before the application of the federal tax system), ratios of the share of total benefits received by each group relative to their share of total pre-tax income were derived. These ratios identify the proportion of total benefits of a tax measure that goes to a particular group of taxfilers in relation to the proportion of total pre-tax income reported by this group. Drawing conclusions based on these ratios allows a distinction between the impact of the tax system and the impact of pre-existing differences in income earned by the different identity groups. It is worth noting that ratios were derived based on the assumption that tax expenditures benefit only taxfilers who claim them on their income tax return.

2.3 Identity Factors under Review

Table 1 shows the identity factors under review in this analysis and provides details on their categorization. The GBA+ analytical framework published in Budget 2018 suggests taking into account intersecting identity factors that go beyond biological differences (sex) such as race, ethnicity, sexual orientation or gender identity.Footnote 13 However, tax data does not allow such distinctions to be made.Footnote 14 The current impact analysis is limited to sociodemographic characteristics that are available in tax data.

Table 1
Details on the identity factors under review
Age group Adjusted1 pre-tax family income2 quintile Family type3 Area of residence
Under age 35 Quintile 1 (Min – $17,823) Sole filer
(filer not in a couple)
Remote
(small and rural communities)
Age 35 to 54 Quintile 2 ($17,823 – $32,927) Sole parent4
(sole filer with children)
Urban
(census metropolitan areas)
Age 55 and over Quintile 3 ($32,927 – $53,073) In a couple without children  
  Quintile 4 ($53,073 – $82,246) In a couple with children  
  Quintile 5 ($82,246 – max)    
1 Total adjusted family income is a more appropriate indicator of the socio-economic status of individuals since it accounts for the fact that family needs increase with family size. In the current study, the adjusted family income of an individual is obtained by dividing his/her total pre-tax family income by the square root of his/her family size.
2 Pre-tax income includes all income for federal tax purposes, with the following adjustments: a) plus the non-taxable portion of capital gains; b) less the gross-up of dividends received; c) less the split pension income amounts transferred from a spouse; and d) less the net capital losses incurred during the year and those carried over from prior years.
3 Family type only considers whether the taxfiler has a spouse or partner (filing or not) as well as whether he or she lives with children under 18 on December 31, 2018. It does not consider whether he or she lives with other relatives.
4 The presence or absence of children under 18 is determined based on reported children’s birthdates.
Source: T1 return data, 2018 for determining the upper limits of each quintile.

Among the 58 measures retained for the current study, a minority of them specifically target some of the identity groups under review. Table 2 identifies 17 measures that target some of these groups. For instance, five measures aim to benefit seniors or pensioner filers, namely the non-taxation of Guaranteed Income Supplement and Allowance benefits, Age Credit, Home Accessibility Tax Credit, Pension Income Credit and pension income splitting. Therefore, it will not be surprising to observe that these measures particularly benefit these groups of filers.

Table 2
Federal PIT expenditures that directly target individuals in specific identity groups, 2018
Lower-income filers Older filers Filers in a couple Filers not in a couple Filers with children Residents of remote areas
Non-taxation of Guaranteed Income Supplement and Allowance benefits Spouse or Common-Law Partner Credit   Adoption Expense Tax Credit Northern Residents Deductions
Non-taxation of social assistance benefits Age Credit Unused credits transferred from a spouse or common-law partner   Child Care Expense Deduction  
Goods and Services Tax/Harmonized Sales Tax Credit Home Accessibility Tax Credit   Eligible Dependant Credit  
Refundable Medical Expense Supplement Pension Income Credit     Canada Child Benefit (CCB)1  
Working Income Tax Benefit Pension income splitting     Tuition Tax Credit (transferred from a dependant)  
1 The CCB targets filers with children living in low- to middle-income families.

2.4 Profile of Filers

Table 3 provides an overview of the distribution of 2018 taxfilers by gender and the four identity factors considered in this study. More than 28 million individuals filed a 2018 Canadian PIT return, of which 48.5% were men and 51.5% were women. About 40.2% of them were aged 55 years or more while 27.8% were under the age of 35. The remaining 32.0% were between 35 and 54 years. A fifth of them (bottom quintile) reported an adjusted pre-tax family income below $17,823 whereas the adjusted pre-tax family income of another fifth of them (top quintile) was above $82,246. More than half of all filers (56.3%) lived in a couple that year. Of them, 34.8% had children under 18 in their family. In comparison, 8.2% of filers who were not in a couple had children under 18 in their family. While a majority of filers lived in urban areas (inside CMAs), close to 30% of filers resided in remote areas (outside CMAs).

It is important to mention that the four identity groups under review are not mutually exclusive. The probability of filers being in a given group does affect the probability that they are part of other identity groups. For instance, Table 3 indicates that filers under 35 years of age are considerably less likely to be living in a couple. They also have a significantly lower family income on average and they are slightly less likely to reside in a remote area.Footnote 15

Since the descriptive statistics presented in this study do not control for the interplay between these characteristics, it will be important to keep in mind that this interdependence may play a role in explaining some of the results obtained.

Table 3
Distribution and profile of Canadian taxfilers, by various identity factors, 2018
  Distribution by group (%) Average age (yrs. old) Avg. adj. family pre-tax income ($) % living in a couple % with children in their family % residing in a remote area
All taxfilers 100.0 48.9 59,080 56.3 23.1 29.1
Gender            
Men 48.5 48.2 61,540 58.3 21.1 29.5
Women 51.5 49.5 56,830 54.4 25.0 28.7
Age group            
Under age 35 27.8 25.9 36,610 30.0 20.4 25.9
Age 35 to 54 32.0 44.5 69,640 69.3 51.4 26.4
Age 55 and over 40.2 68.3 66,250 64.0 2.5 33.4
Family income quintile            
Quintile 1 (Min – $17,823) 20.0 37.0 8,960 25.4 19.2 26.6
Quintile 2 ($17,823 – $32,927) 20.0 54.9 25,000 42.6 17.8 32.7
Quintile 3 ($32,927 – $53,073) 20.0 50.7 42,970 60.3 25.6 31.9
Quintile 4 ($53,073 – $82,246) 20.0 50.3 66,430 72.2 28.3 29.8
Quintile 5 ($82,246 – max) 20.0 51.5 152,070 80.8 24.7 24.3
Family type            
Sole filer 40.2 44.6 39,350 0.0 0.0 27.4
Sole parent 3.6 39.0 25,880 0.0 100.0 33.4
In a couple without children 36.7 59.4 81,100 100.0 0.0 32.0
In a couple with children 19.6 40.7 66,510 100.0 100.0 26.2
Area of residence          
Remote (outside CMAs) 29.1 50.8 52,900 58.1 21.8 100.0
Urban (inside CMAs) 70.9 48.1 61,200 55.6 23.8 0.0
Notes: All shares have been rounded to the nearest tenth. Avg. adj. family pre-tax income amounts are presented in 2018 dollars, and have been rounded to the nearest ten amounts (except for the lower and upper limits of income quintiles). As a result, totals may not always add up.
Source: T1 return data, 2018 and the T1 return data, 2018 merged with Statistics Canada’s Postal Code Conversion File (PCCF), November 2019.

Results: Differential Impacts by Identity Factors other than Gender

3.1 Age Group

In 2018, individuals aged under 35 years represented 27.8% of all filers but reported 18.2% of total pre-tax income (Table 4). In contrast, filers aged 35-54 and 55+ years reported larger proportions of total pre-tax income (39.9% and 41.9% respectively) than the proportions of filers they represented (32.0% and 40.2%).

Table 4 suggests that the 2018 federal PIT system was globally redistributive toward younger filers since the share of total after-tax income held by filers aged under 35 years (19.1%) is higher than the share of total pre-tax income they reported (18.2%).

A comparison between various concepts of income and tax payable indicates that refundable credits are the main contributor of income redistribution toward younger filers. Filers aged under 35 years reported 18.9% of taxable income while their share of net tax payable after the payment of refundable credits was 7.9%. The tax rate structure also contributed to this trend but to a lesser extent.

Although the various income adjustments applied for tax purposes (i.e., exemptions, deferrals and deductions) especially benefit older filers, the proportion of net tax payable considering refundable credits that this age group had to pay (47.7%) was much higher than their proportion of taxable income (41.0%).

Table 4
Total number of filers and total amounts of various concepts of income and tax payable, by age group, 2018
  Number (#) / Amount in millions ($) Percentage (%)
  Under 35 35-54 55+ Under 35 35-54 55+
Total number of filers (#) 7,891,617 9,061,995 11,403,968 27.8     32.0 40.2
Total pre-tax income1 261,980 574,625 604,276 18.2 39.9 41.9
Total taxable income2 240,948 512,149 522,255 18.9 40.2 41.0
Total net tax payable 23,133 70,805 60,317 15.0 45.9 39.1
Total net tax payable after the receipt of refundable credits 9,407 53,106 56,927 7.9 44.5 47.7
Total after-tax income 252,573 521,520 547,349 19.1 39.5 41.4
Total change in the group's amount ($) and share (pp.3) of income before and after the application of the federal PIT system -9,407 -53,106 -56,927 +0.9 -0.4 -0.5
1 Refers to disposable personal income before the application of the tax system.
2  Refers to line 260 of the T1 return, i.e., the income used to calculate federal tax payable.
3 “pp.” stands for percentage points.
Source: T1 return data, 2018.

Table 5 identifies the individual PIT expenditures that contributed or not to this global income redistribution effect toward younger filers. For each of the selected tax expenditures, it presents the share of benefits received by each age group in comparison to the share of pre-tax personal income they reported. Resulting ratios enabled us to classify them in the following three categories:

Overall, the ratios show that a similar number of measures (among the 58 federal PIT expenditures examined in this study) provide a relatively higher benefit to each age group. Indeed, between 25 and 27 measures especially benefit younger, middle-age and older filers. The ratios also indicate an important overlap between the measures that mostly benefit younger and middle-age filers. Among the 37 measures that benefit proportionally more either younger or middle-age filers, 17 of these measures benefit both age groups. Ten exclusively advantage younger filers while a smaller number (6) exclusively advantage middle-age filers. In comparison, measures that especially benefit older filers are much more likely to exclusively advantage this age group (21 out of 25 measures).

Interestingly, even if filers of all age groups are equally likely to claim the credit for the Basic Personal Amount (BPA), the ratios indicate that the BPA is especially benefiting younger filers. Because the BPA is the same for everyone, it represents a higher ratio of pre-tax income for groups with lower pre-tax income such as younger filers. Similarly, some credits granted in recognition of costs related to employment, such as the Canada Employment Credit and the credits for Canada Pension Plan/Quebec Pension Plan (CPP/QPP) contributions and Employment Insurance/Quebec Parental Insurance Plan (EI/QPIP) premiums, are also of slightly greater benefit to younger filers, although younger filers do not necessarily work more than middle-age taxfilers. 

The ratios also highlight important differences in the types of expenditures that especially benefit each age group. As an illustration, Table 6 identifies the top five PIT expenditures for younger and older filers as per the ratios presented in Table 5 regardless of the total cost of each tax expenditure. While none of the top five measures for younger filers specifically target this population, they are all intended to compensate for the cost of activities that are typically performed in the early stage of adulthood, such as completing post-secondary education and getting a first home. Conversely, four of the five top measures for older filers are measures that directly target this population (i.e., the Age Credit, non-taxation of Guaranteed Income Supplement and Allowance benefits, Pension Income Credit and pension income splitting). Although the unused credits transferred from a spouse or common-law partner are not entirely directed to this age group, two of the five credits that can be transferred are (the Age and Pension Income Credits). By disaggregating the total benefits of this last measure, it can be observed that these two last credits make up the largest part of the claims, probably because older filers are more likely to be living in family types and income circumstances that allow for such types of transfers.

The Charitable Donation and Political Contribution Tax Credits are also part of the tax expenditures that are not directly targeted to older filers but still especially benefit them. This is also the case of the tax expenditures associated with:

Table 5
Ratios of the share of benefits received by filers relative to their share of total pre-tax personal income, by age group, 2018
Tax expenditures Ratios by age group Especially benefits
Under
35
35-54 55+ Under
35 Especially benefits Under 35
35 - 54 Especially benefits 35 - 54 55+ Especially benefits 55+
Exemptions            
Lifetime Capital Gains Exemption 0.54 0.70 1.48     YES
Non-taxation of Guaranteed Income Supplement and Allowance benefits 0.00 0.00 2.38     YES
Non-taxation of CPP/QPP contributions by employers 1.43 1.28 0.55 YES YES  
Non-taxation of EI and QPIP premiums paid by employers 1.53 1.25 0.53 YES YES  
Non-taxation of income earned by military and police deployed to international operational missions 2.60 1.26 0.06 YES YES  
Non-taxation of social assistance benefits 1.45 1.11 0.70 YES YES  
Non-taxation of workers’ compensation benefits 0.53 0.83 1.36     YES
Partial inclusion of capital gains 0.20 0.60 1.72     YES
Deductions            
Apprentice vehicle mechanics’ tools deduction 4.59 0.33 0.08 YES    
Capital loss carry-overs 0.10 0.54 1.83     YES
Child Care Expense Deduction 1.47 1.81 0.02 YES YES  
Deductibility of certain costs incurred by musicians or of expenses by employed artists 1.23 1.24 0.68 YES YES  
Deduction for clergy residence 0.46 1.14 1.11   YES YES
Deduction for tradespeople’s tool expenses 3.20 0.86 0.18 YES    
Deduction of allowable business investment losses 0.22 1.09 1.25   YES YES
Deduction of interest and carrying charges incurred to earn investment income 0.11 0.57 1.80     YES
Deduction of other employment expenses 0.81 1.38 0.72   YES  
Deduction of union and professional dues 1.28 1.32 0.57 YES YES  
Disability supports deduction 0.42 0.77 1.47     YES
Employee stock option deduction 0.32 1.22 1.08   YES YES
Moving expense deduction 1.49 1.40 0.41 YES YES  
Non-capital loss carry-overs 0.27 0.88 1.43     YES
Northern residents deductions 1.40 1.16 0.68 YES YES  
Partial deduction of and partial input tax credits for meals and entertainment 0.74 1.47 0.66   YES  
Rollovers of investments in small businesses 0.70 0.84 1.28     YES
Non-refundable credits            
Adoption Expense Tax Credit 0.86 1.96 0.15   YES  
Age Credit – for self 0.00 0.00 2.38     YES
Canada Caregiver Credit – for self 0.23 1.15 1.19   YES YES
Canada Employment Credit 1.75 1.09 0.59 YES YES  
Charitable Donation Tax Credit 0.28 0.66 1.63     YES
Credit for the Basic Personal Amount 1.48 0.86 0.93 YES    
Disability Tax Credit – for self and transferred from a dependant other than a spouse 0.35 0.92 1.36     YES
Dividend gross-up and tax credit 0.31 0.84 1.45     YES
Eligible Dependant Credit 1.18 1.85 0.11 YES YES  
First-Time Home Buyers’ Tax Credit 3.53 0.79 0.10 YES    
Foreign tax credit for individuals 0.58 1.03 1.15     YES
Home Accessibility Tax Credit 0.32 0.55 1.72     YES
Investment Tax Credits1 0.14 0.80 1.56     YES
Labour-Sponsored Venture Capital Corporations Credit 0.69 1.25 0.90   YES  
Medical Expense Tax Credit 0.33 0.61 1.66     YES
Pension Income Credit – for self 0.01 0.06 2.32     YES
Political Contribution Tax Credit 0.24 0.51 1.80     YES
Search and Rescue Volunteers Tax Credit 1.12 0.98 0.96 YES    
Spouse or Common-Law Partner Credit 1.11 1.35 0.62 YES YES  
Student Loan Interest Credit 3.86 0.70 0.04 YES    
Tax credit for CPP/QPP contributions by employed and self-employed persons 1.58 1.25 0.51 YES YES  
Tax credit for EI and QPIP premiums paid by employed and self-employed persons 1.66 1.21 0.51 YES YES  
Tuition Tax Credit – for self2 4.74 0.32 0.03 YES    
Tuition Tax Credit – transferred from a dependant other than a spouse 0.00 1.53 0.93   YES  
Volunteer Firefighters Tax Credit 1.75 1.17 0.51 YES YES  
Unused credits transferred from a spouse or common-law partner3 0.34 0.37 1.88     YES
Refundable credits            
Canada Child Benefit 2.18 1.48 0.04 YES YES  
Goods and Services Tax/Harmonized Sales Tax Credit 2.07 0.66 0.86 YES    
Refundable Medical Expense Supplement 1.75 0.97 0.70 YES    
Teacher and Early Childhood Educator School Supply Tax Credit 1.67 1.47 0.26 YES YES  
Working Income Tax Benefit4 2.77 0.88 0.35 YES    
Other refundable credits5 0.79 1.29 0.81   YES  
Other types            
Pension income splitting 0.00 0.04 2.34     YES
Notes: A ratio higher than 1.05 indicates that a group of taxfilers benefits from the tax expenditure proportionally more than others, and vice versa. Ratios in bold indicate measures that benefit one age group considerably more over another.
1 The Investment Tax Credits includes various tax credits, i.e., the Mineral Exploration Tax Credit, Apprenticeship Job Creation Tax Credit and Investment Tax Credit for Child Care Spaces.
2 Tuition Tax Credit – for self includes Education and Textbook Tax Credit amounts claimed as part of the carry-forward provision, but excludes the portion of the Tuition Tax Credit that is transferred to others.
3 The unused portion of the following credits can be transferred to a spouse or common-law partner: Age Credit, Pension Income Credit, Disability Tax Credit – for self, Tuition Tax Credit and Canada Caregiver Credit for infirm children under 18 years. For these tax expenditures, the portions transferable to a spouse or common-law partner are considered in the “unused credits transferred from a spouse or common-law partner” measure. Thus, only the portions of these measures that taxfilers claim for themselves or their dependants, and that are therefore not related to their marital status, are presented separately in the table.
4 The Canada Workers Benefit replaced the Working Income Tax Benefit in 2019.
5 Other refundable credits include the refund of the investment tax credit, the rebate to employees and partners, and the Part XII.2 trust tax credit.
Source: T1 return data, 2018.
Table 6
The top five federal PIT expenditures for younger and older filers, 2018
Younger (18-34 years)
(18.2% of pre-tax income was held by younger filers)
Older (55+ years)
(41.9% of pre-tax income was held by older filers)
Tax expenditures % of benefits going to younger filers Total costs
($ millions)
Tax expenditures % of benefits going to older filers Total costs
($ millions)
Tuition Tax Credit – for self 86.1 1,630 (all) Age Credit 100.0 3,625
Apprentice vehicle mechanics’ tools deduction 83.5 3 Non-taxation of Guaranteed Income Supplement and Allowance benefits 100.0 225
Student Loan Interest Credit 70.3 50 Pension income splitting 98.3 1,380
First-Time Home Buyers’ Tax Credit 64.1 105 Pension Income Credit 97.5 1,235
Deduction for tradespeople’s tool expenses 58.2 2 Unused credits transferred from a spouse or common-law partner 79.0 340
Sources: T1 return data; 2018 and 2020 RFTE.

3.2 Income Group

Table 7 aggregates total amounts of different concepts of income and tax payable by filers’ family income categories. The first category, called first or bottom quintile, includes the 20% of filers with the lowest family income adjusted for family size. The last category, called fifth or top quintile, includes the 20% of filers with the highest adjusted family income.

The distribution of total personal pre-tax income by quintile shows considerable income inequalities between these income groups. Filers in the bottom quintile reported 4.2% of total pre-tax income in 2018 in comparison to 49.0% for those in the top quintile. However, a comparison with other types of income and tax concepts suggests that the federal PIT system is globally redistributive toward lower-income filers.

Comparing the distribution of taxable income (a concept of income derived for tax purposes, i.e., after the application of exemptions, deferrals and deductions) to that of pre-tax income, the results show slight decreases in the shares of income held by the first two quintiles as well as by the top quintile. These changes reduce the portions of taxes payable by members of these quintiles as opposed to what they would have paid if tax rates had been applied to pre-tax income. In contrast, these changes increase the portions of taxes payable by members of the third and fourth quintiles.

The progressive tax rate structure and existing credits, in particular refundable credits, are especially important drivers of the federal PIT system’s income redistribution impact. The shares of tax payable by members of the top quintile before and after the application of refundable credits (66.4% and 84.9% respectively) are significantly higher than the share of taxable income they report (47.7%). In contrast, the shares of tax payable by members of the first three quintiles are all lower than their shares of reported income. As an example, members of the bottom quintile reported 3.7% of taxable income in 2018 while their tax liabilities represented only 1% of all taxes payable before the application of refundable credits. When refundable credits are taken into account, the amount of credits they receive is even greater than the amount of taxes they owe, which increases the share of after-tax income they hold relative to their share of pre-tax income. Such a trend is especially important for members of the first income quintile and is also true for quintiles two and three, but to a lesser extent.

On the other hand, the shares of before- and after-tax income held by members of quintile four are very similar (22.6% and 22.5%), and this trend is completely reversed for members of the top quintile; i.e., the proportion of after-tax income held by the fifth quintile is lower than its proportion of pre-tax income (45.8% versus 49.0%). All this suggests that the global income redistribution impact of the federal PIT system comes mainly from quintile 5 toward quintiles 1, 2 and 3. As noted earlier, changes in income for tax purposes generally advantage members of the top quintile, which likely attenuates the observed redistributive impact.

Table 7
Total number of filers and total amounts of various concepts of income and tax payable, by adjusted family income quintile, 2018
  Number (#) / Amount in millions ($) Percentage (%)
  1st
quintile
2d
quintile
3rd  
quintile
4th  
quintile
5th  
quintile
Q1 Q2 Q3 Q4 Q5
Total number of filers 5,671,253 5,672,598 5,672,709 5,672,526 5,671,494 20.0 20.0 20.0 20.0 20.0
Total pre-tax income 60,209 131,206 218,225 325,121 706,120 4.2 9.1 15.1 22.6 49.0
Total taxable income 46,969 113,443 205,554 300,576 608,811 3.7 8.9 16.1 23.6 47.7
Total net tax payable 1,500 3,535 14,894 31,909 102,418 1.0 2.3 9.7 20.7 66.4
Total net tax payable after the receipt of refundable credits -12,552 -5,687 8,115 28,156 101,408 -10.5 -4.8 6.8 23.6 84.9
Total after-tax income 72,761 136,893 210,110 296,965 604,712 5.5 10.4 15.9 22.5 45.8
Total change in the group's amount ($) and share (pp.) of income before and after the application of the federal PIT system +12,552 +5,687 -8,115 -28,156 -101,408 +1.3 +1.3 +0.8 -0.1 -3.2
Source: T1 return data, 2018.

Among existing individual PIT expenditures, some are explicitly targeted to lower income filers to achieve particular policy objectives. Other are notionally available to all filers but, in practice, only result in tax savings for those with high enough taxable income. It is thus interesting to examine the extent to which individual PIT expenditures influence the income of filers based on their family income situation. In order to shed some light on how individual PIT expenditures contributed to the global income redistribution trends observed in Table 7, the total benefits associated with the list of 58 PIT expenditures previously established have been broken down by adjusted family income quintile. Each PIT expenditure was then classified as especially benefiting filers in one or several of the five income quintiles.

PIT expenditures that especially benefit lower-income filers relative to their share of income are considered progressive since they contribute to income redistribution from the top to the bottom of the income distribution. In contrast, expenditures that especially benefit higher-income filers are considered regressive as they contribute to increased income inequalities between these two groups.

The classification in Table 8 first shows that few measures especially benefit individual quintiles. Most of them especially benefit members of two or more quintiles at a time. However, certain trends are observed depending on the type of tax expenditure considered. Notably, Table 8 suggests that individual PIT expenditures in the form of exemptions, deferrals and deductions are more likely to especially benefit members of higher quintiles (Q4 and Q5) and, therefore, to be regressive. Among all measures considered of this type, only two especially benefit members of lower income quintiles. These are the two expenditures aiming to exempt from tax income received via income support programs available to low-income individuals, namely the non-taxation of Guaranteed Income Supplement and Allowance benefits and the non-taxation of social assistance benefits. Two others are neither regressive nor progressive since they especially benefit taxfilers located in the middle of the income distribution. These are the non-taxation of workers' compensation benefits and the Apprentice vehicle mechanics' tools deduction. The remaining 21 PIT expenditures of this type are found to advantage higher-income taxfilers, and among these, ten especially benefit filers in the top quintile only. These include measures concerning:

An opposite trend is observed with respect to refundable credits. Most refundable credits especially benefit members of lower income quintiles – which was expected given the eligibility criteria of these measures – and thus contribute to reduce income inequalities between filers at the top and bottom of the income distribution. This is notably the case of the Canada Child Benefit (CCB), Goods and Services Tax/Harmonized Sales Tax Credit (GSTC), Refundable Medical Expense Supplement (RMES) and Working Income Tax Benefit (WITB). Among refundable credits, the Teacher and Early Childhood Educator School Supply Tax Credit and other refundable credits (includes the refund of the investment tax credit, the rebate to employees and partners, and the Part XII.2 trust tax credit) do not contribute to this trend since they especially benefit members of quintiles 4 and 5 respectively. It is interesting to note that, among refundable credits that contribute to income redistribution, the CCB and the GSTC provide a relatively higher benefit to members of the first three income quintiles while the RMES especially benefits members of the first two quintiles only. In comparison, WITB benefits are concentrated more narrowly at the bottom of the income distribution; only members of the first income quintile especially benefited from this PIT expenditure in 2018.

Patterns are more nuanced with regard to non-refundable credits. Of the 26 non-refundable credits under review, five are neither progressive nor regressive since they especially benefit filers in the middle of the income distribution (Q2, Q3 and Q4). These include the Disability Tax Credit, First-Time Home Buyers’ Tax Credit, Pension Income Credit, Student Loan Interest Credit and Volunteer Firefighters Tax Credit. Of the 21 remaining non-refundable credits, seven are progressive while twice as many (14) are more regressive. Table 9 suggests that the Investment Tax Credits and the foreign tax credit for individuals are among the most regressive non-refundable credits. More than 95% of the benefits associated with these credits went to members of the top two family income quintiles in 2018.

Table 8 also shows that pension income splitting does not globally contribute to income redistribution toward lower-income filers given that the measure especially benefits filers in the third and fourth family income quintiles.

Among all the individual PIT expenditures examined, a larger share appears to especially benefit higher-income filers. This may seem counterintuitive relative to the global redistributive impact found in Table 7. However, this can be explained by the fact that individual PIT expenditures especially benefiting lower-income filers globally provide larger tax relief than those especially benefiting higher-income filers. As an illustration, Table 9 indicates that the benefits associated with (or in other words, the costs associated with) the top five PIT expenditures for lower-income filers are considerably higher than those associated with the top five PIT expenditures for higher-income filers, mainly because of the CCB.Footnote 16

Table 8
Ratios of the share of benefits received by filers relative to their share of total pre-tax personal income, by family income quintile, 2018
Tax expenditures Ratios by family income quintile Especially benefits
Q1 Q2 Q3 Q4 Q5 Progressive   Regressive
Q1 Especially benefits Q1 Q2 Especially benefits Q2 Q3 Especially benefits Q3 Q4 Especially benefits Q4 Q5 Especially benefits Q5
Exemptions                    
Lifetime Capital Gains Exemption 0.09 0.00 0.01 0.02 2.02         YES
Non-taxation of Guaranteed Income Supplement and Allowance benefits 0.62 7.59 1.31 0.22 0.07   YES YES    
Non-taxation of CPP/QPP contributions by employers 0.42 0.78 1.22 1.35 0.86     YES YES  
Non-taxation of EI and QPIP premiums paid by employers 0.46 0.82 1.26 1.37 0.83     YES YES  
Non-taxation of income earned by military and police deployed to international operational missions 0.19 0.10 0.75 1.84 0.93       YES  
Non-taxation of social assistance benefits 8.82 5.46 0.70 0.09 0.02 YES YES      
Non-taxation of workers’ compensation benefits 0.28 1.23 1.86 1.40 0.57   YES YES YES  
Partial inclusion of capital gains 0.31 0.04 0.11 0.19 1.88         YES
Deductions                    
Apprentice vehicle mechanics’ tools deduction 0.23 1.78 2.68 1.24 0.29   YES YES YES  
Capital loss carry-overs 0.16 0.04 0.15 0.31 1.83         YES
Child Care Expense Deduction 0.14 0.62 1.06 1.39 0.95     YES YES  
Deductibility of certain costs incurred by musicians or of expenses by employed artists 0.25 0.71 0.94 1.17 1.06       YES YES
Deduction for clergy residence 0.21 0.92 1.55 1.49 0.69     YES YES  
Deduction for tradespeople’s tool expenses 0.30 0.96 1.81 1.65 0.52     YES YES  
Deduction of allowable business investment losses 0.08 0.13 0.40 0.65 1.59         YES
Deduction of interest and carrying charges incurred to earn investment income 0.15 0.07 0.24 0.46 1.73         YES
Deduction of other employment expenses 0.22 0.27 0.63 0.95 1.34         YES
Deduction of union and professional dues 0.25 0.40 0.90 1.43 1.01       YES  
Disability supports deduction 0.11 0.42 1.17 1.04 1.11     YES   YES
Employee stock option deduction 0.30 0.00 0.01 0.02 2.01         YES
Moving expense deduction 0.29 0.64 0.97 1.16 1.06       YES YES
Non-capital loss carry-overs 0.35 0.59 0.73 0.66 1.37         YES
Northern Residents Deductions 0.35 0.69 0.92 1.06 1.11       YES YES
Partial deduction of and partial input tax credits for meals and entertainment 0.14 0.10 0.28 0.51 1.69         YES
Rollovers of investments in small businesses 0.41 0.38 0.22 0.28 1.74         YES
Non-refundable credits                    
Adoption Expense Tax Credit 0.23 0.77 1.28 1.45 0.81     YES YES  
Age Credit 0.17 2.93 2.61 1.13 0.16   YES YES YES  
Canada Caregiver Credit 0.19 0.97 2.14 1.35 0.56     YES YES  
Canada Employment Credit 1.21 1.65 1.54 1.21 0.60 YES YES YES YES  
Charitable Donation Tax Credit 0.21 0.41 0.72 0.72 1.39         YES
Credit for the Basic Personal Amount 2.22 1.92 1.55 1.10 0.51 YES YES YES YES  
Disability Tax Credit – for self and transferred from a dependant other than a spouse 0.28 1.61 2.14 1.31 0.45   YES YES YES  
Dividend gross-up and tax credit 0.13 0.18 0.46 0.60 1.58         YES
Eligible Dependant Credit 2.77 3.90 1.79 0.72 0.19 YES YES YES    
First-Time Home Buyers’ Tax Credit 0.39 1.14 1.80 1.55 0.53   YES YES YES  
Foreign tax credit for individuals 0.42 0.06 0.15 0.30 1.81         YES
Home Accessibility Tax Credit 0.13 0.52 1.65 1.58 0.70     YES YES  
Investment Tax Credits 0.09 0.07 0.16 0.20 1.88         YES
Labour-Sponsored Venture Capital Corporations Credit 0.07 0.27 1.03 1.60 0.93       YES  
Medical Expense Tax Credit 0.26 1.02 1.75 1.30 0.69     YES YES  
Pension Income Credit 0.10 1.17 2.03 1.38 0.55   YES YES YES  
Political Contribution Tax Credit 0.12 0.27 0.75 1.03 1.28         YES
Search and Rescue Volunteers Tax Credit 0.27 0.77 1.35 1.47 0.78     YES YES  
Spouse or Common-Law Partner Credit 4.37 2.89 1.70 0.76 0.25 YES YES YES    
Student Loan Interest Credit 0.37 1.21 1.91 1.58 0.46   YES YES YES  
Tax credit for CPP/QPP contributions by employed and self-employed persons 0.49 0.99 1.42 1.39 0.74     YES YES  
Tax credit for EI and QPIP premiums paid by employed and self-employed persons 0.55 1.05 1.44 1.37 0.72     YES YES  
Tuition Tax Credit – for self 1.30 3.75 2.04 0.84 0.22 YES YES YES    
Tuition Tax Credit – transferred from a dependant 0.15 0.60 0.92 1.04 1.15         YES
Volunteer Firefighters Tax Credit 0.30 1.07 1.78 1.57 0.55   YES YES YES  
Unused credits transferred from a spouse or common-law partner 0.18 2.76 2.96 0.87 0.20   YES YES    
Refundable credits                    
Canada Child Benefit 9.28 2.54 1.36 0.61 0.07 YES YES YES    
Goods and Services Tax/Harmonized Sales Tax Credit 9.26 4.51 1.22 0.07 0.00 YES YES YES    
Refundable Medical Expense Supplement 10.23 5.11 0.65 0.03 0.01 YES YES      
Teacher and Early Childhood Educator School Supply Tax Credit 0.79 0.46 0.78 1.45 0.98       YES  
Working Income Tax Benefit 21.94 0.83 0.03 0.01 0.00 YES        
Other refundable credits 0.47 0.39 0.69 0.96 1.28         YES
Other types                    
Pension income splitting 0.02 0.37 2.20 1.60 0.56     YES YES  
Notes: A ratio higher than 1.05 indicates that a group of taxfilers benefits from the tax expenditure proportionally more than others, and vice versa. Ratios in bold indicate measures that benefit one group considerably more over another.
Source: T1 return data, 2018.
Table 9
The top five progressive and regressive federal PIT expenditures for lower-income and higher-income filers, 2018
Progressive
(13.3% of pre-tax income was held by filers in Q1 and Q2)
Regressive
(71.6% of pre-tax income was held by filers in Q4 and Q5)
Tax expenditures % of benefits going to lower-income
filers
Total cost
($ millions)
Tax expenditures % of benefits going to higher-income filers Total costs
($ millions)
Working Income Tax Benefit 99.3 1,105 Lifetime Capital Gains Exemption 99.5 1,855
Refundable Medical Expense Supplement 89.2 165 Employee stock option deduction 98.7 770
Non-taxation of social assistance benefits 86.5 300 Investment Tax Credits 96.7 65
Goods and Services Tax/Harmonized Sales Tax Credit 79.7 4,650 Partial inclusion of capital gains 96.6 8,700
Canada Child Benefit 61.9 23,900 Foreign tax credit for individuals 95.5 1,825
Sources: T1 return data; 2018 and 2020 RFTE.

3.3 Family Type

As the 2020 GBA+ study pointed out, there are a number of federal PIT expenditures that include a family component, meaning that they can be transferred or shared between spouses at filing, or that entitlement depends on filers’ family circumstances or income.Footnote 17 It is thus interesting to examine whether individual PIT expenditures influence the income of filers differently based on their family circumstances. As Table 10 shows, filers without a spouse (sole filers and sole parents) represent a larger proportion of filers (43.7%) than the proportion of pre-tax income they report (33.8%), while the opposite is true for filers in couples (with or without children).

Overall, the federal PIT system has a small income redistribution impact between family types. In 2018, the system globally reduced by one percentage point the share of income held by filers in couples without children, while it slightly increased that of all other family types, especially sole parents (0.7 percentage points). The various concepts of income and tax payable compared in Table 10 suggest that all major components of the federal tax system have a positive overall income redistribution impact toward sole parents. On the other hand, it shows that only refundable credits generate a positive income redistribution impact toward filers in couples with children, and that all components other than refundable credits have a small positive impact toward sole filers.

Table 10
Total number of filers and total amounts of various concepts of income and tax payable, by family type, 2018
  Number (#) / Amount in millions ($) Percentage (%)
  Sole filer (S) Sole parent (SC) Couple without children (C) Couple with children (CC) S SC C CC
Total number of filers 11,412,118 994,495 10,393,239 5,557,728 40.2 3.5 36.7 19.6
Total pre-tax income 447,885 39,081 596,656 357,259 31.1 2.7 41.4 24.8
Total taxable income 392,572 33,060 529,874 319,846 30.8 2.6 41.5 25.1
Total net tax payable 41,546 2,797 65,199 44,714 26.9 1.8 42.3 29.0
Total net tax payable after the receipt of refundable credits 35,761 -6,225 62,824 27,080 29.9 -5.2 52.6 22.7
Total after-tax income 412,124 45,306 533,833 330,179 31.2 3.4 40.4 25.0
Total change in the group's amount ($) and share (pp.) of income before and after the application of the federal PIT system -35,761 +6,225 -62,824 -27,080 +0.1 +0.7 -1.0 +0.2
Source: T1 return data, 2018.

In order to observe the redistributive impact between family types of the selected 58 individual tax expenditures, Table 11 classifies them in one or several of the following four family categories:

Again, with this classification, it can be observed that a majority of PIT expenditures especially benefit more than one family type (33 out of 58). Four expenditures predominantly benefit sole filers only. These are the non-taxation of Guaranteed Income Supplement and Allowance benefits (which is the federal PIT expenditure benefiting sole filers the most according to Table 12), the apprentice vehicle mechanics’ tools deduction, the credit for the Basic Personal Amount and the Tuition Tax Credit – for self. A similar number of PIT expenditures especially benefit filers in a couple with children only, including the deduction of other employment expenses, moving expense deduction, partial deduction of and partial input tax credits for meals and entertainment, Volunteer Firefighters Tax Credit and other refundable credits. By comparison, only one expenditure exclusively benefits sole parents relatively more, namely the Eligible Dependant Credit. This measure is identified as the top federal PIT expenditure for sole parents in Table 12. This is consistent with the nature of this credit since only taxfilers who support a dependant and do not have a spouse or common-law partner can claim it.

However, a larger number of PIT expenditures (15) are found to advantage only filers in a couple without children. While the most important measure is pension income splitting, other tax expenditures also significantly benefit these filers, including the Lifetime Capital Gains Exemption, capital loss carry-overs, and the deduction of interest and carrying charges incurred to earn investment income. With the exception of the Search and Rescue Volunteers Tax Credit, which tends to especially benefit younger filers, PIT expenditures that are found to predominantly benefit filers in a couple without children are also measures that especially benefit older filers. The three PIT expenditures that more than proportionally benefit filers in a couple without children and sole filers (the non-taxation of workers’ compensation benefits, partial inclusion of capital gains and Age Credit) are also measures that especially benefit older filers. This makes sense given that living in a childless couple or being unattached are the most prevalent family circumstances of older filers. In 2018, 67.9% of filers aged 55 years or more lived in a couple without children and 35.6% lived without a spouse and children. In comparison, the proportions of filers aged 35 to 54 years who lived in similar family situations were 25.0% and 23.7% respectively.

PIT expenditures targeted to lower-income filers are also found to especially benefit sole filers (with or without children). This may be due to the fact that persons who do not live in a couple are more likely to have a low family income.Footnote 18 The expenditures that especially benefit filers who do not live in a couple include a number of measures that also especially benefit younger filers (i.e., those under 35 years), two-thirds of whom were sole filers in 2018 (66.0%). This is notably the case of the credit for the Basic Personal Amount, of some credits for education expenses (Student Loan Interest Credit and the Tuition Tax Credit – for self) and for the purchase of a first home.

The Spouse or Common-Law Partner Credit is among the PIT expenditures that especially benefit filers in a couple (with or without children). This is expected given that only filers living in a couple can claim this credit. Only filers living in a couple can also claim the unused credits transferred from a spouse or common-law partner. However, this measure especially benefits filers in a couple without children only. This is likely because of the age restriction associated with some of the credits that can be transferred (i.e., the Age and Pension Income Credits). Some PIT expenditures that are not specifically targeted to filers in couples also predominantly benefit filers in this family type, including the deduction of allowable business investment losses, the employee stock option deduction and the Tuition Tax Credit – transferred from a dependant. While this last measure targets parents, Table 11 indicates that both couples with and without children especially benefit from it because many claimants of this measure only have children aged 18 years or more.Footnote 19 

Table 11 also indicates that some measures especially benefit filers with children, whether they are in a couple or not. As expected, the Child Care Expense Deduction and the CCB, which are both directly targeted to families with children, appear as the top two federal PIT expenditures for couples with children in Table 13. However, this is also true for several measures that do not directly target families with children, including the Disability Tax Credit, the Northern Residents Deductions and several employment-related measures (e.g., deduction of union and professional dues and measures related to CPP/QPP and EI contributions). In most cases, those expenditures also especially benefit filers aged under 55 years.

Results in Tables 11, 12 and 13 confirm that the type of family in which filers find themselves can influence the share of benefits they obtained from the various individual PIT expenditures, whether these are directly targeted at certain types of families or not. However, they also demonstrate the important interdependence that exists between filers’ age, family situation, position in the family income distribution and the share of benefits they received from various PIT expenditures.

Table 11
Ratios of the share of benefits received by filers relative to their share of total pre-tax personal income, by family type, 2018
Tax expenditures Ratios by family type Especially benefits
  Sole filer Sole parent Couple without children Couple with children S Especially benefits sole filers SC Especially benefits sole parents C Especially benefits filers in a couple without children CC Especially benefits filers in a couple with children
Exemptions                
Lifetime Capital Gains Exemption 0.87 0.34 1.32 0.70     YES  
Non-taxation of Guaranteed Income Supplement and Allowance benefits 2.54 0.06 0.49 0.02 YES      
Non-taxation of CPP/QPP contributions by employers 0.99 1.25 0.83 1.27   YES   YES
Non-taxation of EI and QPIP premiums paid by employers 1.05 1.26 0.81 1.22   YES   YES
Non-taxation of income earned by military and police deployed to international operational missions 1.19 0.54 0.63 1.43 YES     YES
Non-taxation of social assistance benefits 2.27 3.55 0.24 0.40 YES YES    
Non-taxation of workers’ compensation benefits 1.19 1.01 1.05 0.68 YES      
Partial inclusion of capital gains 1.07 0.26 1.26 0.55 YES   YES  
Deductions                
Apprentice vehicle mechanics’ tools deduction 2.31 0.38 0.31 0.58 YES      
Capital loss carry-overs 0.87 0.26 1.42 0.55     YES  
Child Care Expense Deduction 0.06 4.15 0.04 3.44   YES   YES
Deductibility of certain costs incurred by musicians or of expenses by employed artists 1.10 0.72 0.84 1.18 YES     YES
Deduction for clergy residence 0.39 0.19 1.21 1.51     YES YES
Deduction for tradespeople’s tool expenses 1.61 0.47 0.52 1.10 YES     YES
Deduction of allowable business investment losses 0.63 0.48 1.21 1.17     YES YES
Deduction of interest and carrying charges incurred to earn investment income 0.90 0.39 1.40 0.53     YES  
Deduction of other employment expenses 0.83 0.93 0.92 1.37       YES
Deduction of union and professional dues 0.95 1.41 0.81 1.34   YES   YES
Disability supports deduction 1.73 1.18 0.65 0.65 YES YES    
Employee stock option deduction 0.42 0.41 1.30 1.29     YES YES
Moving expense deduction 0.75 0.69 0.83 1.63       YES
Non-capital loss carry-overs 0.89 0.57 1.24 0.78     YES  
Northern Residents Deductions 1.05 1.56 0.80 1.22   YES   YES
Partial deduction of and partial input tax credits for meals and entertainment 0.79 0.64 0.87 1.52       YES
Rollovers of investments in small businesses 0.76 0.38 1.46 0.61     YES  
Non-refundable credits                
Adoption Expense Tax Credit 0.15 1.43 0.67 2.57   YES   YES
Age Credit 1.22 0.01 1.50 0.01 YES   YES  
Canada Caregiver Credit 0.51 1.22 1.26 1.15   YES YES YES
Canada Employment Credit 1.18 1.20 0.80 1.08 YES YES   YES
Charitable Donation Tax Credit 0.77 0.29 1.34 0.81     YES  
Credit for the Basic Personal Amount 1.23 1.00 0.91 0.85 YES      
Disability Tax Credit – for self and transferred from a dependant other than a spouse 1.03 1.59 0.88 1.10   YES   YES
Dividend gross-up and tax credit 0.73 0.34 1.30 0.92     YES  
Eligible Dependant Credit 0.48 30.44 0.01 0.08   YES    
First-Time Home Buyers’ Tax Credit 1.38 1.12 0.69 1.02 YES YES    
Foreign tax credit for individuals 0.75 0.23 1.33 0.84     YES  
Home Accessibility Tax Credit 0.86 0.61 1.40 0.56     YES  
Investment Tax Credits 0.53 0.14 1.47 0.90     YES  
Labour-Sponsored Venture Capital Corporations Credit 0.82 1.27 1.10 1.03   YES YES  
Medical Expense Tax Credit 0.93 0.65 1.28 0.65     YES  
Pension Income Credit 0.99 0.05 1.64 0.04     YES  
Political Contribution Tax Credit 0.85 0.20 1.46 0.52     YES  
Search and Rescue Volunteers Tax Credit 0.90 0.57 1.15 0.91     YES  
Spouse or Common-Law Partner Credit 0.02 0.03 1.20 1.99     YES YES
Student Loan Interest Credit 1.59 1.54 0.54 0.96 YES YES    
Tax credit for CPP/QPP contributions by employed and self-employed persons 1.06 1.33 0.79 1.23 YES YES   YES
Tax credit for EI and QPIP premiums paid by employed and self-employed persons 1.12 1.33 0.78 1.18 YES YES   YES
Tuition Tax Credit – for self 2.37 0.77 0.36 0.38 YES      
Tuition Tax Credit – transferred from a dependant 0.40 0.93 1.42 1.06     YES YES
Volunteer Firefighters Tax Credit 0.87 0.69 0.85 1.45       YES
Unused credits transferred from a spouse or common-law partner 0.01 0.00 2.16 0.41     YES  
Refundable credits                
Canada Child Benefit 0.07 11.19 0.09 2.57   YES   YES
Goods and Services Tax/Harmonized Sales Tax Credit 1.93 4.45 0.40 0.46 YES YES    
Refundable Medical Expense Supplement 1.82 4.98 0.40 0.53 YES YES    
Teacher and Early Childhood Educator School Supply Tax Credit 0.93 2.11 0.59 1.64   YES   YES
Working Income Tax Benefit 1.81 6.69 0.32 0.49 YES YES    
Other refundable credits 0.81 0.85 0.97 1.30       YES
Other types                
Pension income splitting 0.00 0.00 2.38 0.06     YES  
Notes: A ratio higher than 1.05 indicates that a group of taxfilers benefits from the tax expenditure proportionally more than others, and vice versa. Ratios in bold indicate measures that benefit one group considerably more over another.
Source: T1 return data, 2018.
Table 12
The top five federal PIT expenditures for sole filers and sole parents, 2018
Sole Filers
(31.1% of pre-tax income was held by sole filers)
Sole Parents
(2.7% of pre-tax income was held by sole parents)
Tax expenditures % of benefits going to sole filers Total costs
($ millions)
Tax expenditures % of benefits going to sole parents Total costs
($ millions)
Non-taxation of Guaranteed Income Supplement and Allowance benefits 79.0 225 Eligible Dependant Credit 82.6 980
Tuition Tax Credit – for self 73.6 1,630 (all) Canada Child Benefit 30.3 23,900
Apprentice vehicle mechanics’ tools deduction 71.7 3 Working Income Tax Benefit 18.1 1,105
Non-taxation of social assistance benefits 70.4 300 Refundable Medical Expense Supplement 13.5 165
Goods and Services Tax/Harmonized Sales Tax Credit 60.1 4,650 Goods and Services Tax/Harmonized Sales Tax Credit 12.1 4,650
Source: T1 return data; 2018 and 2020 RFTE.
Table 13
The top five federal PIT expenditures for filers in a couple without and with children, 2018
Couple Without Children
(41.4% of pre-tax income was held by filers in a couple without children)
Couple With Children
(24.8% of pre-tax income was held by filers in a couple with children)
Tax expenditures % of benefits going to filers without children Total costs
($ millions)
Tax expenditures % of benefits going to filers with children Total costs
($ millions)
Pension income splitting 98.5 1,380 Child Care Expense Deduction 85.3 1,355
Unused credits transferred from a spouse or common-law partner 89.4 340 Canada Child Benefit 63.7 23,900
Pension Income Credit 68.0 1,235 Adoption Expense Tax Credit 63.7 2
Investment Tax Credits 60.8 65 Spouse or Common-Law Partner Credit 49.4 1,740
Political Contribution Tax Credit 60.2 30 Teacher and Early Childhood Educator School Supply Tax Credit 40.7 5
Sources: T1 return data; 2018 and 2020 RFTE.

3.4 Area of Residence

The examination of tax expenditures’ benefits by area of residence based on T1 return data is not as straightforward as the examination by filers’ age, income group and family type. As explained in Section 2.1, this was made possible by merging T1 return data with the PCCF data. While this technique requires the exclusion of some filers (about 1.9% of them in 2018) due to data unavailability or inconsistencies, it allowed a reasonably good identification of filers’ main area of residence based on their reported postal codes.Footnote 20

In 2018, residents of remote areas (outside CMAs) represented 29.1% of filers whose areas of residence could be identified. These filers reported 25.9% of total pre-tax income.

Overall, Table 14 indicates that the 2018 federal PIT system slightly reduced income inequalities that existed between remote and urban areas. Indeed, the share of after-tax income held by residents of remote areas (26.4%) was 0.5 percentage points higher than their share of income before the application of the tax system (25.9%). Among the main tax system components, the progressive tax rate structure had the largest redistributive impact toward remote areas (result not reported).

Table 14
Total number of filers1 and total amounts of various concepts of income and tax payable, by area of residence, 2018
  Number (#) / Amount in millions ($) Percentage (%)
Remote Urban Remote Urban
Total number of filers (#) 8,099,614 19,754,178 29.1 70.9
Total pre-tax income 366,702 1,049,523 25.9 74.1
Total taxable income 323,708 930,568 25.8 74.2
Total net tax payable 34,464 116,664 22.8 77.2
Total net tax payable after the receipt of refundable credits 23,769 92,995 20.4 79.6
Total after-tax income 342,933 956,528 26.4 73.6
Total change in the group's amount ($) and share (pp.) of income before and after the application of the federal PIT system -23,769 -92,995 +0.5 -0.5
1 Excludes the 1.9% of 2018 filers with missing regional information.
Source: T1 return data, 2018 merged with Statistics Canada’s Postal Code Conversion File (PCCF), November 2019.

To examine the income redistribution impact of individual PIT expenditures by area of residence, a regional breakdown of the share of benefits received by each group in comparison to their share of pre-tax personal income was calculated. Resulting ratios were used to classify each expenditure in the following three categories (Table 15):

Out of the 58 PIT expenditures under review, about a third (21) were found to have no significant interregional impact in 2018, meaning that their benefits were distributed almost proportionally to the share of pre-tax income reported by filers residing in remote and urban areas. Among the other expenditures, a majority (23 out of 37) especially benefited residents of remote areas.

Expenditures that predominantly benefit residents of urban areas are mainly deductions. Four out the 17 deductions under review especially benefit filers in remote areas, while nine especially benefit residents of urban areas. Table 15 confirms that remote area residents especially benefit from the only deduction that specifically targets this population, namely the Northern Residents Deductions. As Table 16 indicates, this measure is the top PIT expenditure for remote area residents. In comparison, Table 16 shows that the number one PIT expenditure favouring urban area residents is the employee stock option deduction.

An opposite pattern is observed for all other types of PIT expenditures since larger proportions of exemptions and credits (refundable and non-refundable) are found to especially benefit residents of remote areas. Among all exemptions and credits under review, only the partial inclusion of capital gains, foreign tax credit for individuals, Investment Tax Credits and Tuition Tax Credit – for self and transferred from a dependant especially benefit filers residing in urban areas.

Table 15
Ratios of the share of benefits received by filers relative to their share of total pre-tax personal income, by area of residence, 2018
Tax expenditures Ratios by area of residence Especially benefits
Remote Urban Remote Especially benefits remote -- Especially benefits Urban Especially benefits Urban
Exemptions          
Lifetime Capital Gains Exemption 1.82 0.71 YES    
Non-taxation of Guaranteed Income Supplement and Allowance benefits 1.41 0.86 YES    
Non-taxation of CPP/QPP contributions by employers 0.99 1.00   YES  
Non-taxation of EI and QPIP premiums paid by employers 0.99 1.00   YES  
Non-taxation of income earned by military and police deployed to international operational missions 1.40 0.86 YES    
Non-taxation of social assistance benefits 1.15 0.95 YES    
Non-taxation of workers’ compensation benefits 1.52 0.82 YES    
Partial inclusion of capital gains 0.69 1.11     YES
Deductions          
Apprentice vehicle mechanics’ tools deduction 1.84 0.71 YES    
Capital loss carry-overs 0.59 1.14     YES
Child Care Expense Deduction 0.69 1.11     YES
Deductibility of certain costs incurred by musicians or of expenses by employed artists 0.61 1.14     YES
Deduction for clergy residence 1.00 1.00   YES  
Deduction for tradespeople’s tool expenses 1.61 0.79 YES    
Deduction of allowable business investment losses 0.62 1.13     YES
Deduction of interest and carrying charges incurred to earn investment income 0.62 1.13     YES
Deduction of other employment expenses 0.87 1.04   YES  
Deduction of union and professional dues 1.08 0.97   YES  
Disability supports deduction 0.56 1.15     YES
Employee stock option deduction 0.28 1.25     YES
Moving expense deduction 1.37 0.87 YES    
Non-capital loss carry-overs 1.00 1.00   YES  
Northern Residents Deductions 3.75 0.04 YES    
Partial deduction of and partial input tax credits for meals and entertainment 0.54 1.16     YES
Rollovers of investments in small businesses 0.66 1.12     YES
Non-refundable credits          
Adoption Expense Tax Credit 0.90 1.03   YES  
Age Credit 1.37 0.87 YES    
Canada Caregiver Credit 1.05 0.98   YES  
Canada Employment Credit 1.06 0.98   YES  
Charitable Donation Tax Credit 0.77 1.08   YES  
Credit for the Basic Personal Amount 1.11 0.96 YES    
Disability Tax Credit – for self and transferred from a dependant other than a spouse 1.18 0.94 YES    
Dividend gross-up and tax credit 0.91 1.03   YES  
Eligible Dependant Credit 1.13 0.95 YES    
First-Time Home Buyers’ Tax Credit 1.07 0.98   YES  
Foreign tax credit for individuals 0.49 1.18     YES
Home Accessibility Tax Credit 1.07 0.98   YES  
Investment Tax Credits 0.68 1.11     YES
Labour-Sponsored Venture Capital Corporations Credit 1.30 0.90 YES    
Medical Expense Tax Credit 1.20 0.93 YES    
Pension Income Credit 1.30 0.90 YES    
Political Contribution Tax Credit 1.01 0.99   YES  
Search and Rescue Volunteers Tax Credit 2.49 0.48 YES    
Spouse or Common-Law Partner Credit 1.03 0.99   YES  
Student Loan Interest Credit 0.97 1.01   YES  
Tax credit for CPP/QPP contributions by employed and self-employed persons 1.01 1.00   YES  
Tax credit for EI and QPIP premiums paid by employed and self-employed persons 1.01 1.00   YES  
Tuition Tax Credit for self 0.55 1.16     YES
Tuition Tax Credit – transferred from a dependant 0.64 1.13     YES
Volunteer Firefighters Tax Credit 3.19 0.23 YES    
Unused credits transferred from a spouse or common-law partner 1.38 0.87 YES    
Refundable credits          
Canada Child Benefit 1.21 0.93 YES    
Goods and Services Tax/Harmonized Sales Tax Credit 1.22 0.92 YES    
Refundable Medical Expense Supplement 1.29 0.90 YES    
Teacher and Early Childhood Educator School Supply Tax Credit 1.08 0.97   YES  
Working Income Tax Benefit 0.99 1.00   YES  
Other refundable credits 0.97 1.01   YES  
Other types          
Pension income splitting 1.35 0.88 YES    
Notes: A ratio higher than 1.10 indicates that a group of taxfilers benefits from the tax expenditure proportionally more than others, and vice versa. The 1.10 is slightly higher than for the other identity criteria (1.05). This is due to the small number of filers’ exclusions that had to be applied before performing an analysis by area of residence, which likely introduced less precision to the analysis.
Source: T1 return data, 2018 merged with Statistics Canada’s Postal Code Conversion File (PCCF), November 2019.
Table 16
The top five federal PIT expenditures for remote and urban residents, 2018
Remote
(25.9% of pre-tax income was held by filers residing in remote areas)
Urban
(74.1% of pre-tax income was held by filers residing in urban areas)
Tax expenditures % of benefits going to remote area residents Total costs
($ millions)
Tax expenditures % of benefits going to urban area residents Total costs
($ millions)
Northern Residents Deductions 97.0 230 Employee stock option deduction 92.9 770
Volunteer Firefighters Tax Credit 82.6 20 Foreign tax credit for individuals 87.3 1,825
Search and Rescue Volunteers Tax Credit 64.4 2 Partial deduction of and partial input tax credits for meals and entertainment 86.1 200
Apprentice vehicle mechanics’ tools deduction 47.7 3 Disability supports deduction 85.5 3
Lifetime Capital Gains Exemption 47.2 1,855 Tuition Tax Credit – for self 85.4 1,630 (all)
Sources: T1 return data, 2018 merged with Statistics Canada’s Postal Code Conversion File (PCCF), November 2019 and 2020 RFTE

3.5 Summary

Table 17 is a summary table that displays the target population of the various individual PIT expenditures under review, provides a reminder as to which gender benefits relatively more from each of these measures, and identifies the various other identity groups that especially benefited from each of them in 2018.

For almost all individual PIT expenditures examined, Table 17 confirms the gender impacts that were found in the 2019 GBA+ study. Almost all measures that were identified as being gender-neutral, to the advantage of men or to the advantage of women in 2016 remained so based on 2018 data.Footnote 21 Only two measures identified as being gender-neutral in 2016 now appear to be slightly in favour of men, likely because of changes in market conditions: the partial inclusion of capital gains and the dividend gross-up and tax credit.

Regarding the deductions added to the list, i.e., apprentice vehicle mechanics' tools deduction, deductibility of certain costs incurred by musicians and of expenses by employed artists, and partial deduction of and partial input tax credits for meals and entertainment, the 2018 data indicates that men especially benefit from them. This is also the case for the majority of other deductions and the newly included Investment Tax Credits.

Further, the results show that the first part of the newly split credit, i.e., the Tuition Tax Credit – for self, especially benefits women as was observed in 2016 for the entire Tuition Tax Credit. However, the part of the Tuition Tax Credit – transferred from a dependant is found to be relatively gender-neutral, meaning that it does not favour one gender over another.

As previously mentioned, only a few PIT expenditures target specific identity groups. Table 17 confirms that these measures are indeed reaching their targets, which tend to benefit relatively more from each measure. For instance, all PIT expenditures targeting seniors are found to especially benefit older filers. In the same vein, all PIT expenditures targeting lower-income filers especially benefit filers in the lowest family income quintiles. However, there are notable distinctions in the income groups that mostly benefit from the PIT expenditures targeting lower-income filers. While the CCB and GSTC especially benefit members of the first three income quintiles, the benefits of the RMES and non-taxation of social assistance benefits are mostly concentrated in the first two quintiles. Further, the Working Income Tax Benefit especially benefited filers in the first income quintile only. These results may be explained by the different phase-in and phase-out thresholds and reduction rates underlying these measures. It is also worth noting that the non-taxation of Guaranteed Income Supplement and Allowance benefits especially benefits filers in quintiles 2 and 3 but not filers in the bottom quintile.

Table 17 also suggests that even when a tax expenditure does not have any specific target population, it always ends up especially benefiting some identity groups over others. However, the main beneficiaries of individual PIT expenditures change from one measure to another and each of the groups especially benefit from at least some of them. Moreover, the identification of the number of individual expenditures especially benefiting a particular group can be seen as partially informative given that total benefit amounts may differ greatly from one measure to another.

Table 17
Target population of individual PIT expenditures and identity groups that especially benefit from them, 2018
Tax expenditures Target population among the identity groups under review1 Gender that especially benefits2 Other identity groups (under review) that especially benefit
Exemptions      
Lifetime Capital Gains Exemption -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
-Remote area residents
Non-taxation of Guaranteed Income Supplement and Allowance benefits -Seniors
-Low-income
-Women -Older filers
-Filers in quintiles 2 and 3
-Sole filers
-Remote area residents
Non-taxation of CPP/QPP contributions by employers -No specific identity group -None -Younger and middle-age filers
-Filers in quintiles 3 and 4
-Filers with children
Non-taxation of EI and QPIP premiums paid by employers -No specific identity group -None -Younger and middle-age filers
-Filers in quintiles 3 and 4
-Filers with children
Non-taxation of income earned by military and police deployed to international operational missions -No specific identity group -Men -Younger and middle-age filers
-Filers in quintile 4
-Sole filers and filers in a couple with children
-Remote area residents
Non-taxation of social assistance benefits -Low-income -Women -Younger and middle-age filers
-Filers in quintiles 1 and 2
-Sole filers and sole parents
-Remote area residents
Non-taxation of workers’ compensation benefits -No specific identity group -Men -Older filers
-Filers in quintiles 2-3 and 4
-Filers without children
-Remote area residents
Partial inclusion of capital gains -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers without children
-Urban area residents
Deductions      
Apprentice vehicle mechanics’ tools deduction -No specific identity group -Men -Younger filers
-Filers in quintiles 2, 3 and 4
-Sole filers
-Remote area residents

Capital loss carry-overs
-No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
-Urban area residents
Child Care Expense Deduction -Filers with children -Women -Younger and middle-age filers
-Filers in quintiles 3 and 4
-Filers with children
-Urban area residents
Deductibility of certain costs incurred by musicians or of expenses by employed artists -No specific identity group -Men -Younger and middle-age filers
-Filers in quintiles 4 and 5
-Sole filers and filers in a couple with children
-Urban area residents
Deduction for clergy residence -No specific identity group -Men -Middle-age and older filers
-Filers in quintiles 3 and 4
-Filers in a couple
Deduction for tradespeople’s tool expenses -No specific identity group -Men -Younger filers
-Filers in quintiles 3 and 4
-Sole filers and filers in a couple with children
-Remote area residents
Deduction of allowable business investment losses -No specific identity group -Men -Middle-age and older filers
-Filers in quintile 5
-Filers in a couple
-Urban area residents
Deduction of interest and carrying charges incurred to earn investment income -No specific identity group -None -Older filers
-Filers in quintile 5
-Filers in a couple without children
-Urban area residents
Deduction of other employment expenses -No specific identity group -Men -Middle-age filers
-Filers in quintile 5
-Filers in a couple with children
Deduction of union and professional dues -No specific identity group -Women -Younger and middle-age filers
-Filers in quintile 4
-Filers with children
Disability supports deduction -No specific identity group -Women -Older filers
-Filers in quintiles 3 and 5
-Sole filers and sole parents
-Urban area residents
Employee stock option deduction -No specific identity group -Men -Middle-age and older filers
-Filers in quintile 5
-Filers in a couple
-Urban area residents
Moving expense deduction -No specific identity group -Men -Younger and middle-age filers
-Filers in quintiles 4 and 5
-Filers in a couple with children
-Remote area residents
Non-capital loss carry-overs -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
Northern Residents Deductions -Remote area residents -Men -Younger and middle-age filers
-Filers in quintiles 4 and 5
-Filers with children
-Remote area residents
Partial deduction of and partial input tax credits for meals and entertainment -No specific identity group -Men -Middle-age filers
-Filers in quintile 5
-Filers in a couple with children
-Urban area residents
Rollovers of investments in small businesses -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
-Urban area residents
Non-refundable credits      
Adoption Expense Tax Credit -Filers with children -Men -Middle-age filers
-Filers in quintiles 3 and 4
-Filers with children
Age Credit -Older filers -Women -Older filers
-Filers in quintiles 2, 3 and 4
-Filers without children
-Remote area residents
Canada Caregiver Credit -No specific identity group -None -Middle-age and older filers
-Filers in quintiles 3 and 4
-Sole parents and filers in a couple
Canada Employment Credit -No specific identity group -Women -Younger and middle-age filers
-Filers in quintiles 1, 2, 3 and 4
-Sole filers, sole parents and filers in a couple with children
Charitable Donation Tax Credit -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
Credit for the Basic Personal Amount -No specific identity group -Women -Younger filers
-Filers in quintiles 1, 2, 3 and 4
-Sole filers
-Remote area residents
Disability Tax Credit -No specific identity group -Women -Older filers
-Filers in quintiles 2, 3 and 4
-Filers with children
-Remote area residents
Dividend gross-up and tax credit -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
Eligible Dependant Credit -Sole parents -Women -Younger and middle-age filers
-Filers in quintiles 1, 2 and 3
-Sole parents
-Remote area residents
First-Time Home Buyers’ Tax Credit -No specific identity group -None -Younger filers
-Filers in quintiles 2, 3 and 4
-Sole filers and sole parents
Foreign tax credit for individuals -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in couples without children
-Urban area residents
Home Accessibility Tax Credit -Older filers -Women -Older filers
-Filers in quintiles 3 and 4
-Filers in a couple without children
Investment Tax Credits -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
-Urban area residents
Labour-Sponsored Venture Capital Corporations Credit -No specific identity group -None -Middle-age filers
-Filers in quintile 4
-Sole parents and filers in a couple without children
-Remote area residents
Medical Expense Tax Credit -No specific identity group -Women -Older filers            
-Filers in quintiles 3 and 4
-Filers in a couple without children
-Remote area residents
Pension Income Credit -Older filers -Women -Older filers
-Filers in quintiles 2, 3 and 4
-Filers in a couple without children
-Remote area residents
Political Contribution Tax Credit -No specific identity group -Men -Older filers
-Filers in quintile 5
-Filers in a couple without children
Search and Rescue Volunteers Tax Credit -No specific identity group -Men -Younger filers
-Filers in quintiles 3 and 4
-Filers in a couple without children
-Remote area residents
Spouse or Common-Law Partner Credit -Filers in a couple -Men -Younger and middle-age filers
-Filers in quintiles 1, 2 and 3
-Filers in a couple
Student Loan Interest Credit -No specific identity group -Women -Younger filers
-Filers in quintiles 2, 3 and 4
-Sole filers and sole parents
Tax credit for CPP/QPP contributions by employed and self-employed persons -No specific identity group -Women -Younger and middle-age filers
-Filers in quintiles 3 and 4
-Sole filers and filers with children
Tax credit for EI and QPIP premiums paid by employed and self-employed persons -No specific identity group -Women -Younger and middle-age filers
-Filers in quintiles 3 and 4
-Sole filers and filers with children
Tuition Tax Credit – for self -No specific identity group -Women -Younger filers
-Filers in quintiles 1, 2 and 3
-Sole filers
-Urban area residents
Tuition Tax Credit – transferred from a dependant -Filers with children or dependants -None -Middle-age filers
-Filers in quintile 5
-Filers in a couple
-Urban area residents
Volunteer Firefighters Tax Credit -No specific identity group -Men -Younger and middle-age filers
-Filers in quintiles 2, 3 and 4
-Filers in a couple with children
-Remote area residents
Unused credits transferred from a spouse or common-law partner -Filers in a couple -Men -Older filers
-Filers in quintiles 2 and 3
-Filers in a couple without children
-Remote area residents
Refundable credits      
Canada Child Benefit -Low-to-middle income filers with children -Women -Younger and middle-age filers
-Filers in quintiles 1, 2 and 3
-Filers with children
-Remote area residents
Goods and Services Tax/Harmonized Sales Tax Credit -Low-income -Women -Younger filers
-Filers in quintiles 1, 2 and 3
-Sole filers and sole parents
-Remote area residents
Refundable Medical Expense Supplement -Low-income -Women -Younger filers
-Filers in quintiles 1 and 2
-Sole filers and sole parents
-Remote area residents
Teacher and Early Childhood Educator School Supply Tax Credit -No specific identity group -Women -Younger and middle-age filers
-Filers in quintile 4
-Filers with children
Working Income Tax Benefit -Low-income -Women -Younger filers
-Filers in quintile 1
-Sole filers and sole parents
Other refundable credits -No specific identity group -Men -Middle-age filers
-Filers in quintile 5
-Filers in a couple with children
Other types      
Pension income splitting -Older filers -Men -Older filers
-Filers in quintiles 3 and 4
-Filers in a couple without children
-Remote area residents
1 The specific identify groups under review in this analysis are: age group, adjusted family income group, family type and area of residence.
2 Based on results published in the 2019 GBA+ and confirmed/adjusted with 2018 unpublished results.
Source: T1 return data, 2018.

4. Conclusion

This study provides a snapshot in time of the differential impacts of the federal PIT system by age group, income group, family type and area of residence. It shows that the various components of the system reallocate some portion of earned income between these groups. Because the main beneficiaries of the various existing PIT expenditures change from one measure to another, some PIT expenditures especially benefit one group over another. To illustrate, some measures especially benefit younger filers versus older filers, low-income filers versus high-income filers, filers in a couple versus sole filers, and urban residents versus rural residents (and vice versa within the four identity groups). In 2018, all these groups benefited relatively more from at least some of the available federal PIT expenditures.

However, given the inherent progressive nature of the federal tax system, the analysis shows that, overall, it tends to favour economically disadvantaged groups (i.e., groups which report lower proportions of total pre-tax income compared to the proportions of filers they represent). As was the case for women, the shares of after-tax income held by younger filers, members of the lower family income quintiles, sole parents and rural area residents were higher than their shares of pre-tax income.

Contrary to gender (with few exceptions of gender fluidity), age, family situation, income group and area of residence are not static characteristics. They may change over an individual’s lifetime. In addition to getting older, individuals can also experience various changes in family and income situations in their adulthood and move in and out of urban areas. Accordingly, from one period to another in their lives, they may be in a position to benefit relatively more from the various available tax breaks. Nevertheless, considering that tax expenditures can be used to achieve policy objectives in a given year, including vertical equity (i.e., the idea that taxfilers who have the ability to pay more taxes should contribute more), the analyses presented in the current study can help identify the expenditures that work in favour or against such objectives.

It is important to stress that the tax system has various objectives and that a tax expenditure cannot be assessed entirely on the impact it has on the allocation of income between groups. A thorough assessment of tax measures requires the consideration of a much broader range of possible effects than the ones studied in the current paper.

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