Archived - The National Child Benefit Progress Report 2004

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Chapter 2
The National Child Benefit Supplement

The Federal Child Benefit System

The Government of Canada has long provided Canadian families with child benefits. The Child Tax Exemption was established as early as 1918. This was followed by the Family Allowance benefit and various types of child tax measures aimed at providing financial support to parents.

Since July 1998, the Government of Canada has provided direct financial assistance to families with children through the Canada Child Tax Benefit (CCTB). The CCTB is designed to help families with the costs of raising children and takes the form of a non-taxable monthly payment for families with children, based on a family's net income and the number and ages of the children within the family.

The History of Federal Child Benefits in Canada

1918 — Child Tax Exemption: This exemption provided income tax savings that increased as taxable income increased. It did not provide benefits to families that did not have a tax liability.

1945 — Family Allowance: This benefit was provided to all Canadian families with dependent children.

1973 — The Family Allowance benefits were tripled, indexed to the cost of living, and made taxable.

1978 — Refundable Child Tax Credit: This targeted and income-tested child benefit, which was delivered through the tax system, provided a maximum benefit to low-income families, a declining amount to middle-income families, and no benefit to upper-income families.

1993 — Child Tax Benefit (CTB): This benefit consolidated refundable and non-refundable child tax credits and the Family Allowance into a monthly payment based on the number of children and level of family income. It also included the Working Income Supplement (WIS), which provided an additional benefit to low-income working families with children. In 1993, federal expenditures on child benefits, including WIS, totalled $5.1 billion.

1998 — The CTB was replaced by the Canada Child Tax Benefit (CCTB). The National Child Benefit (NCB) Supplement replaced the WIS, and is provided to all low-income families as part of the new CCTB.

The CCTB is made up of two key components: the base benefit of the CCTB, which is paid to low- and middle-income families with children, and the NCB Supplement, which is an additional benefit paid to low-income families with children. Eligible Canadian families with children receive the base benefit and the NCB Supplement through a single monthly payment. Between July 2003 and June 2004, approximately 3.1 million families with 5.6 million children received the base benefit of the CCTB.

Figure 2 illustrates the CCTB structure for families with two children as of July 2004. During the 2004-2005 benefit year (from July 2004 to June 2005), two-child families with net incomes less than $22,615 received the maximum benefit level of $5,222. Under the CCTB benefit structure, all families in receipt of the NCB Supplement receive the maximum level of the base benefit of the CCTB. Families with net incomes above $22,615 but below $35,000 continue to receive the maximum level of the base benefit of the CCTB, but the level of NCB Supplement to which they are entitled decreases as family income increases. Finally, those families with net incomes above $35,000 but below $95,400 receive only the base benefit of the CCTB. The level of this benefit also decreases as family income increases.

Figure 2 - The Canada Child Tax Benefit for a Two-Child Family: July 2004 to June 2005

Figure 2 - The Canada Child Tax Benefit for a Two-Child Family: July 2004 to June 2005

Description

The line graph represents the relationship between the CCTB base benefit and the NCB Supplement, with the amount of the benefit on the y axis and the net family income on the x axis.

The graph shows that a two-child family with a net income of up to $22,615 receives the maximum amount of the CCTB base benefit and the NCB Supplement, for a total benefit of $5,222.

Two-child families with a net income above $22,615 continue to receive the maximum CCTB base benefit, while the amount of NCB Supplement gradually decreases, from its maximum at $22,615 net family income to no NCB Supplement at $35,000 net family income.

Two-child families with a net income above $35,000 continue to receive the CCTB base benefit, although the amount of that benefit gradually decreases. No benefit is paid to two-child families with a net income above $95,400.

NCB Supplement reduced to zero at net income of $35,000. CCTB base benefit reduced to zero at net income of $95,400.

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Federal Support to Low-Income Families with Children

The NCB Supplement represents the Government of Canada’s contribution to the NCB initiative. To underscore its commitment to Canadian families with low incomes, the Government of Canada has significantly increased its contributions to support low-income families with children since the implementation of the CCTB.

As its initial contribution to the NCB initiative, the Government of Canada committed to $850 million for the NCB Supplement, in addition to the $5.1 billion per year that had been provided under the former Child Tax Benefit. Additional investments in the program were announced in the 1998 and 1999 federal budgets. In 2000, the Government of Canada announced further investments in the NCB, including the restoration of full indexation of benefit levels, as well as the income levels that determine a family’s entitlement to benefits. Indexation ensures that benefit increases are not eroded by inflation.

In its 2003 Budget, the Government of Canada increased the NCB Supplement by $150 per child per year in July 2003, and by $185 in July 2005. A further increase of $185 is scheduled for July 2006. These increases will bring the projected benefits to $3,243 for the first child, $3,016 for the second child, and $3,020 for each additional child by July 20075.

Figure 3 shows the increase in the value of annual federal expenditures on low income families with children from 1995-1996 to 2005-2006. From $300 million spent on the former Working Income Supplement (WIS) in 1995-1996, the federal investment in the NCB Supplement has increased steadily and is projected to reach $3.4 billion in 2005-2006. In addition, the federal investment provided to low-income families with children through the base benefit of the CCTB has increased over this period, with $3.4 billion projected to be provided to NCB Supplement recipients in 2005-2006, compared to $2.6 billion in 1995-19966.

Figure 3 - Federal Investments for Low-Income Families in Receipt of Both the CCTB Base Benefit and the NCB Supplement for Program Years (July to June)

Figure 3 - Federal Investments for Low-Income Families in Receipt of Both the CCTB Base Benefit and the NCB Supplement for Program Years (July to June)

Description

1995-1996*
Working Income Supplement = $0.3 billion
Child Tax Benefit = $2.6 billion

1996-1997
Working Income Supplement = $0.3 billion
Child Tax Benefit = $2.6 billion

1997-1998
Working Income Supplemen and NCB Supplement = $0.5 billion
CCTB Base Payment = $2.6 billion

1998-1999
NCB Supplement = $1.1 billion
CCTB Base Payment = $2.6 billion

1999-2000
NCB Supplement = $1.5 billion
CCTB Base Payment = $2.7 billion

2000-2001
NCB Supplement = $1.9 billion
CCTB Base Payment = $2.8 billion

2001-2002
NCB Supplement = $2.5 billion
CCTB Base Payment = $3.1 billion

2002-2003
NCB Supplement = $2.4 billion
CCTB Base Payment = $3.3 billion

2003-2004
NCB Supplement = $2.7 billion
CCTB Base Payment = $3.5 billion

2004-2005**
NCB Supplement = $3.0 billion
CCTB Base Payment = $3.4 billion

2005-2006**
NCB Supplement = $3.4 billion
CCTB Base Payment = $3.4 billion

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* Includes the former Working Income Supplement for the years 1995-1996 to 1997-1998.
** Figures for 2004-2005 and 2005-2006 are projections.
Source: CCTB administrative data from the Canada Revenue Agency (January 2005).

The NCB Supplement targets low-income families with children and provides these families with additional assistance on top of the base benefit of the CCTB. Between July 2003 and June 2004, 1.5 million families with 2.7 million children received the NCB Supplement.

Federal Investment in the NCB Supplement by Province and Territory

Table 1 shows the breakdown of federal expenditures on the NCB Supplement and the number of children who benefited by province and territory for 2002-2003 and 2003-2004. As shown in Table 1, federal expenditures on the NCB Supplement have increased from $2.4 billion in 2002-2003 to $2.7 billion in 2003-2004. Federal expenditure increases reflect the initial instalment of the long-term investment plan put in place by the 2003 Budget. Table 1 also shows that, overall, the number of children who received the NCB Supplement increased between 2002-2003 and 2003-2004.

Table 1
Number of Children in Receipt of the NCB Supplement, and Federal NCB Supplement Expenditures by Jurisdiction for 2002-2003 and 2003-2004 Program Years (July to June) in Current Dollars*

Jurisdiction July 2002 - June 2003 July 2003 - June 2004
Children Receiving NCB Supplement (thousands) Benefits paid ($ millions) Children Receiving NCB Supplement (thousands) Benefits paid ($ millions)
Newfoundland and Labrador 52.0 47.9 50.3 51.9
Prince Edward Island 13.1 11.3 13.0 12.5
Nova Scotia 88.4 82.3 88.0 92.0
New Brunswick 71.1 65.3 70.6 72.7
Quebec 633.7 565.0 631.6 629.4
Ontario 952.5 842.7 967.9 962.4
Manitoba 135.1 122.2 137.3 139.9
Saskatchewan 126.7 115.6 126.9 130.2
Alberta 266.6 230.7 270.4 263.5
British Columbia 355.7 320.4 356.6 361.6
Yukon 2.5 2.1 2.5 2.3
Northwest Territories 4.4 3.7 4.4 4.2
Nunavut 6.1 5.4 6.3 6.3
Total 2,711.4** 2,416.5*** 2,727.7** 2,730.3***

* Current dollars are in the actual dollars in a given year and are not adjusted for inflation.

** Includes Canadians living outside of Canada.

*** Totals may not add due to rounding.

Source: CCTB administrative data from the Canada Revenue Agency.

Increased Federal Financial Assistance for Families with Children

Canadian families with children have benefited significantly from increases to the base benefit of the CCTB and the NCB Supplement. As Figure 4 shows, prior to July 1997, the maximum benefit for a family with two children was $2,540. In July 1997, when the WIS was enhanced and restructured, prior to the launch of the NCB, the maximum benefit for a two-child family was $3,050. With the CCTB base benefit and the NCB Supplement, the level of federal child benefits that low-income families with two children were eligible to receive reached $5,680 in July 2005.

Figure 4
Maximum Levels of Federal Child Benefits for Two-Child Families for 1995-1996 to 2005-2006 Program Years (July to June) in Current Dollars*

Figure 4 - Maximum Levels of Federal Child Benefits for Two-Child Families for 1995-1996 to 2005-2006 Program Years (July to June) in Current Dollars*

Description

A line graph illustrating the maximum levels of federal child benefits for two-child families.

1995-1996 $2,540**
1996-1997 $2,540**
1997-1998 $3,050**
1998-1999 $3,050
1999-2000 $3,410
2000-2001 $3,956
2001-2002 $4,544
2002-2003 $4,682
2003-2004 $5,055
2004-2005 $5,222
2005-2006 $5,680

* Current dollars are in the actual dollars in a given year, and are not adjusted for inflation.
** Includes the former Working Income Supplement for the years 1995-1996 to 1997-1998.
Note: Amounts do not include an additional benefit provided for each child less than seven years of age for whom no child care expenses were claimed. This amount was increased to $243 per child as of 2005-2006.

As of July 2005, low-income families with children (whose family net income is equal to or below $21,480) receive maximum annual CCTB benefits (base benefit of the CCTB and NCB Supplement) of $2,950 for the first child and $2,730 for the second child, bringing the amount of total federal child benefits for a family with two children to $5,680, or more than double that of the pre-NCB 1996-1997 levels (see Table 2). For third and subsequent children, the amount of the benefit is $2,734, which includes an additional amount of $86 per year for third and subsequent children. An on-line Canada Child Tax Benefit calculator provided by the Canada Revenue Agency can be used to determine the amount of benefits to which families are entitled.

Table 2
Maximum Levels of Federal Child Benefits for 1996-1997 and 2005-2006 Program Years (July to June) in Current Dollars*

Number of Children 1996-1997 Maximum CTB+WIS 2005-2006 Maximum Base Benefit + NCB Supplement Percentage Increase from 1996-1997 to 2005-2006
1 $1,520 $2,950 94%
2 $2,540 $5,680 124%
3 $3,635 $8,414 132%
4 $4,730 $11,148 136%

* Current dollars are in the actual dollars in a given year, and are not adjusted for inflation.

Note: Amounts do not include an additional benefit provided for each child less than seven years of age for whom no child care expenses are claimed. In 1996-1997, this benefit was equivalent to $213 per child and is $243 per child as of 2005-2006.


5To target the increase in the NCB Supplement to lower-income families, the income threshold at which the NCB Supplement begins to be phased out was adjusted, keeping the reduction rate for the first child constant at the July 2003 level.

6 Figure 3 does not show federal expenditures on the base benefit of the CCTB for middle-income families who do not receive the NCB Supplement. In 2003-2004, the Government of Canada invested $2 billion in the base benefit of the CCTB paid to 1.6 million families with 2.9 million children that had an income above the threshold at which the NCB Supplement is reduced to zero. Taking total expenditures on the base benefit of the CCTB and the NCB Supplement together, the Government of Canada's support to Canadian families with children reached a total of $8.2 billion in 2003-2004, and is projected to reach $10 billion by July 2007.

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