Most Canadians have completed and filed their taxes for another year. Many have likely already spent their refunds and others have begrudgingly sent off the cheques to cover what they still owed government.
Personal income taxes were the subject of a discussion in the Canadian Senate last week when Island Senator Catherine Callbeck rose to question the usefulness of some non-refundable tax credits.
She called on the federal government to improve its tax credits by making them refundable instead.
It’s a valid point. What good are personal tax credits to people whose incomes are so low, they don’t owe any taxes?
A refundable credit, perhaps added to the HST rebate, would benefit many more.
“Over the course of the last eight years, the Conservative government has repeatedly introduced — to great fanfare — personal tax credits that are not useful to the countless Canadians who need them the most,” said Callbeck in the Senate Thursday.
“In order to take advantage of these credits, a person's income must be high enough that he or she owes taxes to the federal government. The non-refundable tax credit can only be used against taxes owing.”
She presented an example of the Family Caregiver Tax Credit, which is available to caregivers of infirm, dependent relatives and can be worth up to $309. However, because it is one of those non-refundable tax credits, a mother earning, say, $20,000 would not qualify for any help as a caregiver and would not get the $309 credit. The higher income earners could claim the non-refundable tax credit, so it’s beneficial to them, but it’s of no benefit to the lower income earners.
This tax law affects a significant number of Islanders. In Prince Edward Island, more than 30,000 — roughly 30 per cent of Islanders who file income tax returns — do not pay any federal income tax.
“That means that almost a third of Islanders cannot take advantage of non-refundable tax credits,” added Callbeck.
And this caregiver tax is just one example of non-refundable tax credits that do nothing for the working poor.
The P.E.I. Firefighters Association has said that roughly 20 per cent of Island firefighters are not eligible for the Volunteer Firefighters Tax Credit at all because their income is too low.
As the senator pointed out, the families who could most use a break — those with the lowest incomes — are the ones who cannot qualify for these tax credits.
Her solution is simple: make these tax credits refundable.
“That way, the people who need the cash the most, low-income Canadians, will receive it.”
Perhaps these changes could be implemented before next tax filing season rolls around. It’s only about 300 days away.