Income inequality: Tax tweak could greatly benefit low income Canadians - School of Public Policy report.

CALGARY, Aug. 24, 2015 /CNW/ - With the debate about income inequality on the rise in Canada, governments are considering innovative solutions. One possibility for improving the tax-transfer system involves refundable tax credits (RTCs). Making all tax credits refundable wouldn't require Ottawa to introduce new tax measures; the Canadian tax system already contains a mix of refundable and non-refundable tax credits, so the government could simply continue its practice of designing tax credit programs to be refundable.

A report released today by The School of Public Policy and authors Wayne Simpson and Harvey Stevens analyzes the impact and cost of converting existing non-refundable tax credits to refundable tax credits targeted at low-income households and offers several effective and viable solutions on an issue that is critical to Canadians.

As it stands, non-refundable tax credits (NRTCs) are of no value to persons in a non-taxpaying position, and as such, taxpayers and non-taxpayers are treated differently. Programs such as the Canada Child Tax Benefit and Goods and Services Tax Credit determine benefit levels according to family taxable income - unfortunately most tax credits remain non-refundable and benefit only those who owe taxes.  According to the authors, "making all tax credits refundable is feasible, and would turn the tax system into a proper negative income tax system - where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government."

Converting existing NRTCs to RTCs is a modest but effective step to deliver benefits to low-income households in the fashion of a guaranteed annual income, but the most important part of these and the other conversion plans detailed in the report, is that most of the benefits are directed to low-income households. By far the largest benefits are directed to the poorest families with incomes less than 50 percent of the low-income cutoff. The conversion of existing NRTCs to RTCs is a modest but potentially important step toward fairness in the treatment of tax filers and in addressing Canadian income inequality.

The paper can be downloaded at

SOURCE The School of Public Policy - University of Calgary

For further information: Media Contact: Dana Fenech, 403.210.6508,


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