A federal program focused on tax season doesn’t incentivize someone to work, finds the Montreal Economic Institute..The current form of the Canada Workers Benefit doesn’t prompt Canadians on income assistance programs to pursue full-time work, the MEI economic note explains..“The promise of some obscure tax credit a year from today is of little comfort when you lose out on hundreds of dollars in benefits every month,” says Jason Dean, associate researcher at the MEI and the study’s author. .“Much like one’s paycheque, the Canada Workers Benefit should be deposited bi-weekly in order for it to be as effective as possible.”.The Canada Workers Benefit is a federal income support program targeting low-income workers through a refundable tax credit, helping them keep more of their earnings from the tax man. As such, it is only disbursed around tax season, once workers submit their tax returns..The author points to this timing as a key factor rendering the Canada Workers Benefit much less effective, as the hit to one’s paycheque happens right away, but the compensation only comes much later..The author also finds the Canada Workers Benefit reduces participation tax rates (the speed at which one’s earnings trigger benefit losses) by a meagre one percentage point for full-time minimum wage workers — from 57% to 56% in Quebec and from 44% to 43% in Ontario, for instance..The study points to the benefit’s rapid phase-out as the primary cause for its failure to incentivize full-time work. The benefit is almost fully clawed back before reaching earnings associated with full-time minimum-wage work..The author posits a targeted top-up for full-time work would help incentivize 190,000 people to take on full-time work in Ontario alone. That would generate $120 million in net savings in Ontario alone..“As they say, the best social program is a job,” explains Dean. “We need to design our programs better so we don’t trap people behind the welfare wall, starting with the Canada Workers Benefit.”.The report says the program is modeled after the US Earned Income Tax Credit (EITC). In Canada the CWB is consistent across most provinces, though “Quebec, Alberta, and Nunavut have adapted their programs. Quebec, in particular, raised its maximum subsidy for unattached singles by over 96% since 2018, resulting in a subsidy that is now roughly 2.3 times higher than in the rest of the country.”.You can read the two-page MEI publication here: https://www.iedm.org/wp-content/uploads/2023/05/note072023_en.pdf.
