The Ford government’s child care tax credit, trumpeted in last spring’s budget as a way to help low and modest income families, isn’t exactly as advertised, according to a report by the province’s independent Financial Accountability Office.
Fewer than 300 of about 310,000 Ontario families eligible to receive the credit will get the maximum payout of $6,000 per child.
And only three per cent of the total government spending on the initiative will be distributed to families earning below $21,400, says the report, released Tuesday.
The Childcare Access and Relief from Expenses tax credit — lauded by the government as the “CARE” credit — was introduced in April to help families with children under age 16 offset the cost of child care and help parents return to work sooner after parental leave.
At the time, former finance minister Vic Fedeli called it one of the “most flexible child care initiatives ever introduced in Ontario.”
He lost his job 10 weeks later in a cabinet shuffle after province-wide outrage over hidden cuts in the budget.
The CARE credit, available to parents with annual after-tax household incomes below $150,000, will provide an annual average benefit of $1,300 per family, according to the report.
But two-thirds of the estimated $460 million annual cost of the tax credit will go to families who make more than $63,700 a year. That is because low-income families pay very little income tax and are unlikely to spend their limited income on child care, says the report.
“Lower-income people … don’t necessarily have the means to pay for child care in the same way that a family earning more money does,” Financial Accountability Officer Peter Weltman told reporters.
Under the scheme, families can receive up to $6,000 per child under age seven, $3,750 for those between age seven and 16 and a maximum of $8,250 for a child with a disability.
Ontario has the second-highest average child care costs in the country at $12,800 a year, and the lowest female labour force participation rate at 81.5 per cent, the report says.
While the credit will help more mothers return to work, women’s labour force participation in Ontario will remain “well below the national average,” according to the report.
The CARE credit will expand the workforce by 6,000 to 15,000 people, a “modest 0.4 percentage points,” the report says.
“Child care costs are a deterrent to female labour force participation,” Weltman told reporters.
But Ontario’s tax credit would need to triple to bring women’s labour force participation up to the level of Quebec — the highest in the country — where 86.7 per cent of women with young children are working, he added.
Ontario has the second lowest share of children in child care in the country with 40 per cent of kids under age 5 in care, including unlicensed home daycare and unlicensed before- and after-school programs, according to the report, which used a recent Statistics Canada analysis.
By contrast, 74 per cent of young children in Quebec are in child care, where parents pay an average annual cost of $4,400 for the service. About 28 per cent of Ontario families say the high cost of child care in Ontario is a barrier to using it, the report notes.
Weltman, whose office provides independent analysis on the state of the province’s finances and reports to the legislature, does not offer value judgments on government spending.
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A finance ministry spokesman said the CARE credit is designed to be integrated with the existing Child Care Expenses Deduction.
“In combination, these two tax relief measures provide thousands of families with incomes of up to $60,000 around 75 per cent of child care expenses covered,” said Scott Blodgett.
The Financial Accountability Office’s analysis uses “more limited data sources” than are available to the Finance Ministry, Blodgett added.
According to Weltman’s report about 21 per cent of Ontario’s 1.5 million families with kids under age 16 will be eligible to receive the provincial CARE credit. The remaining families either earn too much or have no reported child care expenses.
NDP child care critic Doly Begum said the analysis was “not surprising.”
“It’s exactly what we expected,” she said in an interview. “It does nothing to help women return to the workforce and it does nothing to create regulated child care spaces.”
“The scheme barely helps anyone. Just 0.1 per cent of families will receive the maximum credit,” she added. “For middle income families struggling to get back to work and struggling to find affordable care, this plan does nothing.”
Child care advocates were equally dismissive of the credit.
“It really is a rebuke of the Ford Conservatives and how they misrepresented the tax credit and its impact when they announced it during the budget,” said Carolyn Ferns of the Ontario Coalition for Better Child Care.
When combined with recent cuts to municipal funding for child care, Ferns said the report shows tax credits “are not a good way to approach child care.”
“It shows the Ford government doesn’t understand the child care file, doesn’t understand what’s needed and that this isn’t a good way to approach families’ child care challenges,” she added.