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'Flexible' child care tax credit for low, middle-income families key promise of PC budget

The Progressive Conservatives say the new tax credit will help parents and guardians “fill the gap” between relief already offered to some families by federal and provincial child care expense deductions.

CARE tax credit applies on sliding scale up to $150K household income

Ontario Education Minister Lisa Thompson said the province's new child care tax credit will help keep costs down despite the cancellation of the fund. (Mike Dotta/Shutterstock)

The Ontario government rolled out its plan to help low and middle-income families with child care costs as part of its much-anticipated first budget on Thursday.

The Progressive Conservatives say the new tax credit will help parents and guardians "fill the gap" between relief already offered to some families by federal and provincial child care expense deductions.

According to the province, the credit is based on a sliding scale for families earning up to $150,000 in household income each year. Those households bringing in $20,000 or less per year will qualify for 75 per cent of eligible expenses per child, the full amount available through the credit.

The credit does not apply to total child care expenses, but rather to eligible expenses calculated using the formula already in place for child care expense deductions.

Therefore each year, a family that qualifies for the full 75 per cent credit could receive up to $6,000 per child under seven years old and $3,750 per child between seven and 16 years old. The amount goes up to $8,250 for a child with "severe disabilities," according to the government.

 More child care options

The province says that, on average, the tax credit — dubbed the Childcare Access and Relief from Expenses (CARE) — will provide about $1,250 per family for some 300,000 households in Ontario.

The program was designed for low and middle-income people because child care expense deductions favour earners in higher income tax brackets, the province says.

According to the government, CARE "is one of the most flexible child care tax credits ever introduced" in Ontario because it can be applied to all forms of child care — whether provided by licensed daycare facilities, in-home caregivers, nannies or babysitters.

"Currently, families in need of child care may have few affordable options beyond subsidized daycare, which may not be available nearby or may have a long waitlist," the government said in its 283-page budget document.

The tax credit will cost Ontario about $390-million annually, the government says, a figure that does not include revenue lost due to the provincial child care expense deduction. Further, the Progressive Conservatives say the credit could help some 9,000 to 19,000 people enter the provincial workforce.

NDP calls it a 'rebate rip-off'

The unveiling of the tax credit comes as the government committed $1-billion over five years to create 30,000 new child care spaces province-wide, including 10,000 in schools.

Speaking to reporters, NDP Leader Andrea Horwath said the PC's child care plan was "not realistic.

NDP Leader Andrea Horwath told reporters she is concerned that the government's plan could lead to decreased regulation of child care services. (Pierre-Olivier Bernatchez/CBC)

"Everyone in the child care field is saying this scheme is a 'rebate rip off'," Horwath said, adding that the push to add tens of thousands of new child care spaces will result in more privatized care that is "not monitored for safety and quality.

"These are little children, toddlers and babies, and this is what the government offers? Parents are not going to see access to more affordable child care spaces that are high quality in this province."

Some kind of refundable child care credit was widely expected in the Progressive Conservative's first budget. Premier Doug Ford promised a rebate during last year's election campaign and included the outline of a plan in his election platform.

Details of the CARE tax credit differ somewhat from the rebate originally proposed by Ford. For example, the previous plan said that families earning up to $34,500 would be eligible for the full 75 per cent credit rate. It also did not specify the maximum earned income that would make a household eligible.

The plan also said that the current income tax deduction for child care expenses would be eliminated — a move the government ultimately decided against.

A January 2019 evaluation of the Progressive Conservatives pre-budget child care rebate by the non-partisan C.D. Howe Institute found the plan would cost upward of $945 million, more than double the party's estimate. The government said Thursday, however, that the analysis assumed the provincial child care expense deduction would be eliminated, which would have significantly increased the total cost.

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