Andrew Scheer proposes tax-free maternity and parental benefits

Conservative leadership candidate Andrew Scheer says he wants to make maternity and parental leave less expensive for families by designating the benefits parents receive while on leave as tax-free.

Conservative leadership candidate would also increase the amount of income parents can earn while on leave

Andrew Scheer, seen here during the Conservative leadership debate in Halifax Saturday evening, wants to make maternity and parental leave benefits tax-free if he's elected to lead a future Conservative government. (CBC )

Conservative leadership candidate Andrew Scheer says he wants to make maternity and parental leave less expensive for families by designating the benefits parents receive while on leave as tax-free.

A release from the Scheer campaign Tuesday framed the proposal as "giving more choice to parents of newborns."

The costs of caring for a new baby, it said, coupled with lost income when a parent stays home to be a caregiver, "can be overwhelming and a source of stress in what should be an incredibly happy time."

Scheer is proposing the government not deduct federal income tax on the special benefits parents can draw on if they're eligible for maternity or parental leave under the employment insurance system.

Because provincial income tax is also deducted from EI benefits, the federal government would need provinces to agree to forego this revenue in order for benefits to be entirely tax-free.

'Too restrictive' for work during leave

Scheer also proposes raising the limit on how much employment income a parent can earn each week while on leave.

Currently, if a claimant works while receiving EI maternity benefits — which are paid to a biological mother for 15 weeks after giving birth — the government deducts the entire amount of the income earned from each week's benefits.

Parental benefits — which are available for up to 35 weeks for either parent, including an adoptive parent — are clawed back if the claimant earns more than $50 of other income in a given week.

But under a pilot project in place until 2018, those receiving parental benefits can keep 50 cents of benefits for every dollar of other income earned, up to a limit of 90 per cent of the average weekly earnings used to calculate their benefit amount.

It's unclear whether the federal government will turn this pilot project into a permanent change down the road.

Scheer's campaign says he wants to go beyond what the federal government is currently looking at with its pilot project.

"I have heard countless stories of frustration from parents who feel the current limits are too restrictive," Scheer's release said. Raising the limit "just makes sense."

Estimated cost: More than $500M

Scheer's campaign estimates that making benefits tax-free would cost the federal government at least $500-600 million annually, a calculation based taking the number of EI maternity and parental leave claimants in 2014-15 and assuming an average annual income among them of about $50,000, triggering a 15 per cent federal taxation rate.

A more precise cost would vary each year based on how many parents drew benefits and how high their rates of taxation would otherwise be.

If taking time off work to care for children became more popular as a result of this kind of change, the cost to the government would rise.

On the other hand, children in lower- and middle-income families could benefit from the boost to their household's budget.