Research suggests Stephen Harper’s plan will benefit better-off families.
One idea proposed by Conservative Leader Stephen Harper during this election campaign is to expand the Canadian Children’s Fitness Tax Credit (CFTC). As it currently stands, the CFTC offers a $500 non-refundable tax credit that parents can receive by enrolling their child in an approved physical activity program. If I understand it correctly, this means that if your income is $50,000, claiming this credit would effectively reduce your taxable income to $49,500.
While a $500 tax credit may sound pretty large, at the end of the day parents only save a maximum of $75 per child (this savings can be increased by another $75 if the child has a disability). And keep in mind that parents still need to be able to afford the full $500 fee up-front – they don’t get the $75 savings until tax season. So if Junior’s soccer fees come to $500 and you only have $425, you’re out of luck. You need to be able to pay that full $500 fee and then wait until the following spring to have your tax bill reduced by $75.
Harper is proposing that the current CFTC be expanded to offer a $1,000 tax credit per child, as well as offering a similar $500 tax credit for adults (an important detail being that these credits won’t be in place until the budget is balanced, which is projected to be 2015 at the earliest). This would mean that parents could now save up to $150 per child, and an additional $75 for themselves … once the budget is balanced.
(The CFTC also isn’t terribly effective from an economic perspective.)
These types of tax credits seem to be catching on with politicians on both sides of the political spectrum as similar credits have been enacted or expanded by the Liberal government in Ontario, the New Democratic Party in Manitoba, the Progressive Conservative Party in Nova Scotia, the Yukon Party in the Yukon, and the Saskatchewan Party (one key difference for the Saskatchewan program being that it is fully refundable). Similar credits are rumoured to be in the works in both Australia and the United States as well.
So, since these types of tax credits seem to be increasing in popularity among politicians, and given the limitations described above, is there any evidence that they actually increase physical activity levels? Luckily, a recent paper by John Spence and colleagues at the University of Alberta looked at this question.
In this new paper, Spence et al. surveyed a representative sample of 2,135 Canadian adults, asking them if they were aware of the tax credit, if they had claimed it/planned to claim it, and whether they believed that it led to their child being more involved in physical activity programs.
I have inserted two figures of their most telling results below. I graphed it twice and wasn’t sure which way did a better job of breaking it down, so I have included both.
Figure 1. Results by Income Quartile (Q1 = lowest income, Q4 = highest income).
Figure 2. Results by question.
Not surprisingly, both graphs suggest that the individuals with a higher income were much more likely to report having a child involved with organized physical activity (68 per cent in Q4 versus 40 per cent in Q1). Similarly, these high-income individuals were much more likely to have knowledge of the CFTC, and have claimed it in 2007 or planned to claim it in 2008. The proportion of individuals in Q3 and Q4 who claimed the CFTC in 2007 was double the proportion of individuals in Q1. The authors also note that among those who claimed the tax credit in the past, only 15 per cent said that it led to their children being more involved in organized physical activity.
Given these findings, Spence and his colleagues conclude that more than half of Canadian parents with children have claimed the CFTC. However, the tax credit appears to benefit the wealthier families in Canada.
Clearly, if increasing enrolment in organized physical activity is the goal, this type of tax credit seems unlikely to make much of a difference. Based on the results of this paper, it seems that the current tax credit is of benefit to people who can already afford to put their kids in organized sports, but is of little use to the children who need it the most.
I would argue that for the same amount of money, we could get far more children involved in sports by funding programs directly, or by working out a system whereby children from low-income families simply have to pay lower registration fees compared to those from high-income families. I know that many sports programs, such as the Fredericton Youth Hockey Association, already have systems like this in place by reducing registration fees and/or providing free equipment to children in financial need.
If getting kids involved in organized activities is the goal, I would argue that this type of program is much more likely to make an actual difference than the fitness tax credits that are popping up around the country. (Full disclosure: My dad is heavily involved with the FYHA and its program for kids with financial need, although I’d be a fan of the program even if he wasn’t.)
While expanding the CFTC isn’t necessarily a bad thing, it’s probably not going to do much to increase enrolment in organized physical activity among those who need it most.
This article originally appeared at the PLoS Blogs.
Photo courtesy of Reuters.