Academic journal article Social Security Bulletin
Canada's Social Welfare Reform
Canada's extensive social welfare net is experiencing financial problems. Because of an aging population, increasing costs of medical care, and a very liberal unemployment policy coupled with persistent unemployment and increasing national deficits, Canadians are reassessing their social welfare programs.
Early 1994, the Minister of Human Resources Development created a Standing Committee on Human Resources Development. The Committee's mandate is to define issues, concerns, and priorities; and to develop an action plan for a general reform affecting all aspects of social welfare, including applicable taxes and laws relating to education, labor, and private pensions. All forms of social assistance and income security programs are to be considered. Specific recommendations were due to be submitted to Parliament by September 30, 1994, with implementation expected in 1995.
Even before the Committee completed its work, two areas of social security-family allowances and unemployment benefits have already undergone change, and health care is being modified in Saskatchewan. Family allowances have undergone the greatest change in recent years. Prior to 1989, a cash benefit was provided for each child regardless of family income; the benefit was taxable based on the income of the highest income member of the family. Beginning in 1989, family allowances were subject to a "claw-back" of part or all of the family allowance benefit, with the "claw-back" calculated as 15 percent of the taxable combined income of the parents that exceeded C$50,000 (US$40,000) per year. The family allowances less any "claw-back" amount were also subject to income tax. In 1992, family allowances were replaced by a benefit that is paid as a refundable tax credit.
A family is entitled to a basic annual allowance amount of C$1,020 (US$816) for each child, plus a supplement of C$75 (US$60) for the third and each subsequent child, and a further supplement of C$213 (US$17O) for each child under age 7. This allowance amount is reduced by 5 percent for families with 2 or more children and reduced 2.5 percent for single-child families whose parents have a net income above C$25,921 (US$20,000) per year. In practice, any remaining allowance amount is then paid as a tax-free monthly benefit beginning in the following year. …