Tax & Spend

April 17, 2021

Tax and Spend: The flaws of Ottawa’s pandemic sick-leave benefit

Graham Hughes/The Canadian Press

Tax and Spend: The flaws of Ottawa’s pandemic sick-leave benefit

Patrick Brethour

For much of the pandemic, the main critique levelled at Ottawa has been that it’s spending too much with few restrictions on who could get the money.
Teenagers living at home receiving thousands of dollars in payments under the Canada Emergency Response Benefit? Not a problem. Wealthy seniors getting a $300 cheque to help out with pandemic expenses? A-OK.
But the result, if not the intent, of Ottawa’s actions on pandemic sick leave has been very different from the more-is-better approach of many other pandemic programs, as the most recent Tax and Spend details. Less than a sixth of the money budgeted for fiscal 2020-21 for the Canada Recovery Sickness Benefit had been used as of March 28, just three days before the end of the fiscal year. And the number of new unique applicants each week has been trending downward since December, even as coronavirus cases have risen sharply across the country.
So far, the federal government has made only one significant revision, doubling the maximum claim period under the CRSB to four weeks from the original two. Ottawa appears intent on sticking with the program as is, despite widespread criticism (and mounting evidence) that the CRSB is ineffective.
One of those flaws: Workers have to apply retroactively, rather than receiving benefits ahead of time, as was the case with the CERB. (That retroactive feature is also true of the other income-support benefits Ottawa introduced in the fall, and is how Employment Insurance benefits are paid out.)
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“This will help ensure that people are getting the benefits for a period for which they are entitled, and avoid the need to repay benefits if they apply but then are able to work,” the government’s FAQ states.
That approach might very well make sense for someone who is unemployed, since it avoids the problem of them having received payments covering a period in which they’ve already returned to work. And it removes an incentive for those receiving income-support payments to delay a return to work.
But do retroactive payments make sense if the goal is to ensure that workers who may be ill with the coronavirus stay home to avoid infecting others? Ottawa thought so in the fall, and if the government has changed its mind since, it isn’t saying – much less acting.

Taxing Questions

Ottawa has cut side deals with several Atlantic provinces that have lowered incremental carbon charges on gasoline and diesel, and eliminated it entirely for home heating fuels, as detailed in a recent Tax and Spend. In doing so, the federal and provincial governments have weakened the price signal built into carbon levies, the phrase economists use to describe how consumers react to a change in cost.
The point of the carbon levy is to increase the price of fossil fuels. Higher prices should, all things being equal, reduce demand – in this case, the demand for fossil fuels, and in turn the production of greenhouse gases.
But one reader asked – if the exemptions disrupt the price signal, why isn’t the same true of the rebates that are paid to households in Ontario, Manitoba, Saskatchewan and Alberta, where the federal backstop applies? There’s a big difference in the two approaches.
Take New Brunswick’s rebates on home heating fuel. Technically speaking, there is a carbon charge on home heating fuel – it’s just that the province rebates every penny that households pay. Consume more gas, get a bigger rebate, pay no incremental cost. Consume less gas, get a smaller rebate – and still pay no incremental cost.
Federal rebates, which return 90 per cent of the direct proceeds of carbon pricing within a province to households, work much differently. Those payments are tied to the number of people in a household, with a small adjustment for geography; rural residents, for instance, receive a slightly higher rebate and amounts also vary depending on the province of residence.
For around three-fifths of households, the rebates are at least as much as carbon costs. (And the term rebate is slightly misleading, since Ottawa has timed the payments to arrive ahead of being incurred.)
Under the federal rebate system, if an individual’s consumption of fossil fuels rose, they would be worse off. The amount of their rebate payment would stay the same, but carbon charges would be higher. Conversely, if that person reduces their consumption of fossil fuels, the amount of carbon charges they pay fall, while the rebate stays constant – and they are relatively better off.
That’s why there is still an incentive to reduce consumption, even with the rebates that Ottawa sends out.

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Basic-income statements: The Parliamentary Budget Officer has issued another report on a basic income program, concluding that the program would dramatically reduce poverty levels. But paying for it would entail eliminating a slew of federal and provincial tax benefits, most notably the basic personal amount deduction. That would boost tax bills, and decrease disposable income, for most moderate- and high-income households.
The idea of a basic income program also surfaced in the policy debates at the federal Liberals’ convention late last week.
Globe and Mail columnist David Parkinson weighed in on the basic-income debate, saying such a program could be a tool to reduce income inequality but also a more agile automatic stabilizer for the economy.
But there are critics aplenty, including economist Mike Moffatt, an assistant professor at the Ivey Business School at Western University. Mr. Moffatt details on Twitter some of the shortcomings of a basic income program, including the treatment of those with disabilities and the financial hit that many households would suffer.
Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.
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About This Newsletter
Every Monday, Patrick Brethour's Tax and Spend newsletter dives into the intricacies and oddities of taxation and government spending. He dismantles political spin, digs behind the headlines and unearths economic trends to increase your understanding of how – and why – the government is spending your money, and sending it your way.

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