Working Income Tax Benefit: A Pathway out of Poverty

As a faith-based organization, Citizens for Public Justice (CPJ) sees Budget 2015 as an opportunity to foster and promote the common good. In our pre-budget submission to the House of Commons Finance Committee we outline three recommendations that would move Canada in that direction. This means highlighting the needs of the most vulnerable in our country and ensuring dignity for all. Doing so in our budgetary process is one way we can respond to God’s call for love and justice.

Recommendation #1: Enhance the Working Income Tax Benefit (WITB) so it extends to all households with earned income under the after-tax Low Income Cut-Off.

The WITB was created in 2007 as a federal refundable tax credit to boost the earned incomes of eligible low-income working individuals and families. This benefit encourages workers to enter the paid workforce (for those stuck behind the “welfare wall”) or to remain in it (for those already working in low-paying jobs). Enhancing the WITB would remove some significant disincentives to paid work in the formal economy, ease pressure on social assistance, and lift working adults out of poverty.

Despite previous boosts to the WITB, the maximum benefit amount for a single worker in 2014 is just $998 per year, reaching $0 at a net income of $17,986 ($27,736 for a family).[1] The current allowable income level remains low enough that someone working full-time year-round at minimum wage would not qualify, even though they would be living in poverty. The refundable amount of the WITB should be increased and extended higher up the income ladder to the after-tax Low Income Cut-Off so that it becomes a pathway out of poverty for Canadians who work but remain poor.

In 2013, the House of Commons Standing Committee on Finance recommended that “the federal government formally review the WITB to determine how it could be expanded or modified to further benefit Canadians and further incent workforce attachment.”[2]

An increase in unemployment and precarious, low-paying work has been a defining feature of the Canadian labour market since the 2008 recession. Forty-four per cent of low-income households in Canada had at least one person working in 2011.[3]  Unfortunately, the working poor find themselves in poverty due to inadequate pay and limited advancement opportunities, but continue to work a comparable number of hours to the rest of the working-age population.[4] Single adults and lone-parent families are most vulnerable because they depend on one income.

In addition to improving the WITB, CPJ and our partners at Dignity for All: the campaign for a poverty-free Canada recommend that the federal government—in consultation with Aboriginal, provincial, territorial, and municipal governments—develop a comprehensive, multilateral poverty reduction plan. By addressing key areas such as health, housing, food insecurity, income inequality and early childhood development, and the plan would go a long way toward improving the well-being and productivity of people living in poverty.

[1] WITB: Calculation and advance payments. In Canada Revenue Agency.

[2] Income Inequality in Canada: An Overview, Report of the Standing Committee on Finance, December 2013. In Parliament of Canada.

[3] Poverty Trends Highlights (2013, October). In Citizens for Public Justice.

[4] Stapleton, J., Murphy, B., & Xing, Y. (2012, February). Working poor in the Toronto region. In Metcalf Foundation.

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