The NCB Progress Report: 2005

• Previous
• Table of Contents
• Next

Chapter 2
The National Child Benefit Supplement

The Government of Canada has long provided Canadian families with child benefits. The Child Tax Exemption was established as early as 1918. This was followed by the Family Allowance benefit and various types of child tax measures aimed at providing financial support to parents.

Since July 1998, the Government of Canada has provided direct financial assistance to families with children through the Canada Child Tax Benefit (CCTB). The CCTB is designed to help families with the costs of raising children and takes the form of a non-taxable monthly payment for families with children, based on a family's net income and the number of children within the family.

The CCTB is made up of two key components: the base benefit of the CCTB, which is paid to low- and middle-income families with children, and the NCB Supplement, which is an additional benefit paid to low-income families with children. Eligible Canadian families with children receive the base benefit and the NCB Supplement through a single monthly payment.

Figure 2 illustrates the CCTB structure for families with two children as of July 2005. During the 2005-2006 benefit year (from July 2005 to June 2006), two-child families with net incomes less than $21,480 received the maximum benefit level of $5,680. Under the CCTB benefit structure, all families in receipt of the NCB Supplement receive the maximum level of the base benefit of the CCTB. Families with net incomes above $21,480 but below $35,595 continue to receive the maximum level of the base benefit of the CCTB, but the level of NCB Supplement to which they are entitled decreases as family income increases. Finally, those families with net incomes above $35,595 but below $96,995 receive only the base benefit of the CCTB. The level of this benefit also decreases as family income increases.

The History of Federal Child Benefits in Canada

1918 — Child Tax Exemption: This exemption provided income tax savings that increased as taxable income increased. It did not provide benefits to families that did not have a tax liability.

1945 — Family Allowance: This benefit was provided to all Canadian families with dependent children.

1973 — The Family Allowance benefits were tripled, indexed to the cost of living, and made taxable.

1978 — Refundable Child Tax Credit: This targeted and income-tested child benefit, which was delivered through the tax system, provided a maximum benefit to low-income families, a declining amount to middle-income families, and no benefit to upper-income families.

1993 — Child Tax Benefit (CTB): This benefit consolidated refundable and non-refundable child tax credits and the Family Allowance into a monthly payment based on the number of children and level of family income. It also included the Working Income Supplement (WIS), which provided an additional benefit to low-income working families with children. In 1993, federal expenditures on child benefits, including WIS, totalled $5.1 billion.

1998 — The CTB was replaced by the Canada Child Tax Benefit (CCTB). The National Child Benefit (NCB) Supplement replaced the WIS, and is provided to all low-income families as part of the new CCTB.

Figure 2
The Canada Child Tax Benefit for Two-Child Family: July 2005 to June 2006

D

Federal Support to Low-Income Families with Children

The NCB Supplement to the CCTB represents the Government of Canada's contribution to the NCB initiative. The Government of Canada has significantly increased its contributions to support low-income families with children since the implementation of the CCTB.

As its initial contribution to the NCB initiative, the Government of Canada committed to $850 million for the NCB Supplement, in addition to the $5.1 billion per year that had been provided under the former Child Tax Benefit. Additional investments in the program were announced in subsequent years, including the restoration of full indexation of benefit levels in 2000 to ensure that benefit increases are not eroded by inflation.

The 2003 Government of Canada Budget announced increases to the NCB Supplement of $150 per child per year in July 2003, $185 in July 2005, and $185 in July 2006. This will bring the projected benefits available through the combined CCTB base benefit and NCB Supplement to $3,271 for the first child, $3,041 for the second child, and $3,046 for each additional child by July 2007.⁵

Figure 3 shows the increase in the value of annual federal expenditures on low-income families with children from 1995-1996 to 2006-2007. From $300 million spent on the former Working Income Supplement (WIS) in 1995-1996, federal investment in the NCB Supplement has increased steadily and is projected to reach $3.5 billion in 2006-2007. In addition, federal investment provided to low-income families with children through the base benefit of the CCTB has increased over this period, with $3.5 billion projected to be provided to NCB Supplement recipients in 2006-2007, compared to $2.6 billion in 1995-1996.⁶

Between July 2004 and June 2005, approximately 3.4 million families with 6.0 million children received the base benefit of the CCTB. The NCB Supplement targets low-income families with children and provides these families with additional assistance on top of the base benefit of the CCTB. Between July 2004 and June 2005, 1.6 million families with 2.8 million children received the NCB Supplement.

Figure 3
Federal Investments for Low-income Families in Receipt of both the CCTB Base Benefit and the NCB Supplement for Program Years (July to June)

D

Federal Investment in the NCB Supplement by Province and Territory

Table 1 shows the breakdown of federal expenditures on the NCB Supplement and the number of children who benefited by province and territory for 2003-2004 and 2004-2005. As shown in Table 1, federal expenditures on the NCB Supplement have increased from $2.7 billion in 2003-2004 to $2.9 billion in 2004-2005. Federal expenditure increases reflect the five-year investment plan put in place by the 2003 Budget. Table 1 also shows that, overall, the number of children who received the NCB Supplement increased between 2003-2004 and 2004-2005.

Table 1
Number of Children in Receipt of the NCB Supplement and Federal NCB Supplement Expenditures by Jurisdiction for 2003-2004 and 2004-2005 Program Years (July to June) in Current Dollars^a

^aCurrent dollars are in the actual dollars in a given year and are not adjusted for inflation.
^bIncludes Canadians living outside of Canada.
^cTotals may not add due to rounding.
Source: CCTB administrative data from the Canada Revenue Agency.

Increased Federal Financial Assistance for Families with Children

Canadian families with children have benefited significantly from increases to the base benefit of the CCTB and the NCB Supplement. As Figure 4 shows, prior to July 1997, the maximum benefit for a family with two children was $2,540. In July 1997, when the WIS was enhanced and restructured, prior to the launch of the NCB, the maximum benefit for a two-child family was $3,050. With the CCTB base benefit and the NCB Supplement, the level of federal child benefits that low-income families with two children were eligible to receive reached $6,175 in July 2006.

As of July 2006, low-income families with children (whose family net income is equal to or below $20,435) receive maximum annual CCTB benefits (base benefit of the CCTB and NCB Supplement) of $3,200 for the first child and $2,975 for the second child, bringing the amount of total federal child benefits for a family with two children to $6,175, or more than double that of the pre-NCB 1996-1997 levels (see Table 2). For third and subsequent children, the amount of the benefit is $2,980, which includes an additional amount of $88 per year for third and subsequent children. An on-line CCTB calculator provided by the Canada Revenue Agency can be used to determine the amount of benefits to which families are entitled.

Figure 4
Maximum Levels of Federal Child Benefits for Two-Child Families for 1995-1996 to 2006-2007 Program Years (July-June) in Current Dollars^a

D

Table 2
Maximum Levels of Federal Child Benefits for 1996-1997 and 2006-2007 Program Years (July to June) in Current Dollars ^a

^aCurrent dollars are in the actual dollars in a given year, and are not adjusted for inflation.

⁵ To target the increase in the NCB Supplement to lower-income families, the income threshold at which the NCB Supplement begins to be phased out was adjusted, keeping the reduction rate for the first child constant at the July 2003 level.

⁶ Figure 3 does not show federal expenditures on the base benefit of the CCTB for middle-income families who do not receive the NCB Supplement. In 2004-2005, the Government of Canada invested $2.4 billion in the base benefit of the CCTB paid to 1.8 million families with 3.2 million children that had an income above the threshold at which the NCB Supplement is reduced to zero. Taking total expenditures on the base benefit of the CCTB and the NCB Supplement together, the Government of Canada's support to Canadian families with children reached a total of $8.9 billion in 2004-2005, and is projected to reach $9.5 billion by July 2007.