Canada’s Children’s Fitness Tax Credit – The Rich Get Richer?

**Grumpy Cat** · 04-10-2011, 03:03 AM

Canada is in the midst of an election campaign and the major parties are putting out a number of policy ideas on a daily basis. One idea proposed by Conservative leader Stephen Harper was 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 saving 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 saving until tax season. So if Junior’s soccer fees come to $500 and you only have $425 dollars, 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.

Mr 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 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.

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 here 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 in (you guessed it) Saskatchewan (one key difference for the Saskatchewan program being that it is fully refundable). Similar credits are rumored to be in the works in both Australia and the USA as well.

So, since are 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 exact question.

In this new paper, Dr Spence et al. surveyed a representative sample of 2,135 Canadian adults to ask them if they were aware of the CFTC, if they had claimed it/planned to claim it, and whether they believed that the CFTC led to their child being more involved in physical activity programs.

I have inserted 2 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. Result 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% in Q4 vs 40% in Q1). Similarly, these high income individuals were much more likely to have knowledge of the CFTC, and have claimed it in 2007 or plan 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 CFTC in the past only 15% said that it led to their children being more involved in organized physical activity.

Given these findings Dr Spence and 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 enrollment 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 CFTC is of benefit to people who can already afford to put their kids in organized sport, 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 sport 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 then 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).

All that to say that while expanding the CFTC isn’t necessarily a bad thing, it’s probably not going to do much to increase enrollment in organized physical activity among those who need it most.