Axe the Autism Tax — Reform the OAP
A parent (most likely a Mom) returning to the workforce, earning $50,000, will see their Childhood Budget reduced by more than their take-home pay. In other words, they’re working for less than nothing. Here’s how.
Take a Dad, earning $61,000 a year, as the sole earner. Using this handy calculator (using 2018 numbers — 2019 appears incomplete), we can figure out how much the family will pay in income tax, EI, CPP, and how much they will receive in Canada Child Benefit (CCB), assuming they have a one-year old child:
Here ETR stands for Effective Tax Rate. Dad brings home just under $49,000 after income taxes, EI and CPP (The family gets a bit of an income tax break, since Dad can claim his spouse’s basic personal exemption). The family receives around $4,500 in CCB payments, bringing their total take-home to $53,322.97, which represents a 12.59% effective tax rate.
Let’s bring Mom into the mix (recognizing this is a heteronormative example). She returns back to work, and earns $50,000. Using the calculator, entering in $61,000 for the taxpayer income and $50,000 for the spouse, here are their combined income tax payments, EI, etc.
The couple’s take home pay has increased, but so has their effective tax rate, and they’ve lost nearly $2,000 in CCB payments, due to the increase in their combined income. We get a better idea of the family’s new position by examining the difference:
By re-entering the workforce, the Mom is facing a 30% effective tax rate, due to the income taxes, EI and CPP she pays, along with the reduction in CCB and the effects on the basic personal exemption.
The important thing to note here is that by taking a $50,000 job, the family’s take-home income has increased by just under $35,000.
Now suppose the child receives a diagnosis before the age of 2, which would make them eligible for a maximum Childhood Benefit (CB)of $140,000. Let’s see what happens to her return-to-work decision.
If the family earns an income of $61,000, they are eligible for 97% of the maximum CB. 97% of $140,000 is $135,800. The family can obtain $135,800 worth of treatment over the next 16 year (assuming no change to family income over that time).
But if the family earns an income of $111,000, they are eligible for 71.5% of the maximum, leaving their CB at $100,100 ($140,000 * 71.5%).
This represents a reduction in childhood benefit of $35,700.
But the family’s take-home pay only increased by $34,827.
A woman with net earnings of $34,827 loses $35,700 in Childhood Benefits under the Ford Plan, an over 100% clawback.
Of course, that is lifetime childhood benefits. So let’s consider the effect on a single year. We know that a family can spend 20% of their Childhood Budget in a single year. Since their budget is reduced by $35,700, this gives them $7,140 less to spend in Year 1. ($35,700 * 20%).
This represents an effective autism tax rate of 14.28%.
Under the Ford Plan, a Mom earning $50,000 with a spouse earning $61,000 would see her effective tax rate rise from 30.35% to 44.63%, thanks to the autism tax.
Note that someone with no kids in Ontario earning $400,000/yr faces an effective tax rate of 44.41%. The Mom earning $50,000/yr in our examples faces a higher effective tax rate.
That is unacceptable. It’s time to axe the autism tax.
