Wealthy claim majority of education tax relief

Top earners received 37.7% of total credits

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OTTAWA – The country’s highest-earning families benefited disproportionately from tax breaks and incentives designed to help people save and pay for post-secondary education, says a new report from the budget watchdog.

The parliamentary budget officer says in 2015, families that were among the top 20 per cent of earners received 37.7 per cent of the total non-refundable tax credits for education, textbook and tuition expenses.

The report says over the last decade, those top-earning households have received a larger chunk of the credits, much as an internal government review found the same group has benefited disproportionately from registered education savings plans.

The analysis says while the highest-earning families claimed the majority of the tax relief, the per-family benefits were more evenly distributed regardless of income.

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The education and textbook tax credits are being eliminated under the Liberals’ first budget, with the money targeted at more non-repayable grants and help with loan repayments. The report said these moves should make post-secondary education more affordable for lower-income students.

Michael McDonald, executive director of the Canadian Alliance of Student Associations, said the report shows the inefficiencies in the system, built on inadequate credits and savings programs.

The alliance and its counterpart, the Canadian Federation of Students, have long called for changes to the grants and loan system to offer more money in up-front grants to low-income students rather than have them pay for tuition and then claim credits later.

The Liberal budget increased spending by $684 million over the next two years on non-repayable student grants to middle and low-income students, broadened eligibility for federal student loans and eliminated several tax credits to help cover the cost of the changes.

The budget didn’t increase funding for a program aimed at helping aboriginal youth pay for college or university — a promise the Liberals made during the election.

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The PBO report said that without any change in policy direction, inflation-adjusted spending will decline by 6.7 per cent over the next five years.

Bilan Arte, national chairperson of the student federation, said the report should be a warning for the federal government to start thinking about giving money to provinces specifically for post-secondary education to drive down tuition costs.

“It’s becoming evident to us that we can’t just put a Band-Aid on a problem that is increasing becoming a crisis in Canada,” she said. “We need a bold new plan.”

The report says even though education is generally a provincial responsibility, the federal government contributed $12.3 billion to post-secondary education in 2013-14. Changes in the Liberal’s first budget are expected to push that spending to $15.7 billion by 2020.

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It also says in 2011 Canada spent 2.8 per cent of its gross domestic product on post-secondary education — more than any other OECD country.

The budget watchdog warned that determining federal spending on post-secondary education is not an exact science because billions provided to provinces through one transfer payment could be spent on any number of social programs.

Unlike transfer payments for health care, provinces don’t have report how the social services transfers are spent, nor are they subject to parliamentary review.

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