Fiscal Analysis of
Federal Children’s
Benefits

Ottawa, Canada
1 September 2016
www.pbo-dpb.gc.ca

 The mandate of the Parliamentary Budget Officer (PBO) is to provide
independent analysis to Parliament on the state of the nation’s finances, the
Government’s estimates and trends in the Canadian economy; and, upon
request from a committee or parliamentarian, to estimate the financial cost
of any proposal for matters over which Parliament has jurisdiction.
This analysis is based on Statistics Canada’s Social Policy Simulation Database
and Model. The assumptions and calculations underlying the simulation
results were prepared by PBO and the responsibility for the use and
interpretation of these data is entirely that of the author.
This report was prepared by the staff of the Parliamentary Budget Officer.
Carleigh Malanik wrote the report. Jason Jacques and Mostafa Askari
provided comments. Jocelyne Scrim assisted with preparing the report for
publication. Please contact pbo-dpb@parl.gc.ca for further information.

Jean-Denis Fréchette
Parliamentary Budget Officer

 Table of Contents
Executive Summary

1

1. Introduction

4

2. Old System of Children’s Benefits

6

2.1.

Canada Child Tax Benefit

6

2.2.

Universal Child Care Benefit

7

3. Canada Child Benefit

8

4. Net Fiscal Cost and Projections

10

5. Distributional Analysis

12

Appendix A: Methodology

15

Appendix B:

Sensitivity Analysis

18

Appendix C:

CCB Reference Charts

19

Notes

21

 Fiscal Analysis of Federal Children’s Benefits

Executive Summary
On July 1, 2016, the federal government introduced a new tax-free Canada
Child Benefit (CCB) in place of an old framework of children’s benefits.
The new benefit replaced the Universal Child Care Benefit (UCCB), the federal
Canada Child Tax Benefit (CCTB) and the federal National Child Benefit
Supplement (NCB).
Bill C-15 repealed the provision for indexation of the new system of
children’s benefits and income thresholds in the Income Tax Act. 1
PBO’s analysis resulted in three key findings:
1.

The new system of children’s benefits costs more than the old system;
however, because the new system is not indexed the cost declines over
time.

2.

Families with incomes below $30,000 will receive the largest benefits on
average.

3.

Since the new system is income tested and the income thresholds are
not indexed, over time more families will see their benefits decline and
fewer families will receive benefits.

PBO estimates that in 2016-17, payments under the new system will cost the
Government $3.4 billion more than those under the old system. By 2020-21,
this net fiscal cost would decline to $2.5 billion (Summary Table 1).

The Canada Child Benefit will have the
greatest cost in 2017-18, after which the
total and net cost will decline.

Medium-term projection of children’s benefits
(billions)

PBO

Summary Table 1

New System (CCB)
Old Systen (CCTB,
NCB and UCCB*)
Net cost

201617
$16.9

201718
$22.4

201819
$22.0

201920
$21.8

202021
$21.5

$13.5

$18.1

$18.2

$18.6

$18.9

$3.4

$4.3

$3.8

$3.2

$2.5

*UCCB is net of taxes
Note:

The 2016-17 CCB estimate reflects an implementation date of July 2016, which
represents three-quarters of the 2016-17 fiscal year. The old system of
children’s benefits estimates were adjusted in the same way to provide a
consistent comparison over the projection period.

By 2024-25, total net spending on the Canada Child Benefit is projected to
fall to that of the old system of children’s benefits, had it not been repealed.
See Appendix A for details on PBO assumptions.

1

 Fiscal Analysis of Federal Children’s Benefits

Summary Figure 1
By 2024-2025 total net spending on the
Canada Child Benefit is projected to fall
to that of the old system of children’s
benefits.

Ten-year projection of children’s benefits
$ Billions
24
22
20
18
16
14
12
10
2016-17

2018-19

2020-21
CCB

2022-23

2024-25

2026-27

Repealed CB

Distributional analysis indicates families will see their average payments
increase by $1,858. However this varies by family income. Families with
adjusted net income below $30,000 will receive the largest payment under
the new system on average.
In general, families who were previously eligible for the old system, and who
continue to be eligible for the new system, will see their annual federal
transfer increase from an average of $4,439 to $5,493.
This average increase is attributable to two factors. The first is an overall
increase in spending on the new system relative to the old: a gain of roughly
24 per cent in 2017-18.
The second factor is a declining number of families eligible for monthly
children’s benefits. In 2017-18, this number will decrease by about 13 per
cent (Summary Table 2).

2

 Fiscal Analysis of Federal Children’s Benefits

Average family children’s benefits will increase
$30,000
and less

$30,001 $65,000

$65,001
and
greater

All

880,000

874,000

1,799,000

3,552,000

$8.9

$7.1

$6.5

$22.4

Average benefits
Number of
families
Total benefits
(billions)

$10,069

$8,077

$3,586

$6,297

880,000

874,000

2,381,000

4,072,000

$6.9

$5.2

$5.9

$18.1

Average benefits

$7,846

$5,991

$2,560

$4,439

New System

2017-18

Old System*

Summary Table 2

Number of
families
Total benefits
(billions)

Note: may not sum due to rounding.
*UCCB is net of taxes.

3

 Fiscal Analysis of Federal Children’s Benefits

1. Introduction
Effective July 1, 2016, the Universal Child Care Benefit (UCCB), the federal
Canada Child Tax Benefit (CCTB) and the federal National Child Benefit
Supplement (NCB) were replaced by the monthly Canada Child Benefit (CCB).
This report examines the net fiscal impact of implementing the new system
of children’s benefits, that is the CCB, and simultaneously repealing the
federal portions of the old system, that is, the UCCB, CCTB and NCB.
The report also provides a 10-year projection comparing the new system and
the old, as well as a distributional analysis for the 2017-18 fiscal year.
The old system of children’s benefits was partially indexed. The CCTB and
NCB payments were means-tested and both the payments and income
thresholds were indexed to inflation. 2 Indexation helped ensure the monthly
benefits retained their real value, or their buying power.
However, since incomes tend to grow faster than inflation, the proportion of
families receiving the benefit declined over time. Together, the CCTB and
NCB represented roughly 72.5 per cent of the $14.3 billion in spending in the
old system of children’s benefits in 2014-15. 3 The UCCB, which comprised
the remaining 27.5 per cent of benefits, was not indexed. As such, overall
children’s benefits were structured to increase over time.
The CCB is not indexed. As such, the real value of the payments, the nominal
level of payments for which families are eligible, and the number of eligible
families will decline over time. This is because nominal family incomes
continue to grow. For some families, their incomes may rise high enough that
their benefit payments are reduced to zero.
Table 1-1 provides a brief comparison of children’s benefits.

4

 Fiscal Analysis of Federal Children’s Benefits

Table 1-1
Comparison of the old and new system
of children’s benefits.

Characteristics of children’s benefits
New System

Old System

CCB

UCCB

CCTB

NCB

Not indexed

Not indexed

Indexed

Indexed

Non taxable

Taxable

Non Taxable

Non Taxable

Means-tested

Not means-tested

Means-tested

Means-tested

$6,400/year for
each child under
six years of age.

$1,920/year for
each child under
six years of age.

$1,503/year* for
each child under
18 years of age.

$2,329/year* for
first child.

$5,400/year for
each child aged
six to 17.

$720/year for
each child aged
six to 17.

Clawback based
on adjusted
family net income
(ranges from
7 per cent to
32 per cent
depending in
income group
and number of
children).

No clawback, but
is taxed at the
marginal rate of
the lower-income
partner.

$2,060/year* for
second child.
$1,960/year* for
each additional
child.
Clawback based
on adjusted
family net income
(2 per cent for
families with one
child; 4 per cent
for families with
two or more
children).

Clawback based
on adjusted
family net income
(ranges from
12.2 per cent to
33.3 per cent
depending on the
number of
children).

*This is the July 2016 indexed value based on legislation, had the CCTB not been repealed.

The CCTB had a base monthly benefit that was reduced with income via a
phase-out rate. Phase-out rates are the proportion of income above a
particular threshold (determined by government legislation) by which the
benefit is reduced.
That is, for every dollar of income above the threshold a family has, a
proportion of that will be subtracted from the base monthly benefit.

5

 Fiscal Analysis of Federal Children’s Benefits

2. Old System of Children’s Benefits
The Canada Child Benefit repealed and replaced both the means-tested
Canada Child Tax Benefit, including the National Child Benefit Supplement,
(hereafter jointly referred to as the CCTB) and the taxable Universal Child
Care Benefit (UCCB). This section describes the old system of children’s
benefits.
Under the former system, total gross spending rose steadily, from
$11.2 billion in 2006-07 to $14.4 billion in 2014-15. This was attributable to
an increasing eligible population and enrichment of benefits (Figure 2-1). 4

Figure 2-1
Federal Children’s Benefits have
grown steadily.

Historical Children’s Benefits Expenditures
$ Billions
16
14
12
10
8
6
4
2
2006-07

2008-09

2010-11

2012-13

2014-15

2.1. Canada Child Tax Benefit
The Canada Child Tax Benefit (CCTB) was a joint federal-provincial initiative
to provide tax-free monthly payments to families to assist them with the cost
of raising their children. These benefits were means-tested.
That is, the calculation began with a basic monthly benefit for each child and
was reduced according to a family’s adjusted net income and the number of
children per family (Table 2-1). 5 The 2015 base monthly benefit of $123 does
not vary by the age of the child. 6
The Government also integrated a National Child Benefit Supplement for
low-income families into the CCTB. For 2015, the supplement amounted to
$190 per month for the first child, $168 per month for the second child, and
$160 per month for each additional child.

6

 Fiscal Analysis of Federal Children’s Benefits

These benefits, as well as the income thresholds for which the reduction to
the monthly benefits was calculated, were indexed to the Consumer Price
Index (CPI).

Phaseout rate

Monthly
benefit*

Distribution
in 2015

CCTB

The CCTB was an indexed,
means-tested benefit.

Snapshot of the CCTB

$0 - $44,701
One child
Two or more children

2.0%
4.0%

$123
+$9

43.5%
56.5%

NCB

Table 2-1

Income Thresholds

$0 - $26,021
One child
Two children
Three or more children

12.2%
23.0%
33.3%

$190
$168
$160

46.5%
36.7%
16.8%

* July 2015 to June 2016 amount

In 2014-15, the Government reported spending a total of $10.4 billion on the
federal share of the CCTB. 7 PBO estimates it would have spent $11.3 billion
on the CCTB in 2016-17. This total would have risen to $12.0 billion in 202021 had it not been repealed.

2.2. Universal Child Care Benefit
The Universal Child Care Benefit (UCCB) was introduced in 2006 to support
families in their child care choices by providing parents with $100 of monthly
taxable income per child under the age of six. 8
These amounts were enriched in 2015, when the UCCB was enhanced to
$160 a month for children under six, and expanded to provide $60 a month
per child aged six to 17.
While the UCCB payments were not indexed, it was a taxable benefit and the
income tax brackets are indexed. 9, 10 Therefore, the amount of taxes paid on
the UCCB would remain relatively stable over time. Families' whose income
grew faster than inflation would potentially enter a higher income bracket,
pay more taxes on the UCCB and thus see the value of their net UCCB
decrease.
In 2014-15, the Government reported gross UCCB expenses amounting to
over $3.9 billion. 11 This amount includes three months of the 2015
enhancements of the UCCB. Since the UCCB is taxable and, therefore. a
revenue source for the government, the net cost would be lower.
PBO estimates the UCCB would have had a net cost of $6.7 billion in 2016-17
and $7.0 billion by 2020-21, if it had not been repealed. These estimates
reflect the 2015 enhancements of the UCCB for a full fiscal year.

7

 Fiscal Analysis of Federal Children’s Benefits

3. Canada Child Benefit
The Canada Child Benefit (CCB) is a tax-free, means-tested annual benefit of
$6,400 for children under six and $5,400 for children aged six through
17. 12, 13 The amount is reduced using a graduated phase-out rate based on
family income and the number of children. 14
Families with adjusted net income greater than $30,000 will have a phase-out
rate of between 7.0 per cent and 23.0 per cent, depending on the number of
children in their family. These phase-out rates increase further once adjusted
family income rises above $65,000 (Table 3-1).

Table 3-1
More families eligible for the CCB will
move into higher income thresholds
over time. As a result, the proportion of
families with children under the age of
18 eligible for the CCB will decline.

Shapshot of the CCB
Family Adjusted Net Income

$0 - $30,000
Family with one child
Family with two children
Family with three children
Family with four or more
children
$30,001 – $65,000
Family with one child
Family with two children
Family with three children
Family with four or more
children
$65,001 +
Family with one child
Family with two children
Family with three children
Family with four or more
children
Families eligible for the CCB
Notes:

Marginal
Phase-out
rate

Distribution
in 2017

Distribution
in 2021

0%
0%
0%
0%

(Calendar Year)
22.7%
19.6%
10.5%
8.9%
8.5%
7.3%
2.6%
2.4%

0%

1.1%

1.0%

7.0%
13.5%
19.0%

22.5%
10.8%
8.1%
2.6%

19.8%
9.3%
7.1%
2.3%

23.0%

1.1%

1.0%

3.2%
5.7%
8.0%

45.7%
17.7%
21.2%
5.6%

47.2%
18.2%
21.6%
5.9%

9.0%

1.2%

1.4%

-

91.0%

86.6%

The denominator is the number of families with children under the age of 18.
As such, values do not add to 100 per cent.
The distribution is of the number of families.

8

 Fiscal Analysis of Federal Children’s Benefits

In 2017, about 3.6 million families will be eligible for the CCB. Roughly
888,000 have an adjusted net family income of $30,000 or less; 881,000 have
incomes of between $30,001 and $65,000; and 1,785,000 have incomes
greater than $65,000. 15
By 2021, these proportions will change slightly, as families move into higher
income groups owing to the lack of indexation for income thresholds.
PBO estimates total spending on the CCB will amount to $16.9 billion in
2016-17. This amount will increase once it has been in place for a full fiscal
year ($22.4 billion in 2017-18). Then it will decline steadily over time, falling
to $21.5 billion in 2020-21.

9

 Fiscal Analysis of Federal Children’s Benefits

4. Net Fiscal Cost and Projections
The CCB came into effect July 1, 2016, half-way through the calendar year
and one-quarter of the way through the fiscal year. PBO pro-rated the cost
for the nine months during 2016-17 in which the new CCB will be in effect.
As a result, PBO estimates a net fiscal increase of $3.4 billion in 2016-17 over
the cost of benefits under the former framework.
In 2017-18, the first fiscal year in which the CCB will be fully implemented,
PBO estimates its total cost will be $22.4 billion. This would represent a net
fiscal increase of $4.3 billion.
By 2020-21, the total cost will decline to a projected $21.5 billion and the net
fiscal cost will drop to $2.5 billion (Table 4-1). Much of this fiscal cost is
explained by the increase in benefits, while a small amount is due to a
reduction in tax revenues. These results are consistent with the estimates in
Budget 2016.

Table 4-1
The Canada Child Benefit will have the
greatest cost in 2017-18, after which the
total and net cost will decline.

Net cost of the CCB estimated to decline over time
(billions)

2016-17

2017-18

2018-19

2019-20

2020-21

CCB

$16.9

$22.4

$22.0

$21.8

$21.5

CCTB, NCB and
UCCB*

$13.5

$18.1

$18.2

$18.6

$18.9

Net cost of CCB

$3.4

$4.3

$3.8

$3.2

$2.5

*UCCB is net of taxes

The legislation in Bill C-15 removed indexation of benefits. This means that
over time, inflation will reduce the real value of the monthly CCB payments.
In addition, without any adjustments to the income thresholds, cohorts of
families will see their wages increase high enough to reduce their monthly
benefits, and in some cases, make them ineligible altogether.
As a result, PBO estimates that the value of CCB payments will decrease over
time. By 2024-25, total CCB payments will fall slightly below those of the
projected value of the old system of children’s benefits, had they not been
repealed (Figure 4-1). Appendix A provides details on PBO assumptions.

10

 Fiscal Analysis of Federal Children’s Benefits

Figure 4-1
Total spending on the new CCB is
projected to decline below that of the
old system of Children’s Benefits.

Ten-year projection of children’s benefits
$ Billions
24
22
20
18
16
14
12
10
2016-17

2018-19

2020-21
CCB

2022-23

2024-25

2026-27

Repealed CB

11

 Fiscal Analysis of Federal Children’s Benefits

5. Distributional Analysis
PBO prepared a distributional analysis that shows the average family’s child
benefits for the 2017-18 fiscal year. This is compared to the average family’s
benefits under the former framework.
The analysis projects that average benefits will increase by roughly $1,858,
which decreases by family income. The number of families eligible for
children’s benefits will decrease, given that the UCCB was not means-tested
(Table 5-1).

Table 5-1

Average children’s benefit payments will increase
2017-18
Old System Children’s
New System of Children’s
Benefits*
Benefits

While the average benefits will increase
for eligible families, the number of
eligible families will decline.

Family Adjusted
Net Income

Average
benefit

# of eligible
families

Average
benefit

# of eligible
families

$7,846
$5,991
$2,560
$4,439

880,000
874,000
2,318,000
4,072,000

$10,069
$8,077
$3,586
$6,297

880,000
874,000
1,799,000
3,552,000

$0 - $30,000
$30,001 - $65,000
$65,001+
All
*net of income tax on UCCB

Families with an adjusted net income below $30,000 will continue to receive
the largest average benefit payments. 16

Table 5-2
Families that were previously eligible for
the old sytem of children’s benefits will
see their benefits increase from an
average of $4,439 to $5,493.

Families will see their average benefits increase
2017-18

New system of Children’s Benefits among the
same families eligible for the old system

Family by benefit

Average benefit

# of eligible families

$0 - $30,000
$30,001 - $65,000
$65,001
All

$10,069
$8,077
$2,783
$5,493

880,000
874,000
2,318,000
4,072,000

*Compared to old system of Children’s Benefits

The age of the child is one factor in determining the total payment for each
family. Families with younger children receive a higher benefit than families
with older children. The number of children in each family is also a
determining factor. This explains how the average benefit per family can be
greater than the base CCB figures of $6,400 for children under six and $5,400
for children aged six through 17 (described in Section 3).

12

 Fiscal Analysis of Federal Children’s Benefits

Table 5-3
Average benefits differ depending on
family characteristics.

Children’s benefits vary by family characteristics
Families with only young children
(under six years of age)
Old

Families with a combination of young
and old children
New

Old

New

$0-$30,000

$7,294

$9,127

$0-$30,000

$12,103

$15,696

$30,001-$65,000

$5,694

$7,445

$30,001-$65,000

$10,009

$13,294

$65,001+

$3,053

$3,743

$65,001+

$4,204

$5,482

All
$4,588
$5,953
Families with only older children
(between ages six and 17, inclusive)
Old

All
$7,131
$9,769
Families with children (under 18 years of
age)

New

Old

New

$0-$30,000

$6,625

$8,568

$0-$30,000

$7,846

$10,069

$30,001-$65,000

$4,955

$6,841

$30,001-$65,000

$5,991

$8,077

$65,001+

$1,791

$2,798

$65,001+

$2,560

$3,586

All

$3,490

$5,270

All

$4,439

$6,297

Families with a combination of young and old children have a greater number of children
on average (that is, as least two) than families with only young or only older children (that
is, at least one). As such, the average benefits appear to be greater. In fact, a family with
two young children would receive a greater amount than a family with either a combination
of one young and one older child, and a family with two older children.

Figure 5-1 calculates the annual benefit payments to families according to
their adjusted family net income for families with a combination of both
younger and older children. Where there is an odd number of children, the
assumption is that there are more children under the age of six than over.
The maximum benefit is payable to families with incomes below $30,000.
The number of children determines the family’s phase-out rate, which
determines their clawback (that is, the amount by which the maximum base
benefit is reduced).
Families with higher incomes can continue to be eligible for the new system
of child benefits, depending on the number and age of their eligible children.
Appendix C provides two additional scenarios demonstrating the level of
benefits payable to families depending on their characteristics.

13

 Fiscal Analysis of Federal Children’s Benefits

Benefits per family with children under 18 years of age
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$$30,000
$43,100
$56,200
$69,300
$82,400
$95,500
$108,600
$121,700
$134,800
$147,900
$161,000
$174,100
$187,200
$200,300
$213,400
$226,500
$239,600
$252,700
$265,800
$278,900
$292,000
$305,100
$318,200
$331,300

Benefits

Figure 5-1

2 children

Adjusted Family Net Income
3 children
4 children

5 children

14

 Fiscal Analysis of Federal Children’s Benefits

Appendix A:

Methodology

To estimate the level of spending on children’s benefits for both the
aggregate (that is, total) and per-family, PBO used three data sources:
Statistics Canada’s Social Policy Simulation and Database and Model
(SPSDM); custom data from Statistics Canada’s T1 Family File; and the Public
Accounts of Canada for data verification where available.
First, PBO used the SPSDM to estimate the historical level of spending on the
old system of children’s benefits. After comparing the estimates for the
CCTB and UCCB against those of the Public Accounts, PBO calculated an
adjustment factor, which reflected the fact that Public Accounts data were on
average 18 per cent higher than the estimates produced by the SPSDM.
Using custom data from Statistics Canada, PBO was able to determine that
the number of low-income families was relatively under-represented for the
calculation of the CCTB, as was their total level of CCTB payments. Families
in other income groups were close, though PBO used an adjustment factor
for consistency.
Similarly, PBO determined the UCCB results would also require a small
adjustment to be more consistent with the historical gap between SPSDM
results and those of the Public Accounts. Table A-1 lists the adjustment
factors used.
Historical data for the CCB, however, were not available for comparison.
Therefore, PBO used custom data from Statistics Canada, which calculated
the level of the CCB for families by income group and the number of children
(one to four or more), using the 2013 and 2012 T1 Family File.
Since the CCB did not actually exist in 2013, PBO deflated the 2016 benefit
amounts and income thresholds to 2013 using historical CPI growth rates,
and provided the data to Statistics Canada for calculation. Even though the
CCB is not indexed, doing so ensured the 2013 calculation would resemble
results indicative of a ‘first year of implementation’.
Table A-2 provides the CPI growth rates used to deflate the 2016 benefit
levels and income thresholds, as well as the derived 2013 CCB benefit levels
and income thresholds used in the calculation.
Second, PBO estimated the level of spending on children’s benefits for 2016
to 2021 using the SPSDM. Then, PBO applied the 2013 adjustment factor for
all years. That is, PBO assumes this adjustment factor will remain stable over
time.

15

 Fiscal Analysis of Federal Children’s Benefits

Table A-1

Adjustment factors applied to SPSDM data

Income group 1
Income group 2
Income group 3

CCTB
dollar
1.171
1.091
1.387

CCTB
recipient
1.258
0.918
1.038

UCCB
dollar
0.98
0.98
0.98

CCB
dollar
1.220
0.920
0.858

CCB
recipient
*
*
0.936

* This number of CCB recipients was set equal to the number of adjusted CCTB recipients

Table A-2

CCB assumptions for custom data request
CPI growth
rate
2016
2015
2014
2013

1.3%
1.7%
0.9%
1.9%

Benefit
Level
(young
children)
$6,400
$6,320
$6,213
$6,155

Benefit
Level (older
children)

First
Income
Threshold

Second
Income
Threshold

$5,400
$5,332
$5,242
$5,194

$30,000
$29,623
$29,125
$28,853

$65,000
$64,182
$63,104
$62,515

To produce a 10-year projection of the CCB, PBO created a satellite model
that produced very similar results to the adjusted SPSDM estimates. Data for
this model included the same custom CCB data from Statistics Canada, as
well as publicly available T1 Family File data.
The model builds two main variables for the projection period: the annual
base benefit per family by net adjusted family income and the number of
children, and the clawback per family by net adjusted family income and the
number of children. Subtracting the clawback from the base benefit for each
group, then summing, produces the aggregate level of CCB spending.
The main factors in determining the base benefit include projections of total
population of children under the age of six and those aged six to 17, as well
as the base benefit amounts (that is, $6,400 and $5,400 in 2016). To assign
these children to families based on the family’s income group and size, PBO
used the 2012 and 2013 distribution determined from the custom data
calculated by Statistics Canada.
To project this distribution into the future, PBO used the 2012-13 growth
rate, and projected forward using the year-over-year growth rate. This
distribution was applied evenly for children under the age of six and for
those aged six to 17.
Projecting the clawback required several more calculations. The main factors
used were the number of families eligible for the CCB in each of the adjusted
net income groups, the number of children, the average net adjusted income
for each income group, and the phase-out rates and income thresholds.

16

 Fiscal Analysis of Federal Children’s Benefits

To determine the number of eligible families in each sub-group, PBO started
with the data acquired for 2012 and 2013. Comparing the number of eligible
families to publicly available data on the total number of families for the
same two years, PBO created ratios that were applied to historical data.
Specifically, PBO used T1 Family File data from 2000 to 2013 and applied the
average 2012-13 ratios.
To project this into the future, PBO used the average annual growth rates of
the publicly available variables (used as denominators in the ratios) for
families with income under $65,000, and the average annual growth rates
from the SPSDM for families with income $65,000 and over.
Using the rates from the SPSDM for the latter group ensures that PBO
reflects the number of families moving into this higher income group and the
number of families becoming ineligible because of their growing income.
Estimating the historical average family adjusted net income was a similar
process, with one exception. PBO used the SPSDM to calculate the average
annual growth rate of the average family adjusted net income by income
group (for 2013 to 2021), rather than the historical growth rates. This is
because the average family adjusted net incomes would otherwise outgrow
the threshold by which it was contained, which is not possible.
The phase-out rates remain static throughout time. The income thresholds
for 2013 and 2012 were the deflated values. However, from 2016 to the end
of the projection period, PBO used the 2016 income thresholds levels. This
reflects the fact that the CCB is not indexed. Appendix B presents estimates
where this assumption is relaxed.
With the projected clawback factors, PBO calculated the total clawback for
families with income between $30,000 and $65,000 as:
[(Yi – THi)*Ni.k*PORi,k]
The calculation for the clawback for families with income above $65,000 is:
[(THj – THi)*Nj.k*PORj,k] + [(Yj – THj)*Nj.k*PORj,k]
Where Yi is the average adjusted family net income for income group i, THi is
the threshold for income group I (that is, $30,000 for income the baseline
scenario), Ni,k is the number of families in income group i with k number of
kids, and PORi,k is the phase-out rate for income group i with k number of
kids. THj is the threshold for income group j (that is, $65,000 for the baseline
scenario), Nj,k is the number of families in income group j with k number of
kids, and PORj,k is the phase-out rate for income group j with k number of
kids.

17

 Fiscal Analysis of Federal Children’s Benefits

Appendix B:

Sensitivity Analysis

PBO sensitivity analysis presents alternate scenarios that, among other
things, estimate the cost of indexing the new CCB and enriching to reflect
historical trends. With respect to the latter, the Government occasionally
made nominal increases to the base benefits above and beyond inflation
adjustments. PBO refers to this as an “enrichment factor.” 17

Figure B-1
Indexing the CCB would ensure that
benefits do not fall below their historical
level, the real value of payments would
not decline, and the distribution of
recipients would remain relatively stable
over time.

Projections of alternate scenarios
$ Billions
40
35
30
25
20
15
10
2016-17

2018-19

2020-21

2022-23

2024-25

2026-27

CCB

Old System of Children's Benefits

CCB indexed

CCB indexed and enriched

If CCB base benefits and income thresholds were indexed to inflation, total
CCB would grow throughout the projection period at an average annual rate
of 3.7 per cent. If indexed to inflation and increased nominally so as to keep
pace with the growth of wages, as the CCTB was, the CCB would grow at an
average annual rate of 4.5 per cent, according to PBO estimates. 18
This is compared to the projected average annual growth rate of -1.0 per
cent for the current CCB. The net fiscal cost over the next five years would be
$42.4 billion cumulatively, if the CCB were both indexed and enriched.

18

 Fiscal Analysis of Federal Children’s Benefits

Appendix C:

CCB Reference Charts

PBO calculated examples of CCB amounts for families with only children
under the age of six, only children aged six to 17, and a combination of
young and older children for up to five children.
Once income reaches $30,000, benefits decline at a rate equivalent to the
phase-out rate. After the family adjusted net income reaches $65,000, the
benefits decrease more slowly.
The level of income at which benefits are zero depends on the number of
children and the age of the child.

Benefit per family with children under 6
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$$30,000
$43,100
$56,200
$69,300
$82,400
$95,500
$108,600
$121,700
$134,800
$147,900
$161,000
$174,100
$187,200
$200,300
$213,400
$226,500
$239,600
$252,700
$265,800
$278,900
$292,000
$305,100
$318,200
$331,300

Benefits

Figure C-1

Adjusted Family Net Income
1 child

2 children

3 children

4 children

5 children

19

 Fiscal Analysis of Federal Children’s Benefits

Figure C-2

Benefit per family with children ages 6 to 17
$30,000
$25,000

Benefits

$20,000
$15,000
$10,000
$5,000

$30,000
$43,100
$56,200
$69,300
$82,400
$95,500
$108,600
$121,700
$134,800
$147,900
$161,000
$174,100
$187,200
$200,300
$213,400
$226,500
$239,600
$252,700
$265,800
$278,900
$292,000
$305,100
$318,200
$331,300

$-

1 child

Adjusted Family Net Income
3 children
4 children

5 children

Benefit per family children under 18 years of age
$35,000
$30,000
$25,000
Benefits

$20,000
$15,000
$10,000
$5,000
$$30,000
$43,100
$56,200
$69,300
$82,400
$95,500
$108,600
$121,700
$134,800
$147,900
$161,000
$174,100
$187,200
$200,300
$213,400
$226,500
$239,600
$252,700
$265,800
$278,900
$292,000
$305,100
$318,200
$331,300

Figure C-3

2 children

2 children

Adjusted Family Net Income
3 children
4 children

5 children

Note that for Figure C-3, when there are an odd number of children, PBO
assumed there were more young children than old.

20

 Fiscal Analysis of Federal Children’s Benefits

Notes
1.

Budget Implementation Act, 2016, No. 1. Statute of Canada: 2016, c. 7. Royal
Assent (2016-06-22).

2.

Additionally, the government occasionally made nominal increases to the
base benefits above and beyond inflation adjustments. PBO refers to this as
an enrichment factor.

3.

Public Works and Government Services Canada, Public Accounts of Canada,
Vol. II, Table 2a., 2015.

4.

Source: Finance Canada, Fiscal Reference Tables, 2016

5.

In 1993, the Child Tax Benefit (CTB) replaced the Child Tax Credit (CTC) and
the Family allowance. The CTB originally included a Working Income
Supplement (WIS) and the basic Child Tax Benefit. The WIS was based on
earnings. In 1998, the CTB was replaced by the CCTB. The basic benefit has
the same level and structure of the Child Tax Benefit and the CCTB
Supplement replaced the WIS, but was no longer related to earned income.
The CTC that was introduced in 2007 is different than the 1993 CTC
referenced here. Also note that Quebec does not take part in the CCTB.
Source: Department of Finance. (2002). Archived Tax Expenditures and
Evaluations 2002. Ottawa, Ontario: Retrieved from
http://www.fin.gc.ca/taxexp-depfisc/2002/taxexp02_e.pdf.

6.

The Alberta government varied the CCTB amounts based on the age of the
child.

7.

Public Works and Government Services Canada, Public Accounts of Canada,
Vol. II, Table 2a., 2015.

8.

Department of Finance. (2006). The Budget Plan 2006: Focusing on Priorities.

9.

The UCCB was taxable in the hands of the lower-income spouse. Department
of Finance. (2006). The Budget Plan 2006: Focusing on Priorities.

10. In 2015, the Government made an enhancement to the existing benefit for
children under the age of 6.
11. Public Works and Government Services Canada, Public Accounts of Canada,
Vol. II, Table 2a., 2015.
12. Source: Budget Implementation Act, 2016, No. 1. Statute of Canada: 2016, c.
7. Royal Assent (2016-06-22).
13. For the 2017-18 benefit, provinces and territories may enter into an
agreement with the federal government to reconfigure the CCB, as long as
they do not require additional federal funds.
14. For the purposes of this report, income is defined as adjusted family net
income. That is, the family net income (line 236 of income tax and benefit

21

 Fiscal Analysis of Federal Children’s Benefits

return) less any registered disability savings plan (RDSP) income received,
plus any RDSP repayments. Family income does not include children's net
income. Family income is calculated every July, based on the previous year's
income. http://www.cra-arc.gc.ca/E/pub/tg/t4114/t4114e.html#family_net_income
15. Adjusted net family income is calculated by deflating the current year's
income by a CPI deflator. See Appendix A for more information.
16. According to analysis conducted by Godbout, Luc; St-Cerny, Suzie;
"L'Allocation Canadienne pour Enfants: de la promesse à sa mise en place,"
Chaire en fiscalité et en finances publiques, 2016, results are similar when
using the specifications provided in the Liberal Party's platform document
instead of the specifications in Bill C-15.
17. PBO used CPI to index the old system of CB, and the enrichment factor used
for the projection of both the old system of CB and CCB was calculated as
the growth rate of real (that is, accounting for inflation) per-capita gross
domestic product (GDP). The base year to determine real GDP was 2007.
Both the enrichment factor and the CPI were the same as used in preparing
PBO's Fiscal Sustainability Report (FSR) 2016. Additionally, the calculation of
the old system of CB used the projection in PBO's FSR, with modifications.
Link to the report: http://www.pbodpb.gc.ca/web/default/files/Documents/Reports/2016/FSR_2016/FSR_2016_E
N.pdf
18. The satellite model for the CCB was disaggregated enough to permit the
enrichment and indexation factors to be applied to the relevant factors (that
is, base benefits and income thresholds). The model for projection the old
system of children's benefits, on the other hand, enriched and indexed the
aggregate CCTB estimates.

22