To adhere to an Action Plan that is, at its premise, unfair is ludicrous.

The recently unveiled Universal Child Care Benefit (UCCB) of the Canada Action Plan is inherently just that, unfair, inequitable and unjust (I think that’s clear).

A family of 4, for example, with a total household revenue of say $40,000, certainly can benefit from the $1,920.00 annually paid out for each child under 6 years of age. Could they use more? Of course! Does a family of 4 with a total household revenue of say $350,000.00 need that same amount? No. Could their “entitlement” be instead transferred proportionally to the family with the $40,000.00 revenue – of course. Should it be? My answer is “yes”.

It is, to me, grossly disproportionate to pay these 2 families the exact same benefit per child. Even if one argues that the higher income household paid more taxes (which may not necessarily be the case), who needs the benefit more? We all pay, allegedly, the same costs for food, gas and clothing, etc., with GST and PST added to that. The difference is that to the $40,000 guy, these taxes take away from an already minimal revenue, whereas the $350,000 guy usually has his accountant claim back much of the GST and PST paid, if he has incorporated a company and/or has a good accountant.

Think about it. The family of 4 living on $40,000 wants to buy a laptop computer for the house that costs $1,000. On that they also pay $154 in taxes for a total of $1,154. The $350,000 guy pays the same amount initially but, as it is a laptop for the “office”, he can usually not only deduct the $154 on the next GST and PST filing, but if he has his company pay for the laptop, he can also deduct 45% for amortization (okay he has an aggressive accountant) so the laptop actually ends up costing him $550 after all is said and done. And as it’s portable, who really knows where it is, office or home.

So again, I ask, does this $350,000 family really need the same child care benefits as our $40,000 guy’s family? You know my answer already. I hope I know yours.

Then I read a Financial Post article by Garry Marr who quotes a certified Financial Planner Jason Heath. Mr. Heath suggests, aside from saving/investing this new found retroactive Child Care Benefit (in RESPs for example), that the family go ahead and “have a little fun”. Really?! I am confident in saying that most families of 4 living on a $40,000 gross income are in debt. So, instead of adding to the hole they are digging, they should pay down debt thereby reducing interest charges which then increases their liquidity ($350,000 incorporated guy can usually write off some of the debt (and the fun); not so for the $40,000 guy).

The Governments and Statistics Canada tell us most households spend beyond their means and our prorata debt load is increasing (of course they should know since they also increase our debt load). Hell, consumer debt has been termed “unsustainable” and by December 2014 it had increased by 7.7% over the year prior to a whopping $1.513 TRILLION [Globe & Mail – March 3, 2015]. Yes the “T” word which has been driven mostly by credit card debt. So by all means go out and spend that windfall tax benefit if you truly believe staying in debt is for you.

And while holders of variable mortgage rates are happy after the latest rate cut by the Bank of Canada, credit card interest, which is a fixed and stated amount, remains exorbitant. So smart money thinkers should pay off those debts with the Child Care Benefit windfall and through their house mortgage (where possible) and save the interest you were spending monthly on debt payment by investing in either an RRSP, which gets you more money back, or invest in the RESP which the Government matches at 20% of your contribution in the form of grants up to a maximum of $500 per year or $7,000 total per child. That could mean an additional $4,000 per child, per RESP of “free” money, if you use the entire $160 per month from birth to the age of 17. Now $350,000 guy would do that, so why wouldn’t you, (and his interest payments are usually tax deductible, again with the help of that smart accountant)?

Like weight loss, debt reduction is usually a long hard process but worth it in the end. The pressure on the $40,000 guy is lessened, the hole is slowly filled in and with reduced or no interest to pay and the tax benefits from the RRSP deductions/RESP investments, you will see positive results. Isn’t that the benefit you really want?

So write your MPs/MNAs and complain about this unfair Universal Child Care Benefit. After all, you deserve better, don’t you?

Me Hammerschmid is a practicing Family Law Attorney since 1982 and Senior Partner at Hammerschmid & Associates, 1 Westmount Square, Suite 1290; and a founding and current member (past Secretary for 28 years) of the Family Law Association of Quebec. She can be reached at 514-846-1013 or hammerschmid@vif.ca. Inquiries treated confidentially.
A frequent guest inn CBC TV/Radio, CTV and CJAD on Family Law; Me Hammerschmid is a monthly guest with Dr. Laurie Betito on CJAD’s Passion, on the last Thursday of each month.

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