Dalton McGuinty & his Children's Activity Tax Credit

image: Chris Doucette - Toronto Sun

Since July 1st, fitness-loving Ontarians have had to swallow an 8% increase in their gym memberships, workout gear, protein shakes, swimming lessons, etc……thanks to the HST.

Also since July 1st, industry groups like the Fitness Industry Council of Canada along with some municipal governments have been pressuring the Ontario government to introduce a “non-refundable provincial income tax credit patterned after the federal “Children’s Fitness Tax Credit”.

So, it should come as no surprise that yesterday, Premier McGuinty held a press conference at a Toronto YMCA to announce his new brand spanking new Children’s Activity Tax Credit.

The Plan….

Allows parents to claim up to $500 of eligible expenses per child on sports, arts and other activities incurred on or after Jan. 1, 2010.
Families would receive a refundable tax credit worth up to $50 per child under 16 years of age, and up to $100 for a child under the age of 18 with a disability.
And according to the gov’t, this tax credit would provide about $75-million each year to assist the cost of registering kids in programs and would benefit 1.8 million children.

Analysis of “The Plan”

According to the official government opposition…

“The government basically put a tax on children’s activities and then a couple months later turns around and provides a tax credit,” said NDP leader Andrea Horwath.
“The tax credit, in many cases, won’t make up for the amount of dollars being gouged from families,” she added.

Let’s test that theory…

If a parent spends $500 on her kid’s burgeoning hockey career, she pays an additional 8% or $40 in new HST tax - Boooo!!!!
But thanks to the new tax credit, she gets $50 back on her tax return - Woo Hoo!!! Free government money!!!

Unless….she keeps spending money on her kid’s physical fitness…and ends up paying more in HST than she receives via the tax credit.

And considering that the prototypical Canadian parent spends thousands of dollars on their little Crosbys & Ovechkins, odds are that the $50 Ontario tax credit is just going to be a proverbial drop in the HST bucket.

But, what about all of those low-income Canadian parents who can’t afford to put their kids into hockey in the first place?

Maybe this tax credit was designed for them.

Maybe this tax credit is going to help Ontario’s low-income families become more active & reduce their high levels of obesity.

Or….maybe not.

According to this research, only 28.2 % of “low income” parents claimed the federal fitness tax credit for the 2007 tax year, while approximately 55 % of “high income” parents in the highest income quartile had claimed it.

Based on this data, the researchers concluded that “household income was a significant factor in whether Canadian parents were more likely to report their child being in organized physical activities, and if the parent was more likely to be aware of and claim the CFTC”.

“It appears that a tax credit such as the CFTC will only benefit those people who can afford to pay the costs of registration for a PA program and carry that burden through to the end of the tax year.”

Conclusion

I have no reason to doubt that Premier McGuinty is genuinely interested in helping Ontario’s kids become more physically active.

However, this tax credit idea seems:

Politically self serving, and
Ineffective.

And when you consider that 87% of Canadian kids are not getting their recommended daily amount of exercise, perhaps we should take the estimated $75 million in tax credits and spend them in a more effective fashion.

For example…. $75 million would pay for 1250 new fitness parks.…that Ontarians could use…for FREE.