In 2022, I was optimistic that poverty would be addressed in Canada because of the federal government’s 2018 poverty reduction strategy. They had set a new measure for poverty, where the price of a basket of basic food, clothes, housing and transport was set as the poverty line. This line is adjusted regionally and according to family size. In 2015 , 14.6 % of Canadians could not afford this basket of goods. Their target was to decrease poverty to 11.6% by 2020 and 7.3% by 2030. I had no idea at the time that they had already reached their 2030 target of cutting poverty in half! The graph below shows that the pandemic resulted in a dramatic decrease in poverty, due to the income supports in place at the time. However, significant progress had been made by 2019 and it appears to be holding below the 10% mark in the most recent figures from the 2022 income survey. It seems absurd to say that poverty is declining in Canada with high rent and food prices. We will find out for sure when the 2024 income survey comes out. For today, let’s look at how the tax system is helping reduce poverty in Canada.
The success of poverty reduction before the pandemic has been attributed to the Canada Child Benefit, a program reaching 3.7 million households and a size of $25 billion ($20B USD) by 2021. A more focused, but much smaller program, the Canada Workers Benefit, encourages Canadians to get over the “welfare wall” , the pattern of claw-backs that sees people in poverty lose welfare support just as they are returning to the workforce. It likely has little effect on the poverty rate, as its benefits are focused on those in deep poverty.
One of the key obstacles to using the tax system as a poverty fighting tool is making sure that poor Canadians file their taxes so that they can receive benefits like the GST Credit, the Canada Carbon Rebate and the Canada Workers Benefit. In addition, these transfers are generally sent quarterly or as a lump sum , which is not helpful for people living day-to-day. The Canadian Revenue Agency has started to change that with a program called SimpleFile, which can be done over the phone after answering some basic quesions.
A key component of the National Poverty Reduction Strategy is to listen to the poor. Next time, we will hear more about what they have been saying to the National Advisory Council on Poverty, including reducing poverty for renters and Indigenous Peoples.